It will be a busy year for the social housing sector as the government aims to catalyse development to meet its target of building 1.5m new homes by 2029. Greater resources and deep pockets will be needed to meet those targets and to comply with a raft of new legislation and regulations expected throughout the new year.
Spending review will put budgets under the spotlight
The first milestone will be the spring Spending Review where a new Affordable Homes Programme is expected to be announced. Its outcome will have a major impact on development.
This year will also see the government implement the results of several consultations that took place throughout 2024. In particular, the sector awaits the enactment of a new rent settlement and Awaab’s law, both of which will have a big impact on social housing providers’ budgets and activities in the years ahead. There will also be a consultation launched early this year on the new Decent Homes Standard which will need attention from registered providers and other stakeholders.
Building safety
The Spending Review should provide more detail as to how the Remediation Acceleration Plan will achieve the identification and remediation of unsafe cladding on buildings above 11m in height. At present, development and asset management teams are stretched both in terms of money and resources, making it difficult to achieve resolution of these long-running projects in the timeframes all would desire.
The effect of the Building Safety Levy (expected in autumn) on stretched development teams is also something to watch. Further decisions on the meaning and effect of new legislation by the courts and tribunals will guide parties on resolution of extant liabilities and in drafting future contracts. A working group within the courts should assist in providing consistency of approach but, as every lawyer will tell you, each case turns on its facts.
A standardised tenancy system
Introduced to parliament on 11 September 2024, the Renters’ Rights Bill is set to bring about the biggest reform to housing law in almost 40 years. It promises more security for tenants and empowers them to challenge poor practice and unfair rent increases without fear of eviction.
The Bill will remove all assured shorthold and fixed-term tenancies, replacing them with periodic assured tenancies. This means landlords will no longer be able to use the mandatory ground under section 21 of the Housing Act 1988 to gain possession and will instead have to use one of the expanded grounds set out in the Bill.
This will be a one-stage implementation for the private rented sector, whereby all existing tenancies will convert to the new system and any new tenancies signed on or after the implementation date will be governed by the new rules. The date for this is to be set by regulations but could be as early as Spring 2025.
The government has confirmed its intention to extend the abolition of section 21 into the social rented sector as well, though this requires statutory consultation and will therefore be applied at a later date. Registered providers should expect this change at some point in 2025 as it is clear that the government wants parity between the social and private rented sectors and has set out the structure for this in the Bill.
The return of the debt capital markets
The slow stabilisation of interest rates will see the social housing sector return to seeking funding from the debt capital markets via more private placements and bond issuances in 2025.
Social housing providers, particularly those with a significant portfolio of care and supported housing, will face challenges with the largely unexpected increase in national insurance contributions, and we can expect to see budgets and business plans revised for the new financial year.
However, strategic partnerships and joint ventures involving lenders, private developers and public sector bodies, coupled with the launch of new funding products, such as the recently launched National Wealth Fund and other government-guaranteed retrofit schemes, may offer additional avenues for providers seeking funding to help them deal with the challenges they face. There is even talk of a return to the better parts of the PFI model.
There will likely be more merger activity as providers seek to find efficiencies and economies of scale in service provision and delivery in an ongoing challenging operating market.
A return of local authority housebuilding
Local authorities have been promised a “revolution”, with £1bn to fund tens of thousands of local authority-owned homes.
Local authorities have, however, lost much of the expertise they had when they built, owned and managed large property portfolios. That will need to be rediscovered. Many local authorities do have development companies, and they will be at the forefront of council housing in 2025 and beyond.
It is reasonable to expect local authorities to accelerate plans to buy back good quality homes that were sold under the right to buy. There will be significant opportunities too for experienced residential developers and consultants to help local authorities achieve their and the government’s development aspirations.
Rebecca Jason is a partner and head of housing finance at Winckworth Sherwood
