Tuesday, 01 September 2015

Concern over affordable rent programme leads associations to slim down development plans

Housing associations cut development by half

England’s largest housing associations have slashed development programmes by up to 50 per cent, bids submitted to the Homes and Communities Agency this week reveal.

An Inside Housing survey of 20 associations show eight expect development levels to drop. Just two expect to build more homes. The news follows Tuesday’s bid deadline for a share of the £1.8 billion available under the affordable rent programme, which the government hopes will provide 56,000 low-cost homes over four years towards a target of 150,000 by 2015.

Bidders are expected to use extra income from charging rents at up to 80 per cent of market levels on new builds and re-lets, to leverage bank loans to help finance developments. But our poll reveals associations are bidding cautiously amid concerns about the extra level of borrowing risk.
Three housing providers - 38,000-home Metropolitan Housing Trust, 38,000-home Symphony Housing Group and 15,000-home Plus Dane - expect their development to drop by half. Others, including Affinity Sutton and Bedfordshire Pilgrims Housing Association, expect drops of between a quarter and a third.

People are bidding very cautiously because it is a step in the dark

James Tickell, director of consultancy Campbell Tickell

Keith Exford, chief executive of Affinity Sutton, said: ‘Associations might have been prepared to take more risk if there were not so many uncertainties.’

Bill Payne, chief executive of Metropolitan Housing Trust, said he was concerned about leaving tenants in a benefit trap by moving properties to affordable rent.

One senior housing figure, who did not wish to be named, said he would not be surprised if landlords’ caution left the programme undersubscribed.

James Tickell, director of consultancy Campbell Tickell, said: ‘My guess is there will be enough bids to fill the programme, but I don’t think it will be massively oversubscribed. People are bidding very cautiously because it is a step in the dark.’

Plus Dane Group expects to develop 1,000 homes under the affordable rent programme, half the amount it built over the past four years. But its chief executive Ken Perry hopes to fund additional homes through other mechanisms, including a group bond issue.

Bromford Housing Group is one of two landlords which expect to deliver more homes under the new regime. Bidding as part of a consortium with seven other associations, it has submitted a £100 million bid to build 5,000 homes over four years in the midlands and west England.

Mick Kent, chief executive of BHG, said landlords in the midlands were more able to develop under affordable rent than those in London because rents are lower, making them more affordable.

Two councils have also confirmed they have bid, Barking & Dagenham Council hopes to secure £25 million to build 850 homes, while Birmingham has also bid but not revealed details.

Additional research by Inside Housing reporters

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