More for less

A survey finds housing association finance directors sceptical about government plans to boost affordable and social housing.

A year ago,  government-commissioned report showed that the present rate of new provision of social housing – estimated at around 30,000 units per year – fell short of newly-arising need by about 17,000 units. She also said that extra provision above that would be needed if in-roads were to be made into the backlog, represented by 20,000 households living in overcrowded conditions, and 100,000 living in temporary housing.

But finance directors in some of the country’s biggest housing associations are largely sceptical about whether government policies will achieve that level of supply. The most overwhelming condemnation of policies designed to encourage more affordable house building was reserved for the decision to allow private developers to bid for social housing grant.

 ‘Do you think competition with private developers for social housing grant will mean that more homes are produced in total, at less cost?’

All but two of the 18 finance directors who responded said ‘no’.

One said: ‘The pot of social housing grant will remain the same, so the only way this will happen is if developers are materially cheaper. We’ve seen no evidence that this will be the case.’

Some predicted that developers wouldn’t be keen to get involved. ‘Developers will still want to make acceptable profits, and grant will come with strings attached,’ said one.

‘Initially it could work, because developers will transfer ownership and management to housing associations after completion. But in the longer term, the assumptions used to produce the lower cost to the public purse won’t be sustainable.’

A few thought there may be early ‘wins’, but in the long term the overwhelming majority of finance directors could see no advantage in sharing social housing grant. ‘In the short term maybe, as private developers seek to prove themselves, but in the long term no, unless government is prepared to allow for lower standards.’

Standards emerged in the survey as a real worry. ‘The bigger concern is that we will get homes of an inferior standard,’ said one sceptic. ‘Developers houses are often cheaper quality and therefore in the long-run have a shorter life. Their space standards are geared for under-occupation – so the small spare room can be used for a study, for example – which our allocations rules tend to prohibit when initially letting the properties.’

Finance directors hoped long-term lifecycle costs would be taken into cons-ideration when comparing the success of the new scheme with the existing system. One hoped for: ‘Some form of arrangement whereby developers are forced to consider whole-life costing could prevent long-term problems.’

The survey also showed that association development programmes were increasingly reflecting government policy designed to boost home ownership – and away from traditional social rented accommodation.

We asked finance directors: ‘Will you build more homes for ownership than for rent next year?’ All but two associations said ‘no’, but many admitted that the balance between rented and shared owned accommodation was changing. Typical responses were: ‘More home ownership is planned to respond to market needs’; ‘More than in previous years’; or ‘We currently have 85 per cent rented housing and are redressing the balance in our portfolio’.

A couple of finance directors said the move towards more shared ownership was forced by the way in which associations are funded: ‘We’ll certainly be building more for sale as a percentage of our overall total. Tight government funding means this is the only way to meaningful profitablity’.

Another said shared ownership was essential to subsidise rented accommodation, for which grant was very low. Three respondents reported that their rented programme was matched – or nearly matched – by low-cost homeownership units. ‘The balance will move closer to a 50/50 mix.’

Only one finance director – who runs the budget at an urban transfer association – said the development programme was at a standstill: ‘Our business plan is so tight we’re unlikely to do any new build at all next year, apart from a barter transaction with a developer where we are getting rented properties in exchange for transfer of land.’

As associations gear up for the government’s efficiency drive, we asked: ‘Will it mean your housing association provides more housing for less money?’

Finance directors were split down the middle. Some felt there would be no link between savings made and new affordable homes. ‘It’s not certain for new developments, but if structured properly it ought to lead to more efficient management of housing in the medium term.’

Others saw a direct link: ‘The focus on efficiency will free up resources which can be applied to new development.’

One finance director said it was important to understand that ‘efficiency is not about saving money, particularly in a situation where there is a fixed rental stream arising from rent reform. It is about using that fixed income in ways that deliver a better product.’

Another director dismissed government action to increase the supply of housing land because ‘it appears ODPM is unwilling to fundamentally review the planning system in England’.

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