Chamberlain Walker

A new settlement with Housing Associations

The Policy Exchange report A New Settlement Between Government and Independent Housing Associations (authored by Chris Walker) suggests pressing the reset button on the way Government and Housing Associations work together. It is built on the premise that housing associations are independent organisations and that Government should not tell them what to do. However, the report also acknowledges that Government has every right to decide how public money is spent. This includes the Government using financial incentives to encourage housing associations to do the things it wants them to do, in order to meet its policy objectives.

Last Autumn, the Government set an aspiration to build 1 million homes over the next five years – namely the current Parliament. That means 200,000 a year. But average housebuilding over the last 10 years has been around 130,000. Granted this was punctuated by recession, but the 10 years prior were not much better (~140,000).

Many housing associations want to build more homes but feel they are unable to. For example, historically, regulation has curtailed their ability to strategically asset manage to create churn and financial capacity to build. The recent deregulatory moves in the Housing & Planning Act (2016) should improve matters but could go further. Housing association assets are also valued very conservatively, constraining what can be borrowed against them to build. And latterly, the social rent cuts – applied to all housing associations, even the efficient ones that are building – have hit rental incomes, also impeding their ability to ‘borrow to build’.

The report establishes that housing associations have been building around 50,000 homes a year on average – mostly affordable. But they could have the capacity to build 100,000 – both affordable and market.

How? The idea of the New Settlement is a new ‘City Deal’ type of framework, with a number of voluntary deals called ‘Housing Deals’, negotiated between Government – either National or Devolved – and individual housing associations. These would be time-limited deals, renegotiated perhaps every 5 years.

A housing association signing up would commit to higher building rates of typically between 3% and 4% of its housing stock. This would be demonstrated through the housing association’s audited annual reporting. In return, the Government would give housing associations signing up complete discretion over the use of social housing grant from housing asset sales (so building on the deregulation of the Housing & Planning Act) and allow them greater freedom to set their own independent rents within an overall rent budget or envelope that could rise as much as CPI annually.

The deal could also include other important areas of policy important to the Government of the day, including (currently) asks around promoting homeownership.

Housing Deals would be win-win. They would be good for the Government. They would be good for housing associations: at the National Housing Federation annual conference last month, the theme was housing associations ‘owning their future’. Housing Deals could be a vehicle for individual housing associations to do just that. But above all, Housing Deals would be good for housing outcomes.