Council development is an opportunity not a threat

Assuming these changes do go ahead – and they were not mentioned in the Queen’s Speech – the government will seek to strike ‘deals’ with councils to boost housing supply.

These ‘deals’ are expected to incentivise councils to become active players in the social housebuilding market once again and will consist of a package of measures including flexibility on borrowing caps, new deals on rent setting and access to direct funding.

“Increased competition could sound unnerving to housing associations.”

‘Deals’ are underpinned by practical changes, including compulsory purchase order reform, allowing councils to buy brownfield and derelict sites more cheaply and new powers to intervene where planning permissions are not being built out by developers.

Many councils are unlikely to jump straight back into the housebuilding market with both feet. The project management, construction and housing management skills they once had in abundance have transferred to housing associations and private developers.

Housing associations have largely assumed responsibility for delivering affordable and social housing schemes across the UK and it is likely councils will look to work with them in order to re-enter the housebuilding market in a meaningful way.

While some councils will look to ‘go it alone’, many will want to continue to work with associations and private developers.

Here, adopting delivery models that maximise the complementary skills of the parties – while being mindful of attitudes to risk, control, procurement, charitable duties and tax – remains the key to success.

Increased competition could sound unnerving to housing associations who have enjoyed a relatively uncluttered market place in the affordable and social housing development space until now.

“Associations should be ready to seize opportunities to work with councils.”

Fast-acting, ambitious councils could retain land for in-house development, rather than providing such land to housing associations.

Ultimately, however, councils re-entering the housebuilding market will help to drive efficiencies and create improvements in planning and build.

Backed by their skills and significant experience, housing associations are well placed to capitalise on existing relationships with councils and developers to increase overall housing supply and unlock difficult sites.

To prepare for market changes ahead, housing associations should be ready to seize opportunities to work with councils, secure ‘deals’ with the government and sell-in development, construction and management expertise.

Practically speaking, this means associations ensuring they have the right corporate structures in place for the projects they want to undertake alongside effective governance arrangements to enable quick and efficient decision-making.

A clear understanding of funding documentation will be essential; knowing which financial covenants will be triggered and in what circumstances saves significant time when considering delivery models.

Additionally, housing associations must continue to understand their existing asset base and have a clear focus on opportunities that meet identified need and deliver on values, mission and objectives.

While market diversification may bring some threats, there are likely to be far more opportunities for housing associations.

The key to sustained success lies in preparation, continued proactivity and understanding the partnering arrangements available.

Rachel Gwynne, legal director, Shakespeare Martineau