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How housing providers can help the UK bounce back from COVID-19
The latest valuations of the sector show that housing providers have the strong financial base from which to ensure the UK housing market hits the ground running when the lockdown is lifted, writes Robert Grundy
In common with the rest of the economy, the social housing sector has spent the past two months dealing with the massive curveball of the coronavirus crisis. The lockdown and response to ensuring colleague and customer safety have seen building work and non-essential maintenance paused.
Research from Savills shows how the lockdown has slowed the housing market, with home sales activity dropping away (potentially hitting house prices by 5% to 10% in the short term) and lettings restricted, too.
In our recent valuations update in light of COVID-19, produced with JLL, we said the impact of the crisis could see total housing sales transactions across all UK markets halve to around 600,000 in 2020.
However, in that same paper we also make clear that there is little impact on affordable housing valuations at this point and that the social housing sector remains in robust financial health. This is the crucial point for me as, in my view, housing providers have a key role to play as we emerge from the lockdown period and restart the housing market.
So how have we reached this conclusion and what does it mean for the role for the affordable housing sector in the recovery from the pandemic?
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Impact on valuations
In line with government guidance and Savills’ own duty of care to our colleagues and customers, there cannot be on-site inspections during lockdown. As a result, our valuations for lenders or for housing association balance sheets have been desktop valuations and can still be relied on during this time.
So, what does this mean for the two main measures of affordable housing valuation: Existing Use Value for Social Housing (EUV-SH) and Market Value Subject to Tenancies (MV-T)?
Although there is an increase in voids and rent arrears, the underlying strength of affordable homes as a tenure remains. Combined with the quick mitigating steps taken by housing providers and extensive government support for the wider economy, the impact of COVID-19 on valuations has been relatively slight to date.
“Although there is an increase in voids and rent arrears, the underlying strength of affordable homes as a tenure remains”
Regrettably, many social housing tenants are suffering increased financial hardship, but they are being supported to pay their rent and remain in their homes through the furlough scheme or other welfare measures.
Allied to the pause in development and non-essential repairs and maintenance I referred to earlier, we are not seeing any significant reductions in EUV-SH valuations and expect this to continue.
Due to the weakness in the wider housing market, we expect to see falls in house prices and no growth in market rents this year. As a result, MV-T valuations may show modest falls of up to 10%, depending on local circumstances.
Housing provider strength
While there have clearly been very tough decisions taken by housing providers concerning furloughing staff and supporting the continued delivery of essential care and support services, the housing association sector has demonstrated its overall financial strength and ability to adapt during the crisis.
Our valuations paper demonstrates that at present housing providers still have good loan security and firm financial foundations.
While supporting tenants and residents through the coronavirus response, the sector has been planning for life and work once the lockdown is over and we emerge from the crisis.
To that end, it has been really encouraging to see how housing providers have continued to raise funds to help deliver their longer-term plans to build more affordable homes, address fire safety issues and play their part in responding to the global climate emergency.
These overarching factors were the sector’s drivers before the outbreak, and they remain as challenges when this is over.
Emerging from the crisis
As I mentioned, in my view, affordable housing providers have an important role to play as we emerge from the crisis. Due to their financial strength, flexibility and clear social purpose, providers are well placed to quickly invest in building and maintaining homes and supporting the wider economy.
“It has been really encouraging to see how housing providers have continued to raise funds to help deliver their longer-term plans to build more affordable homes, address fire safety issues and play their part in responding to the global climate emergency”
In particular, housing associations will be able to deliver the affordable homes needed to house the key workers who have kept the country going during lockdown.
But housing associations can do even more to help the UK rebound from the pandemic – and do so in a way that addresses those key challenges of climate change and fire safety.
The government is exploring how it can best support the housing market to recover.
It is right that a range of measures are considered, however housing associations are able to move quickly, have extensive and trusted supply chains, and have sites ready to build hundreds of thousands of affordable homes that are safe and green.
Housing providers have the strong financial base from which to ensure the UK housing market hits the ground running as the lockdown is lifted.
Robert Grundy, head of housing, Savills
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