Housing associations are committed to ramping up their delivery of social rented homes over the next five years, as government policy becomes more favourable towards the sector, an exclusive survey has revealed.
Research conducted by Savills UK and Social Housing found that nearly 80 per cent of housing leaders aim to deliver social rented housing, compared with just over half of those surveyed in 2017.
The report was launched today at Housing 2018 in Manchester, a key event for the Chartered Institute of Housing and Europe’s biggest housing conference.
A total of 100 housing association chief executives and senior board members gave their views on the challenges their sector faces in delivering more homes, as they detailed their expected development plans from 2018-2022.
The findings affirm a refocus from last year, when leaders were increasingly eyeing the sales market in a bid to find new income streams. While this is still an important factor for many of those surveyed, there seems to be renewed focus on the sector’s core social purpose of delivering homes for those who need it most, particularly in the wake of last summer’s Grenfell Tower tragedy.
A sizeable 65 per cent, for example, said tenant services had been a priority in the past 12 months, while 90 per cent said fire safety had been an increased priority over the same period.
In line with this, one of the key takeaways from the research was that 94 per cent of respondents said housing priority fell into one of three groups: working households unable to afford the market, the homeless and vulnerable people.
Lucian Cook, Savills’ head of UK residential research, said: “There is a greater realisation of the need to house people from very wide socioeconomic backgrounds and demographics.
“We’ve got this extra £2bn of funding, with [an indication that] demand for this is going to be significant, but I also suspect [the results reflect] the fact that the wider conscience of society has been impacted by the events of Grenfell.”
Mr Cook also pointed to the improved relationship with the government following the tougher times of 2015, when the previous administration introduced a four-year rent reduction.
He added: “There is a real sense that housing associations, politically, have been brought back into the fold in terms of what they have to offer to help address the housing crisis.”
Despite Brexit being just nine months away, only four per cent of leaders said it was a top-three barrier to delivery.
That said, when asked more specifically about how Brexit would impact their organisation, associations were clearly worried about the effect it will have on the construction sector.
An overwhelming 94 per cent of leaders said Brexit would negatively impact construction capacity. Operating cost will also be negatively affected, according to 76 per cent of respondents.
Some associations are taking control of this delivery challenge, though, through modern methods of construction.
One focus group attendee revealed that they were looking to set up a local offsite manufacturing factory in partnership with three or four other organisations.
Partnerships and competition
Mergers have become less favourable among leaders, with 39 per cent of respondents saying they were considering one in the next year, compared with 58 per cent last year. Instead, there is a greater interest in partnerships between local authorities (65 per cent) and private developers (66 per cent).
However, increased competition between associations is also playing a role in pushing up land prices, particularly around schemes with between 100 to 200 units.
Bids for Section 106 stock continue to heat up, with one association revealing it had lost 60 bids in a row for affordable rented homes, which meant it had to increase its focus on delivering homes itself.
Mr Cook said this high level of competition for Section 106 units and for the land which is available to them calls into question whether a more accommodating planning environment is needed for associations to get access to strategic land.
“The primary areas where there’s going to be joint venturing or partnering or working with third parties are going to be about use of public sector land in terms of working quite closely with Homes England as a source of bringing land through the system,” he said.
“But also with some of the major house builders, who have some of the large sites and who through the Letwin Review are going to be under some pressure to make sure that housing is brought forward at a slightly higher pace.”
Addressing these barriers will be crucial to meeting the government’s 300,000-homes target, particularly in delivering social housing across the country.
Elsewhere, there is still a recognition that market sale and rent activity will be an important element within associations’ development programmes in terms of cross-subsidising their social activity – albeit the proportion of leaders planning to deliver market units has reduced.
Specifically, those planning to deliver homes for sale over the next year stood at 41 per cent, compared with 44 per cent the year before. A smaller proportion of leaders are planning market rent this year at 17 per cent, compared with 23 per cent the year before.
Larger differences could be tracked across the five-year development view, with 61 per cent planning to deliver market sale over 2018-2022, compared with 66 per cent for the 2017 respondents.
Meanwhile, those aiming to deliver homes for market rent over the next five years stood at 27 per cent, representing an 11 percentage point decrease from last year.
At the same time there has been a drop in interest among housing leaders towards partnering with institutional investors, which Mr Cook said could correlate with a change in attitude towards the build-to-rent sector.
Funding and financing
When asked about the funding strategy or financial structures underpinning associations’ development plans, a slight majority of 57 per cent said they already had them in place.
Similarly to 2017, gearing capacity and exit charges from existing loan agreements remained the two most pressing funding challenges for associations, although this is a problem that has clearly become more acute over the past 12 months.
This year, 76 per cent of leaders listed gearing capacity as a top-three issue, compared with 30 per cent the year before, and 70 per cent of leaders flagged exit charges within their top-three challenges, compared with 43 per cent in 2017.
Interestingly, a much larger proportion of leaders this year listed board appetite as a barrier to funding, with nearly 30 per cent saying it was a top-three issue, compared with only two per cent last year.