If the government’s plan to pay grant to developers would result in an expansion of the social housing programme – or delivery at lower cost while maintaining quality – associations would support it. But previous initiatives demonstrate this will not happen
This proposal puts at risk associations’ ability to deliver sustainable communities through mixed developments and is likely to incur higher costs in the long term.
The government has attempted to radically increase the volume of social housebuilding and lower cost on four previous occasions.
First, the 1960s experiment with system building and tower blocks. Volume was achieved but the poor quality of the buildings created a financial burden that is still with us. The high-rise designs were not appropriate for families and exacerbated social problems.
Second was the housing market package of the early 1990s. The government made about £600m available for associations to buy completed or on site developments from housebuilders. The programme exposed the significant differences in designing for sale as opposed to social rent. Developments bought under this package were let predominantly to homeless families. Concentrations of households with multiple needs required intensive and costly management. Many larger projects funded by this initiative became stigmatised, contributing to social housing’s poor reputation.
Third was Operation Breakthrough, a volume procurement initiative launched by the Housing Corporation in 1992. It aimed to save money by standardising design and bulk-buying from major housebuilders.
Six per cent of the corporation’s approved development programme was spent on the scheme. However, housebuilders concluded that Operation Breakthrough “made little or no difference to construction costs”.
The fourth attempt was in 1995, when the government considered making grant available to housebuilders. The idea was dropped because it would not be an effective use of public funds. But now it’s back.
The bidding round for the corporation’s 2004/6 ADP was oversubscribed by a factor of four. This indicates the market for grant is competitive without being wasteful.
The government considered making grant available to builders in 1995. The idea was dropped because it would not be an effective use of public funds
Economies of scale have been achieved by the corporation’s selection of 70 preferred partner associations. The resulting allocations have produced an 8% cost reduction on the previous year.
These advances have been achieved by keen negotiation by associations, creating partnerships with developers and others. These arrangements will be undermined if developers can attract grant directly from the corporation, which neither has the skill nor experience to balance cost and quality.
Housing minister Keith Hill’s suggestion that “corporation representatives will visit schemes to check standards” is risible. Hill says the Housing Bill will not give developers an unfair advantage over associations. To achieve this, the corporation must ensure:
- the proposed £200m pilot is a genuine pilot and new homes delivered through it are independently evaluated after completion, before opening up the ADP to developers
- proposals from developers include the whole-life costs of the development. Associations budget for these long-term costs so the competition between them and developers will be weighted in favour of the latter unless they include whole-life costs.
Also, the cost of regulation is a significant overhead for associations. If developers are not to be regulated, competing housing association proposals need to be discounted by a sum that reflects the cost of regulation.
All the evidence indicates that grant to developers is an ill-conceived idea. It is to be regretted that the new team at the corporation and Richard McCarthy at the ODPM were not able to persuade ministers of the dangers of this proposal. Let us hope they have more success in putting in place rules that will deliver a level playing field – and make the best of a bad job.
Source
Housing Today
Postscript
Mick Sweeney is chief executive of Community Housing Association in north London
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