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Are social landlords losing their appetite to develop, or is it the menu offer they dislike?

Following the announcement of the latest round of HCA grants for the 2015-18 Affordable Homes programme, Keith Searle of SDS wonders if registered housing providers are losing their appetite to build new homes
 
The Homes and Communities Agency (HCA) has allocated just over half of its £1.7bn pot of grant funding for the affordable homes programme 2015-18, and it is clear that some of the biggest developing landlords are shrinking their bids by between a half and two-thirds of their previous programmes.
 
This is not good news for the 1.7 million households currently waiting to be housed, or the country as a whole.
 
Since the prospectus was announced earlier in the year some providers have warned that grant rates were too low and conditions too onerous to justify bidding. They point to the replacement of social rents with higher affordable rents combined with the welfare cuts as not sustainable.
 
The onerous conditions, which many refer to, have been set by the HCA and are in stark contrast to the proposed “cutting of red tape” that many thought would herald this round of funding.
 
Indeed many landlords in the North warned that the low grant rates did not make sense economically in an area where low market rents mean lower affordable rents. In addition many registered housing providers (RHPs) are unhappy with the requirement for landlords to carry out expensive retrofitting of existing stock and to provide greater nomination rights for local authorities.
 
It was hoped that the Government’s 10-year rent settlement would provide sufficient stability but it seem this has been undermined by landlords’ unwillingness to raise rents to levels that are increasingly unaffordable to their tenants
 
The news that RHPs could struggle to build sufficient homes after 2015 comes after it was announced that there are real concerns whether landlords will deliver the current 2011/15 affordable homes programme. Government figures show starts onsite have only reached 42,063 by last autumn against a target of 58,000 homes to be completed by March 2015, casting doubt on whether the homes can be finished in time.
 
So if, for whatever reason, RHPs have lost their appetite, where are the new homes for the future going to come from? Certainly there has been an increase in private developers bidding for grants but that on its own will not be sufficient.
 
In the 1980s, before it was decreed that councils could not build new homes, they were providing 80% of the country’s affordable homes while housing associations made up the rest with 20% The void left by the lack of council house building was quickly filled by housing associations who were geared up and only to ready to take on the development of new homes.
 
Today it is a different story. Now housing associations are developing 96% of the publicly financed homes and there is not a natural successor waiting to take their place. If they have lost the appetite to build who is going to step up to the plate this time?
 
Many think it is time for councils to become housing developers once again and since they were freed from the constraints of the Housing Revenue Account many have either started or are planning building new homes again. However after a 35-year period of inactivity it is going to take a long while for councils to gear themselves up to deliver anything like a significant new build programme.
 
Someone is going to have to do something either at Government level to encourage landlords to invest in new build or by the private sector taking more of an active role working with stock and land-owning councils. Otherwise the country could be facing a social housing crisis in the next decade.
 
Keith Searle is development director at SDS (Shelton Development Services)

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