Housing white paper pledges clarity on rent policy in return for new build

The UK government has pledged to set out a social and affordable rent policy for housing associations and local authorities post-2020 in return for more homes being built in this Parliament.

In its highly-anticipated housing white paper - entitled ‘fixing our broken housing market’ and launched yesterday (7 February 2017) - the government called on local authorities, developers, housing associations (HAs), infrastructure providers, mortgage lenders and local communities to play their role in addressing housing need.

In her foreword, Prime Minister Theresa May said: ‘We will encourage housing associations and local authorities to build more, and we will work to attract new investors into residential development including homes for rent.’

Amid the 100-page paper was a commitment to set out a rent policy ‘in due course’ for housing associations and local authority landlords for the period beyond 2020 ‘to help them to borrow against future income’.

It promised ’clarity’ over future rent levels in return for HAs and local authorities building more homes in this Parliament.

Housing providers were ordered to cut rents by 1 per cent over four years by former Chancellor George Osborne in July 2015, which had a major impact on HA revenues and business plans and resulted in investors - who base investments on rental income streams - calling for certainty from government.

‘We will provide clarity over future rent levels. In return, we expect them to build significantly more affordable homes over the current Parliament,’ the white paper said.

The government added that it will ‘undertake further discussions with the sector before doing so’.

‘Our aim is to ensure that they have the confidence they need about their future income in order to plan ahead. The government also confirms that the 1 per cent rent reduction will remain in place in the period up to 2020,’ it added.

The paper - launched by communities secretary Sajid Javid - called on HAs ‘to explore every avenue for building more homes’.

‘We welcome the sector’s aim to deliver many more homes each year and some housing associations are rising to meet this challenge.However, many housing associations undertake little or no development, and we expect all associations to make the best use of whatever development capacity they have to help meet local housing need.’

It said it also expects HAs to ‘make every effort to improve their efficiency’ to release additional resources for housebuilding.

It added: ‘In some cases, housing associations will be able to drive efficiency through mergers or partnerships with other associations.

‘We welcome the efforts being made by some in the sector to create a single set of metrics to make it easier to compare housing associations’ efficiency. We expect the sector to implement this agenda and deliver measurable improvements in efficiency.’

The government used L&Q as an example of a successful housing association and a leading residential developer, drawing on its move towards strategic land. The paper also encouraged institutional investment in the private rented sector and promoted more modular and factory built homes.

Government has also called on institutional investors to ‘invest more widely in housing, including shared ownership’.

John Marr, senior policy advisor at the Council for Mortgage Lenders, which represents housing funders with £60bn of private finance in social housing, said: ‘We welcome the intention to provide greater certainty on rent policy, particularly post 2020.

‘We look forward to more detail and are ready to engage with government and the sector on how it can best address the challenges of ensuring housing associations are able to develop sustainably.’

Piers Williamson, chief executive of The Housing Finance Corporation - the largest investor in social housing and partner to the government’s affordable housing guarantee scheme - welcomed acknowledgement of the rent policy issue.

He said investors have become more concerned over associations’ exposure to sales risk in recent times - a growing trend as HAs look for new ways to subsidise their core social housing activity - but that this becomes a ‘double jeopardy’ when combined with uncertainty around rental streams within the core social housing business.

‘Now we need to move from acknowledgement to consultation, and come to a formula that means long term investment can carry on being put in,’ he said.

‘It’s now everyone’s job to be constructive about it.’