Recent government statistics reveal a dramatic decline in affordable housing development. In 2023-24, only 43,439 affordable homes were started in England – a staggering 39% decrease from the previous year. London’s situation is even more dire, with an 88% plunge in affordable housing starting from 26,386 to just 3,156. This collapse in supply comes at a time when demand continues to soar.
At this rate it would take 30 years just to clear the current waiting list in England, but the projections go the other way. Research from Jones Lang LaSalle last year projected that the social housing waiting list in England could exceed two million by 2034 unless there is significant intervention.
Local authorities across the UK are legally obligated under the Housing Act 1996 and subsequent legislation to secure accommodation for eligible homeless applicants with priority need. However, councils are increasingly struggling to fulfil these duties due to the severe shortage of affordable homes. The financial burden is substantial, with local authorities spending an eyewatering GBP2.3 billion (US$2.95 billion) on temporary accommodation in 2023-24 alone.
The private rental market offers little relief. Recent research revealed that just 2.5% of private rented homes in England are affordable for people on housing benefit, known as the local housing allowance (LHA), down from 12% in 2021-22. With LHA rates frozen until 2026, and private sector rents rapidly increasing, the situation is only going to get worse.
This crisis presents a unique opportunity for Islamic investors to make a significant social impact while offering compelling advantages: ethical alignment with religious principles, asset-backed security through tangible property as well as financial stability and security, with demand from families and councils alike materially outstripping supply.
Written by Philip Churchill, first published in Islamic Finance news Volume 22, Issue 16 dated 23rd April 2025.