Social housing costs a quarter more than private built homes

Social housing costs 25% more to build than traditional market housing, according to figures obtained by QS News.

The average 72.5m2 social home is given £79,000 by government body the Housing Corporation which makes up around 55% of the overall cost.

This means that the average two-bedroom unit of social housing costs £143,636 including land, infrastructure and building costsWork recently completed by

the Building Cost Information Service (BCIS) calculated that a 78m2 home for private sale costs £72,090 to build. Although this figure excluded land costs it included infrastructure and marketing. As a rule of thumb developers tend to assume that land costs make up one third of the overall cost of a scheme.

On this basis, even including land, traditional housing is built for on average almost £40,000 less than social housing.

The figures give a more accurate picture of the findings of a Department of Trade and Industry study published in December. It showed building costs for social housing soaring ahead of private housing.

It is understood that John Prescott has demanded an explanation for this and that Government officials are exploring means of tackling the cost discrepancies.

QSs expressed concern that private homes should cost a quarter less than social housing to construct.

You’d have to look very carefully on what housing associations spend their money on

Andrew Hemsley, consulting boss, Cyril Sweett

Andrew Hemsley managing director at Cyril Sweett’s consulting division, said: “You’d have to look very carefully at what housing associations spend their money on and how they re-invent their property types [to reflect the market].

“How come house builders can build for less while using modern methods of construction? There is something not right there.

“Associations have been doing partnering and long-term funding deals with the Housing Corporation but they are still very expensive compared to house builders. House builders tend to have higher volumes and build on easier and larger sites but even so the difference is still very large,” he added.

Joe Martin, director at the BCIS, said: “It is interesting that there is increasingly no difference at all between the specifications of social housing and private sector housing. I wouldn’t have thought that the difference in costs between the two would have been that different.”

The Housing Corporation has acknowledged the difference and plans to cut its expenditure per unit by £9000 to £70,000 by financial year 2007/08. This is part of the wider government efficiency drive inspired by last year’s Gershon Review.

However, this would still leave the average unit of social housing at least £30,000 more expensive than private.