Housing associations will be under pressure to increase housebuilding of all tenures, and help close the gap between current supply of 220,000 and the Government’s target of 300,000 new homes per year. Our capacity survey and focus group respondents say that the policy environment is now much less of a constraint, but there is a long way to go and other barriers remain.
The policy environment for delivering affordable new homes is improving, but access to land remains a big barrier
FIGURE 5 | Which housing types should be delivered to meet housing needs? Survey respondents are clear that social rent is the number one housing type required
Source: Capacity survey | Note: Figures may not sum due to rounding
New avenues for delivery
Even with the benefit of Help to Buy, private sector housebuilding appears to be starting to plateau. It will be difficult to increase the supply of traditional ‘for sale’ new homes in the low transaction, low house price growth environment that we forecast to continue over the next few years.
There is growing political acceptance that housebuilding must move beyond existing routes to maximise potential absorption – that means more small and medium developers, more affordable homes and more diverse products, including build to rent and specialist housing for older people.
In our 2017 report, Investing to Solve the Housing Crisis, we estimated that there is a need to create 100,000 new sub-market homes a year. In Labour’s Housing Green Paper, they have pledged to deliver 1 million genuinely affordable homes over 10 years. They have also suggested that they will champion housing associations as major providers of these homes. The National Housing Federation takes it further with their suggestion that we should be building 145,000 new affordable homes.
In 2016/17 just 27,000 sub-market rental homes were created. Of those, local authorities delivered precious few, with all but 3,000 being delivered by housing associations.
In 2016/17 just 27,000 sub-market rental homes were created – all but 3,000 by housing associationsSavills Research
With their own affordable housing Green Paper on the way, the Government has put in a number of building blocks for supporting increased delivery since our last survey.
Last year, our capacity survey clearly showed that uncertainty over future rents was the biggest barrier to housing associations meeting their development aspirations. That particular issue was addressed in October last year when the Government announced that rent increases would be capped to the consumer price index plus 1% in the five years from 2020.
In 2017, our survey was conducted shortly after the Government had issued its Housing White Paper, which heralded a broader approach to housing delivery across a wider range of tenures. The Government followed this up with the consultation paper Planning for the Right Homes in the Right Places. This sets out proposals to require local planning authorities to objectively assess housing need with regard to affordability in their locality and to take into account the needs of specific groups of occupiers.
Furthermore, at the beginning of this year, the Government set out the terms of reference for a review by Oliver Letwin to look into build-out rates on consented sites. The review has looked at how absorption rates can be increased on large sites by creating homes across a wider range of tenures.
Constraints remain in the short-term, two of which stand out. The first is the availability of grant, which the respondents don’t have control over.
The second constraint is lack of access to land, which has meant an increasing emphasis on securing strategic land.
The lack of land has been an important catalyst for merger and partnership activity in the sector, which we explore in more detail in Meeting development aspirations.