The government must be careful not to deter housing associations

Joey Gardiner

This week - as the Labour Party moves closer to discovering exactly how electorally irrelevant it’s about to become - those in the housing association movement, many of whom are undoubtedly the party’s natural supporters, have got through another seven days of dealing with the real-life impact of Labour’s dismal general election defeat.

Because the new all-Conservative administration is proving to be a very tough environment for them indeed. Housing associations had their development grant slashed in the last parliament on the basis they could raise rents to fund their programmes. In this parliament, one of the new government’s first acts was to cut the rents back again - without reinstating the grant, of course. It has left a big black hole in their business plans, and many - as we find out in our interview with Thames Valley’s Geeta Nanda in this week’s print edition - are cutting back development in response. Meanwhile the extension of Right to Buy rules is likely to see their portfolio of social rented homes shrink, potentially impacting on what they can borrow to fund new homes.

Politically, housing associations are used to being kicked from all sides, despite most of them being independent charities set up for a social purpose. They’ve long been distrusted by the left, who see them as a sort of housing equivalent of Academy schools - replacing provision that should come from the state (that is, councils) - while as state-supported bodies, many in the Conservative Party rail against the high salaries often granted to their chief executives. Though it is odd the same rules don’t seem to apply to housebuilders - for example, Berkeley’s Tony Pidgley can pay himself a £23m bonus and the developer’s schemes still attract grant funding without receiving criticism from the same direction.

Politically, housing associations are used to being kicked from all sides

That anomaly aside, there is a view among those that surround the current batch of ministerial policymakers, that the housing association sector is comfortable and complacent - and needs shaking up to become more efficient and more focused on providing new homes. There is undoubtedly some truth in the idea that many housing associations are pretty conservative with their balance sheets; and many of those would argue it is right that they are, given the potential impact on vulnerable tenants if things go wrong.

However, many others such as Thames Valley are increasingly entrepreneurial, commonly using the profits they make on private-sale housing to fund the development of more “affordable” homes. In fact, many are so entrepreneurial that several had to be effectively bailed out by the government’s housing agency at the start of the last recession when sales dried up.

Whatever your view of them, housing associations have grown steadily over the past 30 years to last year produce more than a fifth (22,300) of all the new homes built in England. The sector’s trade association says it can envisage this rocketing so that half of all homes are produced by the sector, given the right policy environment. At the moment, though, this does not appear to be forthcoming.

Nanda is right when she says that the government’s decision to introduce policies that will reduce housing associations’ income is a direct contradiction of the same government’s wish for associations to build more homes. As a sector, housing associations remain a client of vital importance to the construction industry, often taking the lead in pioneering innovative design and construction eschewed by traditional housebuilders, and able to take a more holistic view of the long-term performance of the homes they build. It is abundantly clear to everyone who looks at the housing problem that the economy desperately needs more organisations - whether private, public or non-profit - developing homes, not fewer. The government should be careful it doesn’t achieve exactly the opposite of its intention.

Joey Gardiner, deputy editor