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Associations to boost development, sector survey finds
Housing associations are planning to use extra funding from the government to boost the development of new homes, an exclusive survey of the sector has revealed.
Of 91 associations surveyed by accountants RSM for Inside Housing, 79% said they planned to increase their development in the next four years, with 65% saying recent government announcements would have a positive impact on their development programme.
At the same time, associations took a sharp turn against their previous aims to cut costs, which has been a major theme of recent years due to the rent cut.
Just 48% of respondents said they would focus on cost-saving this year, down from 86% in last year’s survey.
It follows the government’s announcement that rents will rise by the Consumer Price Index (CPI) of inflation plus 1% from 2020.
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Keith Ward, head of social housing at RSM, said: “Amid a worsening housing crisis, it is good news that associations have their foot on the gas.
“Associations are set to deliver homes of all types, including low-cost homeownership and market value properties, but there is a clear emphasis on increasing development plans for affordable and social homes.”
In total, 79% of respondents said extra funding from the government will increase the development of social housing. Theresa May pledged an extra £2bn for affordable housing in October last year.
In Scotland, there was a similar readiness to increase development, with 83% of associations north of the border planning to increase their housebuilding efforts over the next four years.
The survey showed that 59% of Scottish associations, however, do not believe that the government will hit its target to build 50,000 affordable homes by 2021, despite an independent report last week concluding that the aspiration was within reach.
Julian Ashby, then chair of the Homes and Communities Agency’s Regulation Committee, issued a warning to the sector on development in November last year.
Mr Ashby told associations that the government would expect a significant increase in development in exchange for its change in stance towards the sector. He cautioned that the sector could lose its political friends if it did not follow through on its commitments to build.
Asked about the new rent deal, 81% of associations responding to the survey said they would take the opportunity to raise their rents by the full amount permitted. This was despite 52% of them believing such action will lead to bad debt, with tenants potentially becoming less able to pay rent.
Rod Cahill, chief executive of Catalyst Housing, told Inside Housing: “Rents will have gone down by over 15% in real terms in a four-year period. We will, I’m sure, be raising them by the full amount. But Universal Credit is a huge issue for us and our residents.
“It is an issue that the government is going to have to address. We can’t have a situation where some people just can’t pay. Ultimately we can’t house people who are unable to pay the rent.”
Rent arrears have already been a problem faced by increasing numbers of social housing tenants as Universal Credit, the government’s new welfare programme, has been rolled out to replace housing benefit.
In this context, 86% of respondents said they believe welfare reform will have a significant impact on their organisation.
Mr Ward added: “Despite the many thousands of pounds that have been spent so far on preparation activity, the sector is still just as pessimistic about welfare reform as it was when the changes were introduced.
“The relatively limited roll-out that has occurred so far will have done little to allay associations’ concerns about bad debts and arrears. With the changes here to stay, there is unfortunately no let-up in sight.”
In Scotland, where the rent settlement is devolved, associations are also preparing to raise rents. Of the Scottish respondents to the survey, 72% said they intend to raise rents by more than CPI in the next five years.
A new era for social housing
It's a new era for social housing.
The startling change in government policy over the past 12 months has led to a renewed sense of optimism and inspired a change in tack for many.
RSM’s latest Health of the Sector survey shows RPs have started to re-focus, shifting their attention from cost-cutting and instead looking forward to a future of delivery, innovation and transformation.
Our survey shows that the sector and the government are more aligned than they have been for years. The recent commitment to provide an extra £2bn for social housing offered a clear vote of confidence in the sector. After years of being seen as part of the problem, associations are now seen as part of the solution.
Associations said funding, availability of land and planning reforms were major factors that could spur development. The government has shown it is prepared to listen, recently promising to address each of these issues. It is a clear signal that ministers are willing to understand the challenges facing the sector, and offers yet more hope of a more conciliatory relationship over this parliamentary term.
“Our survey shows that the sector and the government are more aligned than they have been for years”
Against this backdrop, RP priorities have begun to flex. Just 48 per cent will focus on cost-saving initiatives over the next 12 months – down from 86 per cent last year. At the same time, our survey shows that 79 per cent plan to increase their development plans over the next four years. The sector’s foot is firmly on the gas.
Our survey reveals that RPs are set to deliver homes of all types, including low-cost home ownership and market value properties. But 79 per cent of RPs say the extra government funding to the sector will help to increase the development of social homes.
Amid a worsening housing crisis, it is good news that the government and the sector are now more in tune. The extra funding and eased development landscape gives associations the certainty they need to develop the homes the country desperately needs.
Keith Ward, head of social housing, RSM
