The role of boards in meeting the supply challenge

Alan Lewin, 25 June 2019

The role of boards in meeting the supply challenge

The housing supply to demand gap continues to widen. What can boards and board members do to help the sector build the homes we need to solve the housing crisis?

At the time of the last General Election in 2017, the Homes for Britain campaign was demanding a programme of 300,000 additional homes a year of which 100,000 should be affordable.

The last analysis from the National Housing Federation put the total gap at nearer to 350,000 just to keep pace. What is our responsibility as board members to close that gap and what are we doing about building homes that meet our residents’ needs?

Let’s go back to basics. What do we need to build homes?

To begin with we need developable land. The greatest proportion of developable land is owned, or in the control of, private developers and the majority of affordable housing schemes are still produced through section 106 agreements.

When assessing development strategy, boards need to consider the benefits and risks of our future homes being built to a specification which is often not ideal from the perspective of affordable housing, and built out at a pace dictated by the sales market rather than need. From an asset management perspective, market designed housing is more likely to require modifications for rental over a 30-year business plan – and from a business risk perspective, housing reliant on market cycles may be delayed or require additional cash to support an uneven sales programme.  

To mitigate these risks, many housing associations are seeking to acquire developable land themselves. This allows for bespoke housing association designed homes, built to reflect local requirements. Such developments may meet the local planning requirements where a private development would not and therefore may be acquired at a lower cost. The downside of land-led schemes is that they tend to require investment at scale and over a long period of time, so only those with strong balance sheets and a greater capacity for risk consider them.

As a board member, I have considered these issues with colleagues as part of awayday scenarios and business planning. We have an overriding responsibility as trustees of the business to ensure its long-term success and sustainability, but we also grapple with the drive to build more affordable housing to meet the still growing gap between housing provision and supply.

It is here that I think there is a wider role for housing associations and local authorities in coming together in joint ventures. We are quite familiar with housing associations entering into land led joint ventures with developers, but with other housing associations and local authorities this is far less common. However, this is where we can really produce the design of homes, perhaps utilising Modern Methods of Construction, that we seek to deliver and we can do so undertaking a lesser degree of risk than we would do on our own.

In addition, I think there is scope for Homes England to do more to facilitate such consortia to open up these land-led opportunities, in particular to smaller and mid-sized housing associations.  The establishment of joint ventures can often be costly and time consuming, eroding value. But using resources from Homes England to assist in facilitation could reduce uncertainty, accelerate delivery, improve quality and open up larger scale projects to smaller housing associations.

Naturally any new initiative involves risk, but the opportunity to create more affordable homes through greater collaboration seems to me to be something all boards should all be aspiring to do.