Building safety concerns easing, review finds
Local authorities trying to build council housing are seeing viability deteriorate while building safety challenges have eased, according to a report from The Housing Forum.
Launched at its national conference earlier this week, the report is The Housing Forum’s second annual review of the government’s 1.5 million new homes goal.
The first review identified 10 challenges that, if resolved, would speed up council housebuilding.
For this year’s review, The Housing Forum looked at which of the 10 challenges had got better and worse, drawing on a survey of 19 councils and public delivery bodies, as well as 153 interviews with council leaders, officers and sector partners.
The review’s sample is self-selecting and has to date focused on councils in London and the wider southeast.
On the viability issue, eight of 16 said it had worsened, with a further eight saying there had been no change.
“Interviewees described house prices flat or falling in London, construction costs that remain high, higher financing costs, and policy costs including levies and standards,” according to the group.
“Contractors, and in two cases a housing association joint venture partner, have gone out of business. Registered providers are pulling back from new development because they are spending more on existing stock and on interest.”
Market stability and investment confidence was also reported to have deteriorated by nine of the 16, with five reporting no change and two saying it had improved.
“Interviewees said confidence has been damaged by global uncertainty and higher financing costs, and that falling prices make investors less optimistic about growth,” said The Housing Forum.
“Councils are also more cautious about income-strip and lease-and-leaseback deals, which can leave them underwriting the risk.”
By contrast, 11 of 16 councils said building safety challenges had eased
“Ambition is not what the councils we have worked with are missing. What councils tell us is getting worse is the money side: viability and market confidence,” said Toby Fox, co-author of the review.
“One London borough has shown it can deliver at scale and is now considering reducing that capacity, because it cannot borrow more.
“If Government expects councils to go further, the funding and the rules need to go further with them: grant that closes the viability gap, borrowing at a cost social housing can bear, and the certainty of multi-year commitments.”
The review asked government to confirm future Social and Affordable Homes Programme allocations promptly and to cut the cost of council borrowing through Treasury guarantees on local authority debt and by issuing Public Works Loan Board loans at an inflation-linked rate.
It also urged the government to work with auditors on consistent guidance on capitalising pre-development costs and to move from scheme-by-scheme bidding to multi-year commitments for councils with credible programmes.
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