We’re all the same in the end

There has been much heat around the issue of paying social housing grant to developers but precious little light.

Now that the consultation has come out and the Housing Corporation has moved to opening up its entire £1.67bn annual budget to non-registered social landlords the clamour of protest is rising once more. But if you shed a little light on the subject a rather surprising picture emerges.

Firstly, it has become clear that despite the often reasonable concerns that many people have about distributing public money in this way, RSLs – especially the big players – are just as interested in sourcing social housing grant in this way as developers. Because of the relaxing of regulation to access this pot of money it is easy to see that associations that operate group structures would rather channel their grant through their developer arms.

Secondly, at the same time as housing associations are setting up stand-alone development arms, developers are becoming interested in setting up management companies and quasi-social housing arms. For instance, one developer has set up housing society as part of its structure and I know of other large developers who are asking the prime minister to let them own a housing association.

Why, though, would a developer have any interest in continued ownership and management of social housing? It is not obviously in the interests of shareholders; if anything it will devalue the share price because homes are built and then not sold. Any profit would come from rental, not sale income. So why take the risk?

The chief executive of a large developer explained it to me as follows. His company has spent decades assembling a large site adjacent to a city centre. It has been an expensive and onerous process but will show a healthy return. Because of a section 106 agreement, he must also build social rented housing, which will be managed by a nominated registered social landlord.

He will not even have any part in deciding which RSL will manage the homes. That is too much of a risk to his investment and as a result he wants to manage it himself.

In short, developers are no longer scared of social housing. Indeed, as a result of the section 106 process and vastly increased government funding, it is being embraced in many boardrooms. When all this shakes out I believe that in 10 years’ time there will be little to distinguish larger developing housing associations from housebuilders.

But what will this mean for new schemes? Will councils be faced with the nightmare scenario of developers refusing to take any potentially awkward tenants from the housing waiting list? Will the good work that so many housing associations have done in building relations with local communities be lost as they are usurped by housebuilders who see such activities as superfluous?

In my view, it is in the interest of private, profit-driven businesses to make mixed communities work. Although many more traditional RSLs and councils will find the idea abhorrent, these businesses are only getting involved because there is a solid business case for doing so and because, ironically, they have a long-term investment in those communities. Indeed, private companies such as Pinnacle have grown exponentially in recent years building a business in managing estates. Many of its clients are councils and housing associations.

The face of the sector is undoubtedly changing. But I believe ultimately it will be better for tenants to have housebuilders on-side and understanding their needs.