Putting the subsidy in subsidised housing: Evidence from the English Affordable Housing Programme on the causal effect of capital grant on affordable housing supply

Abstract

England suffers from a chronic undersupply of affordable housing. And long-term there has been a decline in available capital grant for new supply. Affordable housing advocates argue that provision necessitates some form of subsidy. Yet there is a surprising lack of research analysing the causal effect of capital grant on new affordable housing supply. I address this research gap by conducting a policy evaluation of a change in the 2016-21 Affordable Homes Programme (AHP), which made additional capital grant available for new social rent homes in areas of affordability pressure, defined as local authorities where weekly private rents were at least £50 more than social rents. I apply a fuzzy regression discontinuity design to estimate the causal effect of capital grant on supply. I estimate the treatment effect at 1.45 additional social rent starts per 1,000 dwellings in a local authority in 2019/20. Disaggregating by provider type, I estimate 0.58 additional social rent starts by housing associations per 1,000 dwellings in a local authority. I find no causal effect for social rent starts by local authorities, or affordable housing starts irrespective of tenure. The findings suggest the policy was an effective, albeit limited, intervention for stimulating affordable housing supply.