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A return to housebuilding – what are the options?

Professor Paddy Gray looks at what a return to development for the Northern Ireland Housing Executive might look like

Paddy   Gray

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Paddy   Gray
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NIHE: what would a return to development look like?

It was not that long ago that the Northern Ireland Housing Executive (NIHE) was building the vast majority of new homes across Northern Ireland.

In 1977 more than 70% of new homes were provided by the then largest social housing organisation in the UK. However it hasn’t been building since 2002, when this task was transferred to a number of housing associations.

In the early years of this change in direction, however, building by these relatively small organisations didn’t keep pace with the targets set, and this created a backlog. Today these very same organisations have stepped up to the mark.

Numerically there are now around half of those that existed when the transfer of new build took place back then, but the sector has become more professional and ambitious in its outlook, particularly in leading on mixed-tenure developments.

“The amount of housing that is required differs depending who you talk to.”

Governance arrangements have been tightened by an ever-alert Department for Communities (DfC) and mergers have created greater capacity to borrow, but at the same time smaller associations are allowed to be part of the jigsaw.

Recently the NIHE announced its intention to return to building houses again after 15 years in the wilderness. Many commentators have welcomed this approach, citing the great need for housing – particularly on its own estates. Indeed there is still a need for social housing demonstrated by stagnating waiting lists and recent increases in homelessness. But the amount of housing that is required differs depending who you talk to.

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NIHE has consistently, through its net stock model, estimated that there is a need for 1,500 new homes per year – plus 500 to meet the backlog that was created in the early noughties.

Before the Northern Ireland Government collapsed at the beginning of this year it had set a target of 9,600 up to 2021 while the DfC recently set a reduced target for 1,600 for 2017/18.

In any case housing associations have been more or less meeting the targets set for them in recent years and would surely step up to the mark if those targets increased to meet the backlog identified by NIHE.

“One local journalist even suggested that the entire stock could be sold to a British housing association.”

If the organisation did return to new building it would have to finance this through a number of ways, given current restraints it has on private borrowing as a public body.

It could convert to one or more housing associations (six had been mooted at one stage) although this caused major debate, with one political party referring to the balkanisation of Northern Ireland given the geographical divisions that e­­­xist as more than 90% of social housing across the region is segregated.

It could transfer all of its existing stock to existing housing associations but there is a view that they would not have the capacity to absorb or finance the transfer of more than 85,000 dwellings. In its current status it could refinance its existing historic debt of more than £400m at a lower interest rate raising around £77m per year and it is believed that several banks would be willing to make loans on this basis.

“Investment should be targeted at existing dwellings.”

It could raise finance by increasing rents which are comparably much lower than average housing association rents and similar regions in the UK but this needs political support and recent rent freezes haven’t helped. One local journalist even suggested that the entire stock could be sold to a British housing association.

It is my view that the NIHE has to raise much-needed investment but primarily this should be targeted at its existing dwellings.

A stock condition survey carried out by Savills in 2015 suggested that there has been significant underinvestment in NIHE stock since 2009, with £7bn investment in stock needed over the next 30 years (£340m each year over next five years) and nearly half the stock requiring immediate investment.

This should be where any money raised from whatever source is invested while at the same time the organisation should support the ever professional and financially sound housing associations to continue to meet the new build targets set.

Professor Paddy Gray, Belfast School of Architecture, Ulster University

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