Housing associations are delivering more new homes – with the trend shifting to social rent

Yesterday we released our quarterly statistics showing how many homes housing associations have started and completed building in the last quarter.

Will Jeffwitz, Policy Leader, National Housing Federation

Will Jeffwitz, Policy Leader, National Housing Federation

28 March 2019

In the current climate of market uncertainty, the headlines are hugely positive with starts and completions both up. Housing associations completed almost 44,000 homes in the twelve months to December, an increase of over 12% compared to the previous year.

This isn’t a surprise. Through our sector-wide conversation about supply over the last few months we know that housing associations are passionate about stretching every sinew to solve the housing crisis. And this passion is shared by Homes England and the Greater London Authority, who are putting huge effort into supporting the sector, for example through strategic partnerships with the largest housing associations.

Delving deeper into the data, the survey results show a few growing trends across the housing market:

The pendulum is shifting slowly back towards social rent

From 2011 until last year, government grant funding was not available to build homes for social rent and so numbers dropped dramatically. They were only built where councils enforced it as part of Section 106 agreements, or when housing associations used cross-subsidy from market sale to make up the gap.

However, with funding now available, numbers are starting to creep up again. Starts for social rent in 2018 were up 28.4% compared to 2017 – and up 47.8% in quarter three compared to the same period last year – while completions were up 10.1%.

Meanwhile, starts and completions for more expensive affordable rent properties fell slightly as housing associations moved away from this back to social rent. I would expect this trend to continue as housing associations take advantage of the grant available, and could happen even faster if this grant was available across the country – at the moment it’s only available in half of local authority areas. This is something we’ve called on the Government to change. 

Cross subsidy from market sale is under pressure

In the absence of grant, larger housing associations sell homes on the open market and use the surplus to build more social and affordable homes. This cross-subsidy model relies on a buoyant housing market, and most of this activity has been in London.

But the London market is starting to slow. Completions for market sale were up last quarter compared to the same quarter last year as housing associations finished off homes started months earlier. Starts were down by 22%, perhaps reflecting the uncertainty over Brexit and its impact on market transaction rates and prices. We’ve called on the Government to stand ready to support the sector if needed as the impact of Brexit becomes clearer.

Shared ownership has been increasingly important for the sector

Starts and completions for affordable home ownership homes (mostly shared ownership) in 2018 are strongly up compared to 2017, with completions up 40%. In large part this reflects the recent funding and planning regimes, which have strongly prioritised shared ownership. With all these new homes coming onto the market it is even more important that the public understands what shared ownership is, and that the experience of buying and living in a shared ownership home is as smooth as possible. We’ve been working on a campaign to address these points.

Affordable housing supply is still heavily reliant on Section 106 homes

52% of the starts and completions recorded in the survey this quarter are built by developers as a planning requirement and bought by housing associations. In recent years, low levels of grant for affordable housing and a newbuild market buoyed by Help to Buy have meant that Section 106 agreements have taken the strain.

But as the housing market starts to slow, and competition for these Section 106 properties increases, housing associations will almost certainly need to lessen reliance on Section 106 homes. There are challenges with this – particularly around skills and capacity – but the conversation we've been having with sector about supply raised several great ideas for how the sector could address these.

Finally, a slight word of caution. Quarterly figures always fluctuate and long-term trends are more reliable. Homes England have been trying very hard this year to spread out their support across the year, rather than have a rush to get homes started and completed in Q4 as the year end approaches. This means the year-on-year comparisons might be skewed, with more delivered in the third quarter compared to previous years but less in quarter four. Only the full year figures will show this, due out in June.

But the story these figures show is extremely positive. With the right Government support housing associations can and do build the affordable homes we desperately need. And they are keen to do more. In our Spending Review submission in the coming months we’ll be calling on the Government to commit to a significant increase in support available, so that we can build the 145,000 social and affordable homes we need each year.

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