What are the real prospects for a surge of investment in affordable housing? The prime minister has just told us that he will not fix the “broken housing market” by “endlessly expanding the state.” At the same time, as the chart from the latest UK Housing Review Briefing Paper shows, the new Affordable Homes Programme starting next April will be the biggest in cash terms in England for a decade, signalling a growth in investment and the prospect of providers being able to plan ahead for at least five years.
The truth is that prospects depend a lot more on how providers respond to the programme than on the size of the programme itself. In part this is because the sector has to get to grips with the new provisions about shared ownership, over which there has been a lively debate in Inside Housing. The best guess is that most big providers will find ways to accommodate the changes, difficult thought this may be, as Geeta Nanda recently suggested would happen.
But for housing associations at least the details of the AHP are far less significant than they used to be. Grant currently makes up just 15% of their capital investment, with the rest funded by borrowing or from their reserves. So the state of their own finances is a prime consideration, with income having been affected by increased rent arrears and longer void periods. A fall-off in disposals of shared ownership and market sale properties is also affecting the potential for cross-subsidising new build programmes. However, as our Briefing Paper points out, so far these don’t seem to be serious handicaps. But landlords will be wary of the effects of the end of the furlough scheme and a possible surge in unemployment if the economy takes another hit either because of the pandemic or failure to get a deal with the European Union.
Even more significant as a handicap to new build is the need to invest in the existing stock. Many landlords are still assessing how much new building safety measures will cost them, even if most of those who need to have now dealt with the immediate problems of the cladding systems found to be at fault in the Grenfell Tower fire. Then there is the looming agenda for the sector to decarbonise, which implies spending up to £20,000 per dwelling on improving energy efficiency and installing low carbon heating in existing homes. Inside Housing reports that three-quarters of landlords are waiting for more direction from the government, but can they afford to get behind in meeting what are very tight targets?
Another area of uncertainty, outside providers’ control, is the impact of any changes to the planning system. Planning authorities are warning that affordable housing output will plummet if the reforms are implemented as they stand. Given that nearly half of affordable housing delivery in England comes from developer contributions, with no grant involved, the effect on delivery could be huge.
Finally, another “unknown” is whether the government’s need to stimulate economic recovery might lead to a further boost in housing investment as a sure way of creating jobs. The Labour Party has picked up the proposal from the Affordable Housing Commission for a new rescue package which would lead to social landlords buying properties in the open market, which is one possibility if the housing market starts to flag. Perhaps more likely after the Prime Minister’s speech to the Conservative Party conference is a sizeable boost in investment in energy efficiency. In either case, the sector should argue that it is ready to take the lead and can deliver effectively and quickly.
Original post and comments: Inside Housing