The capacity to build more homes would grow significantly if we support a wider mix of developers and organisations commissioning housing. Our analysis shows that housing associations (HAs) and local authorities have the potential to start building 45,000 new homes a year in England by 2020, with housing associations delivering 35,000 of these.

Housing delivery could be boosted further if more support is given to companies building for the rental market. We estimate that institutionally-funded PRS could add 10,000 new homes to the mix under the right conditions.

This would bring the potential number that could be started by alternative developers to 55,000 a year by 2020, an increase of 120% on the 25,000 new homes started by housing associations and local authorities in the year to March 2015.

Housing associations

Reduced Government grants prompted many in the sector to build homes for market sale in order to cross-subsidise other forms of tenure. The model relies on a strong property market and as a result, appetite for development risk among the sector is generally more robust in and around London.

The g15 group of London’s largest housing associations, are planning to build at least 93,000 new homes in the capital and the South by 2025. They expect to deliver at least 27% (25,110) over the next two years, 41% (38,130) in two to five years and the remainder thereafter.

At a national level, the National Housing Federation, which represents independent non-profit housing associations, told the Lyons Review that more than 100 HAs have the scope, scale and expertise to become major players with the potential to match the private housebuilders in the delivery of new homes.

Local authorities

Local authorities started building 1,830 new homes in England in the year to March 2015. Given the increased activity among Savills local authority client base, we estimate that there is the potential for local authorities to be starting 10,000 new homes a year by 2020.

However, the role of local authorities in boosting housing delivery goes well beyond their ability to build themselves. Councils play a crucial part in the planning system and have a responsibility to set targets that meet local need and to allocate sufficient land for residential development.

Councils can also contribute to greater housing delivery by taking a leadership role in land assembly and by contributing their own assets. These steps would help enable schemes that otherwise may not be viable.

Government as developer

One of the key proposals within the National Infrastructure Plan 2014 is for the government to master-plan, directly commission, build and sell homes. In a pilot programme, which aims to double the usual rate of delivery, the Homes and Communities Agency will commission local contractors to build 10,000 homes on a former RAF base at Northstowe, near Cambridge.

While this particular site carries its own development challenges, the new approach, if successful, could provide homes in addition to those delivered by conventional means. However, to ensure additionality, government commissioned homes must not simply replace existing plans for housing in any given market. Delivering a variety of tenures and targeting market sectors that are not being catered to by private housebuilders is key.

Institutional PRS

We forecast that the number of households renting privately is set to rise by 1.2 million to just over 6 million by 2019, with almost one in four households renting privately. Institutionally-funded rental homes can help meet that demand.

Our recent survey of leading investment houses identified a collective ambition to invest over £30 billion in the UK private rented sector, with over 50 per cent from UK investment houses. However, despite the demand from tenants and investor interest, a shortage of appropriate stock has prevented the sector from growing substantially.

Building to rent has the potential to expand. The Savills investment transactions database shows that a total of £3.2 billion of residential portfolios traded last year. This includes 20 build to rent deals worth £500 million, the bulk of which were in London.

We estimate that institutionally-funded PRS has the potential to deliver 10,000 new homes a year by 2020 if the sector were given greater support via the planning system and did not have to compete directly for land with developers building for the sales market.

Role of contractors

The construction industry is set to play an expanding role in increasing the supply of housing by working in partnerships with different sectors, in a model that may offer greater insulation to market cycles. Construction firms building under contract bear less development risk and therefore can work to substantially lower margins than housebuilders expect.

There is potential for joint ventures between big names such as the Kier Group, Bouygues and Willmott Dixon and local authorities, housing associations and investors in the private rented sector. Willmott Dixon is already playing a greater role in the residential sphere through its specialist rental company be:here and PrimePlace, its sales company.

Building on a different model

Some larger housing associations such as L&Q and Places for People use different commercial models to develop without any government subsidy.

^{Brooklands, Milton Keynes by Places for People and Barratt}