Associations fear further subsidy cuts will end large-scale affordable house building
Developing landlords face extinction
Landlords will slash the number of affordable homes they build if there is a further cut to government subsidy in the next comprehensive spending review.
Worried landlords have been modelling the impact on their business if the government withdraws grant entirely. The next spending review is expected in 2013.
Jerome Geoghegan, development director at 66,000-home London & Quadrant, said that without grant a maximum of 20 per cent of its programme would be for affordable rent.
Affinity Sutton, whose £65 million grant to build more than 3,000 homes is the second largest awarded under the Homes and Communities Agency’s 2011/15 affordable homes programme, said it would have to ‘substantially reduce’ its plans - even if the level of subsidy is maintained.
Keith Exford, chief executive of the 55,000-home landlord, said the current funding regime would mean a 10 per cent increase in stock would require a 50 per cent increase in borrowing, equating to more than £50 million based on the association’s 2010/11 accounts.
Meanwhile, a study by Helena Partnerships found just one in 12 of the homes it could provide after the end of the 2011/15 programme would be for affordable rent if there is no government grant for 2015/19.
Under the current funding system, which has seen the HCA provide grants of on average £22,000 per home, Helena anticipates that half its development programme will be ‘affordable’. But many in the sector expect that the government will either cut subsidy or remove it entirely as part of the next round of funding.
Several other landlords have made contingency plans for a ‘zero grant’ system, with many admitting they would be unable to match their current level of affordable housing.
‘The government will try to cut grant again and there will be some that will play ball and some that can’t,’ said one housing association chief executive who did not wish to be named.
Lucy Thornycroft, interim head of investment policy and strategy at the National Housing Federation, said: ‘Without some subsidy it will be impossible to tackle the housing crisis.’
The news follows a hint by housing minister Grant Shapps that affordable rent might not be a ‘one-off’, and a claim from shadow housing minister Jack Dromey last week that Labour would not ‘simply accept the affordable rent model’ if it wins the next election.