This year’s survey of the top 50 developing housing associations shows the number of homes built is down on last year by a quarter. Jess McCabe and Gene Robertson look at whether the right ingredients are in place to re-heat construction activity from such a flat performance
If social landlords operated like a pizza delivery service - delivery on time or your pizza for free - they might have to give away a few homes this year.
This year Inside Housing’s annual ranking of the top 50 developing housing associations reveals that even those delivering the most new homes across England completed just 25,634 homes in the last financial year. This is down by a startling 25 per cent on this time last year, and less than last year’s top 50 expected to build.
But, as we dig into the details of what the top 50 are building, are there clues as to why completions have dropped? And can we believe assurances from the Homes and Communities Agency that the proverbial pizza delivery is in fact only around the corner?
Each year, Inside Housing surveys the biggest 100 housing associations in England, in order to rank the 50 housing associations that are building the most homes. We compile two rankings - those which completed the most homes in the last year, and those planning to build the most new homes next year.
As well as a ‘who’s who’ of the big builders and those that have the most homes in their pipeline it provides a window into broader industry trends. We find out exactly how many homes associations are constructing and what tenure they are, as well as surveying their plans for the future.
Last year’s top 50 completed 34,435 homes between 1 April 2011 and 31 March 2012. This year’s top 50 managed just 25,634. This number is 14 per cent lower than last year’s top 50 expected to deliver - they anticipated they would build just under 30,000 during 2012/13.
Bump in the road
The numbers have fallen short, but Richard Hill, the outgoing deputy chief executive of the Homes and Communities Agency, is fairly positive about the results. Mr Hill says these numbers just represent a bump in the road, caused by the transition two years ago from the old grant programme for social housing to the current 2011/15 affordable homes programme.
‘There is a drop off in completions - and a much, much better position on starts than last year,’ Mr Hill says. Indeed starts by the top 50 are up, from 17,350 in 2011/12 to 27,938 in 2012/13.
According to the HCA’s own statistics, Mr Hill points out, two years into its affordable homes programme, ‘we’re pretty much half way’ to the programme’s overall target to build 170,000 affordable homes.
He’s also rather bullish for next year, adding: ‘I think we’d expect the completions numbers to be higher than this year and strong starts numbers next year as well.’
This is somewhat borne out by talking to associations in the top 50. The HCA’s upbeat assessment is shared by Paul High, executive director of Orbit Homes, which has leapt from 13th place to third in the top 50 by completions.
‘If starts were down then clearly [we would be] on a downward trend,’ he says. As this is not the case, he’s more positive. The low completions this year, he speculates, are a result of a lull that took place in 2011/12 when there was a gap before the affordable homes programme started, ‘working its way out of the system’.
However, looking at the numbers completed this year, compared with what last year’s top 50 expected to build, this can’t be the whole story. Orbit is actually unusual, in that it completed 914 homes - at the time of last year’s survey it predicted it would build 874. But its jump up the ranking is partly a reflection of the fact that other social landlords haven’t delivered the number of homes they planned to.
Last year, 11 housing associations completed more than 1,000 homes. This year, just two - L&Q and Sovereign Housing Group - delivered this many. One Housing Group topped Inside Housing’s top 50 by pipeline in 2012, predicting it would build 1,570 homes this year. If completed, it would have claimed top spot in our rankings. However, the 14,000-home housing association built just 525 homes in 2012/13. It explains this shortfall, saying the figure supplied last year included all of the homes it would have ‘onsite’, not just those it expected to complete.
Topping the charts
L&Q is top of our completions leader board for the third consecutive year. The London-based association completed 1,444 homes in 2012/13, more than any other social landlord. However, this is still fewer than the 1,608 homes completed by the 70,100-home organisation in 2011/12. But L&Q did outperform its own target - telling us last year it aimed to build 1,143 homes during 2012/13.
Jerome Geoghegan, its group director of development and sales, says delays in the planning system and among contractors can cause fluctuations in the number of homes built year-by-year. We should expect from L&Q ‘a low number next year, but a really high number for the year after’, he predicts.
Even though L&Q retains its top spot, further down the top 50 there have been dramatic reshuffles. Notting Hill Housing Group was in second place last year, when it completed 1,580 homes. This year it has dropped to 19th place, building just 536 homes. The association always knew it would not deliver as many this year - but it has not delivered the 659 homes it said it expected to in 2012/13.
‘I don’t think we have reduced what we are doing. We have increased what we’re doing. It’s a timing issue,’ says John Hughes, group development director at Notting Hill. He also puts this down to the transition between grant programmes. ‘That caused a delay to our programme.’
Lost their way
Five associations have dropped out of the rankings completely, some of them after large drops in the number of homes completed. Sentinel Housing Association has suffered the biggest fall - it ranked 27th last year, when it completed 570 homes, but in 2012/13 it completed just 162 homes.
Julie Porter, assistant director of development at Sentinel, explains this ‘reflects the cyclical nature of our regeneration programme’. She adds: ‘We had one large project that finished the year before last, and another large project hadn’t started yet. We expect our programme to balance out over future years as we have a firm pipeline of 1,250 new homes.’
Likewise Town & Country Housing Group has dropped out of our ranking after completing 164 homes. CHP, which built 485 homes in 2011/12, only finished 90 homes during the past 12 months. It told us that in fact 2011/12 was an exceptionally busy year for CHP, after it received a high grant allocation in the previous year. Fabrick and Your Housing Group - previously ranked joint 47th - also slipped out of our top 50.
