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Disrupt the system

We’ve been tweaking the way we approach housing supply for too long. It’s time for a different approach, says Mark Henderson

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“The first ingredient to being wrong is to claim that you are right. Geniuses have a knack for raising new questions. Hence by the public they are either admired for their creativity or, even more commonly so, detested for disturbing the daily peace of mind.” So said philosopher Criss Jami, who even if you don’t agree with him, at least has a cool name. I do agree with him, however, and now, more than ever, we need a bit of disruption in our housing supply. How long have we had a housing crisis, since when did we actually build enough homes for our country (and even when we did, how long did we do that for)?

The sad answer is that despite whatever tinkering we have done with a pretty fixed state housing supply system, we have failed to fix the problem. And, to make it worse, we keep saying we must tweak the existing system as somehow “it is right”. Well clearly it is not.

So how can we throw a bit of disruption into the housing system, and who should do it? In answer to the second question, who is better placed than the housing association sector? We have the interests of the country at heart, we are here to help solve the lack of affordable housing, no matter what tenure that is, and we have some great innovators and great innovations across the sector to show how it can be done.

Time for change

There are four ways we can pretty readily disrupt the existing system:

  • Building types: how long have we been building in the same way? I was in Egypt 10 years ago, and the pyramids construction method isn’t all that different to how we currently build. Yes, they still stand and it’s reliable, but they never really built enough and nor have we. So offsite construction, flat-pack housing, barcode design and build, cross-laminated timber sheets to build without joins: all of that can disrupt but critical to this is scale and market acceptance, and we can all play a part in each of these areas.
  • Land assembly: I’m a planner, and I don’t blame planners for the problems. I think it’s about reducing risk and increasing certainty for development investment and that needs proper land assembly to provide land for development not only today, but a proper pipeline, so we can also invest in infrastructure and especially in people. How many more apprentices could we employ if we had certainty of developing in a particular area for 10 years or more? Brave civic leadership by local authorities is required to form long-term joint ventures with private developers and associations to build out against a number of sites - some viable, some just below viability.
  • New forms of investment: housing associations are safe and solid organisations for investors. We have a recognised system of regulation that further de-risks us and despite market uncertainties post Brexitrump, we are still a great investment grade sector. So how can we tap into new forms of finance? De-risk and increase certainty for the investor - the private rented sector hasn’t taken off in a huge way yet - because the market can be volatile, so returns to the pension funds etc can be a bit riskier than their normal portfolio of investments. We can create large new developments that provide a mix of rented tenures (from full market to significantly below market) that combine to provide a guaranteed income. And if you cap that income so it always generates a guaranteed income, we can then play with the tenure mix, increase the below-market rents in times of market rents rising and so on. At Home Group, we do this through our new Flexi Rent product and it’s great to see others coming to market with similar opportunities.
  • And, finally, tenure: first we must flex tenures over a customer’s lifetime, maybe starting out with a subsidised rent, before moving to market rent over time and then from equity share to ownership - and then releasing equity into their older years to cover care costs but still leave a legacy for the kids. Then there’s Rent to Buy, bringing ownership to the ‘just managing’ cohort of customers and taking them through the route of saving, generating a decent credit score and finally getting full or part-ownership. It’s great for them to own and have skin in the game of their community, but for us, we’re generating a whole new full or part-ownership cadre of people, disrupting the market once again.

Everything I have talked about here is happening already, and happening within the sector. We have the genius to disrupt the housing market and find real solutions to our crisis - and it seems we have a government that’s prepared to listen and, I hope, work with us to scale these innovations up.

Disruption: bring it on.

Mark Henderson, chief executive, Home Group

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