Social Housing Weekly - 15 October 2024

Cash Rules Everything Around...Housing (C.R.E.A.H)

You'd be forgiven for thinking we here at SHW are completely obsessed with money. It's been the subject of our newsletter for weeks now - how are we going to fund all the new homes we need to pull Britain out of our economic and social slump?

The question preys on the mind precisely because it is hard to answer. Since the government changed hands over 100 days ago, there has been acknowledgement of the scale of the problem and an understanding of the importance of housing but no comprehensive plan for delivery. Or rather, no one piece of strategy that pulls together the strings of government housing policy.

That's not to say nothing is happening. Today, for example, the Prime Minister announced £68m in funding to go directly to 54 councils so they can turn neglected land into new homes. Delivered via the 'Brownfield Land Release Fund', this money can be used by councils to cover the cost of decontamination, clearing disused buildings, or improving infrastructure. Seven of the councils to receive this funding are in London and the ambition is that together they will be able to unlock over 1,000 homes using the cash.

We also have interventions like the 'New Homes Accelerator ', 'brownfield passports', and the New Towns Taskforce - all ambitious programmes that might yet pay dividends in the future.

Still, we hear everyday from clients in the social housing sector that new projects, whether large estate renewals or modest infills, are on hold while they await more direct news from the Chancellor about money - whether that's clarity on rental income (expected), direct grant for new homes (less clear), or support with growing maintenance bills (even less clear). 

Of course, nothing is stopping the sector from digging around in their own proverbial sofa cushions for cash. Interestingly this week we heard the news that Sanctuary Housing Association is selling its student accommodation portfolio (estimated to be valued at no more than £400m) and will reinvest proceeds back into its core housing business. Perhaps others will start to do the same?

We have no answers about what's in the Big Red Box being held tight to the chest of Treasury officials or what will be in the Spending Review this Spring - where we can expect more on housing. We shall, of course, keep speculating until we know more but in the mean time, I'll finish with a little free comms advice to the Prime Minister. A drip-drip of good news announcements is all very well but a confidence-building, strategic approach might be better if you want the sector to start taking risks with you.

Harriet Shone

LCA Director

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Penny for social housing, guv?

Funds are tight, but social homes must be the priority - by Peter Lord

As the National Housing Federation and the Home Builders Federation warn that the government must provide more money for the delivery of social housing, we dive into the funding issue that has gridlocked the sector. 

As we reported last week, more than 1m families and individuals are on the waiting list for a social home and fewer than 5,000 were completed in the past year, well below the 90,000 needed every year for a decade to house everyone. However, the Home Builders Federation told the BBC that while members have at least 13,000 affordable properties, including social homes, ready to be built right now, they can’t start building because there are no housing providers to buy the homes.

But exactly which housing providers would be in a financial position to buy these properties? The plurality of social housing stock is owned by local authorities, which are facing financial dire straits. Councils in London especially are at financial ‘breaking point’ with the capital's 33 local authorities expected to overspend by more than £600m this financial year alone, with the funding gap likely to be over £700m next year. Headline-grabbing cuts to  Christmas lights or teas and coffees for council staff mask the deeper challenge councils face in their underlying budgets.

What then of housing associations, whose share of the market has rocketed in recent decades, and currently house around 6 million people in England alone? Well, they aren't exactly swimming in cash either. A DLUHC report from earlier this year (when it was still DLUHC), somewhat euphemistically described the finances of Social Housing providers as "stretched but resilient", citing the increased operating costs of social landlords, as well as the cost of improvements required to their stock.

It is hard to see where the opportunity comes for housing associations to remedy the hole in their finances. The sector's debt is projected to rise to £120m by 2026, with the sector's opportunity for debt-funded capital expenditure "severely constrained". There is clearly little-to-no opportunity to increase income from rents and other charges, and undoubtedly cutting spending on maintenance and repairs is out of the question. Savills has previously argued that housing associations should delay spending on decarbonisation in order to fund new homes, but kicking the can down the road will only go so far...

So it comes back full-circle to government funding. MHCLG certainly doesn't have any spare cash down the back of the sofa to bail out social housing providers and Reeves has so far kept  a tight, Thatcher-like grip on the public purse. Nonetheless, something has to give or the whole social housing edifice may come crashing ignominiously to earth.

Housing in the headlines

Government housebuilding target to be missed unless it makes funds available

The National Housing Federation and the Home Builders Federation have warned that the Government will miss its target of building 1.5m new homes over this Parliament by nearly 500,000 if they don’t provide funding for social housing delivery and first-time buyers. The news comes as monthly construction output increased by an estimated 0.4% in volume in August after declining 0.4% in July, according to the latest data from the Office for National Statistics.

Government funding to turn neglected land into new homes

The Prime Minister has announced £68m of funding for 54 councils to turn neglected land into new homes. The funding will be made available through the Brownfield Land Release Fund and as a result, land will be released to enable 5,200 homes to be built across the country. Locations for projects include Manchester, Eastbourne, Weston-Super-Mare and Northampton.

Green spaces should not block development, says Reed

The Environment Secretary, Steve Reed, has said that those campaigning to protect green spaces should not expect the right to veto over planning. Reed announced that former Blair and Brown adviser, Dan Corry, will lead a review of Defra regulations, with a view to putting economic growth at the heart of the department’s activities.

Also caught our eye...

• House prices in the UK have risen for the first time in two years, according to a survey by the Royal Institution of Chartered Surveyors (RICS).
  
• The Competition and Markets Authority has cleared Barratt Development’s proposed £2.5bn acquisition of rival housebuilder Redrow. The deal will create the UK’s largest housebuilder.
  
  
• Royal London Asset Management Property has made its build-to-rent debut with the acquisition of 500 apartments and has committed to building a portfolio of 8,000 units in the UK.
  
  
• The boards of Longhurst Group and Grand Union Housing Group have approved a merger to form a 36,000-home landlord.

Let's get political

"More attractive" Britain hosts investment summit

Yesterday, the Government hosted hundreds of international businesses at its inaugural Investment Summit at London’s Guildhall. The Prime Minister and Chancellor addressed the summit and there was an evening reception at St Paul’s Cathedral hosted by King Charles - so the red carpet was truly laid out. In a letter to The Times, some of the world’s biggest banks and companies have said that Britain’s greater stability has increased its attractiveness.

At the Summit, the Prime Minister promised to cut red tape which is holding back investment. He also urged the world’s largest businesses to invest in the UK, promising them stable policy and low regulation as an incentive to do so. The Chancellor is expected to pledge billions of pounds of extra investment in transport, schools and hospitals in the upcoming Budget.

Employers' NI set to rise

Despite the low-tax vibes of the general election campaign, it was always inevitable that government would look to increase revenue to match its spending commitments. Ministers have hinted that the Chancellor is looking to raise National Insurance contributions for employers. This comes as the Institute for Fiscal Studies (IFS) has said that the Chancellor will have to find £16bn of additional funding if the Government is to fulfil the promises made ahead of the election. 

Businesses and millionaires get jitters ahead of budget 

Fears of further tax rises in this month’s Budget have led to a fall in business confidence for the first time in a year. The latest confidence monitor from the Institute of Chartered Accountants in England and Wales shows a drop among companies to 14.4 in the third quarter from 16.7 in the previous three months. In other tax-related unintended consequences, the UK is set to witness the biggest exodus of millionaires in the world ahead of the Government’s planned scrapping of non-dom status. According to analysis by the Adam Smith Institute, the share of the population who are millionaires is expected to fall by 20% over the course of this Parliament, from 4.55% now to 3.62% over the next five years.