Meanwhile, other associations have shot up the leader board. The reasons for these changes demonstrate just how sensitive to policy and local conditions housing associations are.
East Thames Group, for example, is the highest new entrant to the top 50, joining the ranking at number 14 with 653 homes completed. Trevor Burns, assistant director of development, explains that the association - based in east London and Essex - has been playing catch-up. In 2009, East Thames put in place a design guide, which set out tougher standards for the dimensions of new homes and the standard of building. This guide, Mr Burns says candidly, put the association at a disadvantage in negotiations with house builders and in buying land, as its competitors could deliver the same number of homes but cheaper.
But, he explains, the bump in completions this year is a result of new housing standards put in place by the London mayor in 2011, which were set at about the same level as East Thames’ own design guide. ‘Suddenly the playing field is much more level - everyone’s quality standards have gone up to [the same level as] ours,’ Mr Burns states.
Another fast riser is Paradigm, which jumped from 39th last year, when it built 403 homes, to number four in this year’s ranking, having doubled the number of homes completed year-on-year.
One - perhaps surprising - result from this year’s survey is that the top 50 are already planning how many homes they will build as far ahead as 2020. This is despite the fact the government’s current grant programme halts in April 2015 and, at the time this article went press, nothing had been announced to replace it.
Just four of the top 50 developing housing associations by pipeline couldn’t give a figure for how many homes they expect to build between 2015 and 2020. And only one - Great Places - answered ‘zero’.
Our top 50 by pipeline believe they will build at least 110,771 homes during that five-year period. Some of these predictions are more speculative than others - most organisations have yet to secure all of the sites needed to build their planned homes.
Orbit is the housing association with the biggest plans for its development pipeline to 2020. It expects to build 8,000 homes by the end of the decade. Orbit’s Mr High says this number could increase, depending on the level of subsidy the government makes available for building affordable homes.
But delivery above 8,000 is not guaranteed - the number of homes Orbit eventually builds will depend on how generous those government grants prove to be: ‘If it’s available, perhaps a little bit more freely than it has been in the last three or four years, I would expect that number to rise,’ explains Mr High.
As many as 2,000 of Orbit’s 8,000 target could be sold on the open market, he adds. That would be a big change for the association - of the 914 homes it completed during the last year, just 49 were for market sale.
Perhaps predictably, our chart-topper L&Q is furthest along this process, having already secured sites for 99 per cent of the 7,580 homes it expects to build between 2015 and 2020. Only one third of those homes will be ‘sub-market rent’, however. Another sixth will be shared ownership, a sixth will be market rent and a full third will be sold at market rates, explains Mr Geoghegan.
‘We think that is a deliverable proportion,’ he adds. But that also represents a major change from today. Last year, L&Q completed 201 homes for market sale - about 13 per cent of its total. And more than 60 per cent were social rent.
The reason for this change, of course, is that social landlords making plans for the future still don’t know how much, if any, government subsidy will be available to help them build more affordable homes.
But the top 50 are also building on a trend that has already begun. Our research casts a light on the tenures of the homes being built. This is the second year of affordable rents - through its affordable homes programme, the HCA financed associations to build homes to be rented out at up to 80 per cent of market rents, in comparison to the cheaper social rents of the past. As a result, just 47 per cent of homes completed are destined for social rent (see pie chart, right: Homes completed in 2012/13 by tenure). This compares with 66 per cent in 2011/2012.
If the number of starts by the top 50 are any indication, social rent is about to account for only small slice of housing associations’ development programmes - of the homes started in the last year, just 10 per cent are for social rent.
The number of affordable rent homes has unsurprisingly increased, from 6 per cent last year, to 21 per cent this year. Low-cost homeownership has also risen marginally, to 22 per cent from 21 per cent. And homes designated for market sale have risen slightly to 7 per cent.
But looking at the new starts breakdown by tenure, the trend towards the market sales and market rent becomes more striking. One in 10 homes started last year by our top 50 by completions are destined to be sold at the price dictated by the market. And 23 per cent will be sold under a low-cost homeownership scheme.
The number rented out by social landlords at market levels remains small - 754 homes - but is climbing from the 636 homes completed last year to be privately rented.
Some associations say they are using these sales and private rentals to cross-subsidise their programmes to build affordable housing. But, as L&Q’s Mr Geoghegan points out, there are limits to how long associations can do this.
The man presiding over development at England’s highest delivering social landlord echoes noises made by many of the organisations in the top 50 when he says L&Q aims to build ‘as many homes as we can - while remaining within our own risk allocation’.
How the top 50 was compiled
Inside Housing asked the 100 biggest English housing associations, in terms of the number of homes they own and manage, plus a number of others that were part of last year’s survey, a series of questions about how many homes they built over the last year, and their development pipeline to 2020.
We have included two top 50 rankings: the first is based on the actual number of homes associations have completed in the last financial year. The second, more speculative ranking, is based on the number of homes that associations expect to build in the next year. The aim is to give an accurate picture of which organisations are building the most now, and how the picture will change in the coming years.
The rankings were compiled based on their answers and rely on associations to be honest. As in previous years, we will spot-check their end-of-year reports to monitor the accuracy of the numbers we have printed here.