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Brexit hangs over everything

There may have been positive housebuilding announcements in recent months, but Brexit is the big issue on which everything else hangs, writes Martin Hilditch

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Picture: Getty
Picture: Getty
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There have been some positive house building announcements recently, but everything hangs on Brexit, writes @martinhilditch #ukhousing

"Housing associations  say they have been stress testing for the Bank of England’s worst case scenario of a 35% fall in house prices" writes @martinhilditch #ukhousing

From strategic partnerships for housing associations to new plans to help councils build more homes, there have been a number of positive housebuilding announcements in recent months.

Even housing minister Kit Malthouse’s admission this week at a Savills seminar that the percentage of social housing currently being built is not enough represents a positive shift (although admittedly Mr Malthouse was responding to a set of truly dismal social rent figures).

Truth be told, however, welcome though each move is individually, there is a bigger picture that could result in all of this being little more than tinkering around the edges.

This week, with a no-deal Brexit still a real possibility, we’ve paused to take a look at what that might mean.

There are already some worrying warning signs – with new quarterly figures from England’s Regulator of Social Housing showing a 39% increase in the number of affordable homeownership units unsold for more than six months.

"Housing associations say they have been stress testing for the Bank of England’s worst case scenario of a 35% fall in house prices"

The same data showed a 33% increase in housing associations’ market sale units unsold for more than six months.

While this was driven in part by an increase in completions, Simon Dow, interim chair of the regulator, pointed out that it demonstrates “that sales risk is an increasingly important risk for providers to manage” and that it is vital for providers to carry out “challenging stress testing covering the crystallisation of multiple risks from a macroeconomic shock or wider market downturn”. He didn’t spell it out, but we’ll leave readers to guess whether, for example, a no-deal Brexit might crystallise some of those risks.


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Homes England has been speculating already.

Its chief executive Nick Walkley revealed this week that the agency has been drawing up contingency plans for the UK leaving the EU without a deal in March next year.

Meanwhile, in a new report, Savills warned that a housing market downturn could cut Section 106 affordable housing delivery in half – and pointed out that in the last downturn, Section 106 made up 19% of affordable housing starts, compared with 53% today.

Housing associations like Optivo say they have been stress testing for the Bank of England’s worst case scenario of a 35% fall in house prices. There are other issues to throw into the mix too, such as the availability of materials and workers, and the impact of major employers in particular areas shutting down.

 

Whenever it comes, and for whatever reason, the next downturn will test social landlords like never before. More than this, it will prove the extent to which the government’s model for funding affordable housing over the past decade – with its increasing reliance on cross subsidy – has been building failure into the system.

Social housing providers kept the building tap turned on during the last downturn – however, their delivery will be much more dependent on the market next time round. As we approach the Brexit endgame, providers will be eyeing their stress tests – but there’s a wider system under scrutiny.

Martin Hilditch, managing editor, Inside Housing

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