Government admits development may be hit due to ‘challenging position’ for housing associations

The Department for Levelling Up, Housing and Communities (DLUHC) has admitted development by housing associations may fall as they seek to ensure viability and divert funding to improve existing homes.

The government department, in its submission to a Commons select committee, said registered providers, which build around one in four new homes, are facing a “more challenging position” than in recent years.

It said: “It is vital that registered providers (RPs) manage their resources effectively to ensure that their financial viability is maintained and that they deliver on their responsibilities to their residents.

“The government recognises that this will involve difficult trade-offs in some cases, and that this will potentially affect the delivery of new homes and discretionary improvements to existing homes over and above regulatory requirements.”

The comments follow mounting concern that a whole host of issues, including rising inflation, a 7% rent cap this year, new regulations relating to existing stock, along with building safety and net zero requirements, will combine to cause housing associations to build fewer homes.

The levelling up, housing and communities select committee is currently carrying out an inquiry into the finances and sustainability of the social housing sector following widespread concern about its health.

DLUHC has already cut its forecast for delivery through its 2021-26 affordable homes programme from 180,000 to 157,000 homes.

In its submission to the inquiry, the National Housing Federation called on the next government to set out a long-term plan to meet housing need, with outcomes based on design quality, security of tenure and affordability, zero carbon, healthy homes and to ensure housing underpins growth.

It said: “Delivering these outcomes, with measurable targets along the way, would improve the health, income and life chances of millions of people, and drive economic growth, jobs and renewal in every part of the country. This plan would take into account the financial circumstances of social landlords and put them at the heart of delivery.” NHF said it will publish a case for this plan in the summer.

There has been concern in the industry about the extent to which housing associations can step in to forward buy homes off house builders in the event of a deeper economic downturn, as they did during the financial crisis, when they were credited by many with helping the UK to keep building as the rest of the market slowdown.

>>See also: The current funding model for housing associations has been pushed to its limit

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The Chartered Institute of Housing (CIH) in its submission said a programme where the government provides special funds to providers to buy stock could work. “Undoubtedly such a programme could be made to work, if funding recognised the required investment not only in acquisition but in improvement or, for off-the-shelf new build, for improved energy efficiency where needed,” it said.

The CIH said that currently “there is considerable concern that resources will be insufficient to meet the new Decent Homes Standard, and in particular that insufficient progress is being made towards the government’s carbon targets.”

The G15 group in London repeated its calls for a long-term rent settlement for providers, grant funding for regeneration, requirements to release land for affordable housing and a call to remove VAT on housing association activity.