Wednesday, 07 October 2015

Landlord reveals it may not be able to build all 3,000 grant-funded homes

Delivery concerns at Affinity Sutton

One of England’s largest developing landlords has said it is unlikely to be able to deliver all 3,000 homes it is contracted to build by April 2015 under the government’s £1.8 billion affordable homes programme.

Affinity Sutton revealed it will build ‘hundreds’ fewer homes than it agreed two years ago in its partnership deals with the Homes and Communities Agency and the Greater London Authority, due to problems getting some councils to agree to it charging affordable rents.

Under the AHP, landlords are expected to charge up to 80 per cent of market rents in return for a reduced grant level. Affinity Sutton won the second largest allocation of grant funding - £65 million - but its 3,000-home development plans have been reliant on being able to convert a high number of re-lets to affordable rents, as well as charging affordable rent in the new build homes.

Since associations made their funding bids in 2011, several councils have resisted allowing the higher rents to be charged, leaving a funding gap.

In its annual report, Affinity Sutton said: ‘We must balance delivery of the programme with both the management of local priorities and the group’s long-term interests and consequently will not build units at any cost.’

Mark Washer, finance director at the 57,000-home association, said: ‘We understand where local authorities are coming from, but that has meant there is not the level of subsidy needed to deliver the homes.’

He added there was also a lower level of turnover of tenancies than had originally been anticipated.

The association is in talks with the HCA and GLA about whether it will return grant funding. Neither body is likely to impose any penalty on the landlord.

Steve White, chief executive of Hyde Group, said his organisation had experienced similar problems. ‘It has been difficult to get the level of rent convergence we were expecting and we have also struggled to charge the rents we expected - and this has diminished our appetite for another round of affordable rent,’ he said.

He added this will cost Hyde ‘a lot’, but it will still deliver its contracted 1,030 homes using £25 million.

The LGA declined to comment.

A spokesperson for the HCA said: ‘In the event a provider confirms [it is] not confident it is able to deliver its full allocation, and wishes to hand back funding, it should do so to allow us to re-allocate to providers with pipeline schemes that are able to deliver.’

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