Better outlook for affordable housing?

Affordable housing supply halved in England in the year to June, from more than 66,000 homes to just 32,110, according to recent data from the Department for Communities and Local Government (see graph 1). This was the lowest level since 1991, and due mostly to the increasing focus of government on home ownership under David Cameron and George Osborne. “This is not unexpected,” says David Orr, chief executive at the National Housing Federation. “Changes such as the rent cut and the local housing allowance cap have created an uncertain environment for housing associations.” The DCLG predicts an increased supply of affordables in the years to come, as a new cycle of building begins. However, regardless of this week’s Autumn Statement, housing associations, local authorities and market conditions are aligning to improve the outlook. Housing associations’ ducks in a row Housing associations are finally getting to grips with the 2015 announcements that left them vulnerable to Right to Buy and reduced rents. David Jubb, director of greater London development at JLL, says it is a good time for associations to be doing more, though he warns that it will take a few years for more homes to be delivered. “Firstly, owing to the amount of mergers, we will need to create financially strong housing associations, that will compete with some very cheap money. Secondly, we can create housing with alternative tenures, such as shared ownership, with the government announcing capital grants for schemes of 135,000 units.” By building for the private market to fund their social side, associations have pledged to vastly increase the 26,000 homes they build each year (see graph 2). “They are doing more outside the programme than ever before, leveraging in lots of private finance,” says Orr. Much of this supply is not exactly affordable: many associations exercise a one-affordable-to-one-private-sale policy, but it will increase build out. London leads the charge Local authorities will help this, and London is leading the charge of those upping affordable provision. In response to the paltry 13,000 affordable homes built last year, mayor Sadiq Khan has staked a large part of his political capital on increasing this supply. “I inherited a legacy of just 13% of all homes granted permissions being affordable last year. That’s why I have been clear that fixing London’s housing crisis won’t happen overnight. It’s a marathon, not a sprint,” Khan says. “I am determined to do everything I can to help Londoners and that means working with government, councils, housing associations and developers to build the affordable homes London needs.” Much of this work has involved raising the affordable threshold on schemes to 35%, and higher on publicly owned sites. This may curtail development by making schemes less financially viable, but the GLA is also working on new ways to bring development forward. Housing associations are key beneficiaries, as their models incorporate an affordable housing rate of 50%. Market conditions and partnerships The best opportunity, however, could come from the market. After overheating for the past five years, land values in London and the South East are coming down, allowing housing associations and other social providers to enter the sector. Demand, particularly from second-home owners and investors, is softening, which means housebuilders are looking for ways to de-risk schemes. L&Q is already working with a number of major housebuilders, while associations such as Peabody, Notting Hill and Places for People are making moves. “It’s not quite the emergence of the housing associations as a powerhouse, but it is their time,” says Jubb. • To send feedback, e-mail alex.peace@estatesgazette.com or tweet @egalexpeace or @estatesgazette