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Cross-subsidy model is ‘absolutely bust’, says L&Q’s development director

The cross-subsidy model is “absolutely bust” and the only model for delivering affordable housing is through government grant, the director of development and sales at L&Q has said.

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Picture: Sonny Dhamu
Picture: Sonny Dhamu
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Cross-subsidy model is “absolutely bust” and the only way to deliver affordable housing is through government grant, says @fifletcher, director of development and sales at @LQHomesMatter #ukhousing

Speaking at an event in London, Fiona Fletcher-Smith, group director for development and sales at L&Q, said housing associations have been hit with a “triple whammy” of falling sales profits, increased costs and costs associated with fire safety work.

The cross-subsidy model requires associations to raise money through selling private sale homes to fund affordable housebuilding. However the model has been hit badly of late, particularly in London, due to the stagnant housing market making it difficult to sell private sale homes.

The comments from Ms Fletcher-Smith come nearly two weeks after Inside Housing revealed that the housing association has put a pause on new development projects as it battles with a “serious downturn” in the housing market. It was also revealed that London’s biggest association is introducing a recruitment freeze.

In 2018, L&Q was the biggest developer in the sector by a margin of almost 1,000 – turning out 2,862 homes, including more than 1,500 for affordable tenures.

Like many London housing associations, L&Q has a large market sale offer which it uses to fund affordable and social rent homes. Like L&Q, a number of these London-based landlords have seen their income affected by the stagnant London housing market.


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Ms Fletcher-Smith was speaking on a panel about the economic challenges of affordable housing development at London mayor Sadiq Khan’s inaugural ‘Homes for Londoners’ conference.

Speaking on the same panel, Lord Best, chair of the Affordable Housing Commission, said the concept of selling properties on the open market to pay for social housing was a “pretty hopeless model”. He said: “The cross-subsidy model will collapse if the market collapses. If you can’t sell properties we’re all in big trouble.”

Colm Lacey, chief executive of Brick by Brick, Croydon Council’s housing company, said his organisation is also based on the cross-subsidy model. According to Mr Lacey, the value of Brick by Brick’s properties were currently holding, but he admitted that sales were slow.

Speaking to Inside Housing at the event, Mr Khan said he agreed that the cross-subsidy model “is not working for Londoners”.

He referenced previously published research from the Greater London Authority and social landlords, which found that London needs seven times more grant funding than it currently receives to meet affordable housing needs.

He said there is no other way to build homes that Londoners need “because cross-subsidy is not working”.