home building

We were thrilled to welcome 24 housing’s journalist Bill Tanner to our specialist Local Authority seminar. The event collated emerging evidence of what it takes to get councils building homes again – and how.

A major seminar in London (Feb 28th) looks at the future for councils considering home building – bringing together emerging evidence of the case for such an approach.

Key sector speakers will explore issues including local housing companies, HRA new build, use of Right to Buy receipts, and shared ownership.

The seminar is set against the budget announcement of £1bn added borrowing for HRA new build in high demand areas, and a newly released report on investment in the Private Rented Sector (PRS) that opened channels for councils, developers and investors to work alongside each other on next generation of private rented housing.

With a stated commitment to raise housebuilding levels to 300,000 a year, chancellor Philip Hammond used his autumn budget to increase the borrowing cap for councils in some areas to £1bn.

In his budget in November, Hammond said councils in high need of more housebuilding could bid for an increase in the amount they could borrow to fund construction, up to a total of £1bn.

Though the Local Government Association welcomed acknowledgement of the problems facing councils, it said the increase did not go far enough.

The Commons treasury select committee has already said the borrowing cap restricts the number of homes that local authorities could deliver, and to achieve the government target of 300,000 new homes per year, the cap should be abolished.

More than 217,000 new homes were built across the UK in the year to April 2017 – 15% more than in the previous year but well short of that 300,000 target.

The Housing and Finance Institute has also warned that ministers must do more to meet their annual target for new homes built, making three recommendations to boost numbers – one of which is to help public and private groups join up to finance new building.

It also recommends the government make housing a specific national infrastructure priority and focus more efforts on flexible and cheaper modular methods of construction.

Research by the New Local Government Network (NLGN) reveals affordable housing efforts would benefit from a reconsideration of the borrowing cap.

To NLGN, an increased capacity to borrow, among other measures, would give local authorities the autonomy to build housing where it is needed.

The research, commissioned by the National Housing Federation, outlines the collaboration between local government and housing associations, who are committed to providing affordable housing in line with current demand.

NLGN director, Adam Lent, said: “As the country faces the biggest housing crisis in a generation, local authorities are best placed to determine local demand in housing need and meet it.

“As such the government should remove the barriers that prevents both housing associations and councils collaborating and innovating together.”

The NLGN report identifies practical models that could capitalise on such a policy change, with further recommendations that would see an increase in affordable housing stock.

While such changes could make an immediate difference, the report further highlights the need to develop a housing strategy beyond 2020, which looks beyond home-ownership to all types of tenure.

The NLGN also recommended that:

  • Local leaders, such as elected mayors, more proactively assemble and package up publicly-owned sites in ‘bundles’ for development across a city or area, with the view to drive quality development in areas which have traditionally suffered from low quality housing
  • The government continues to implement the proposed rent policy (and increase) of CPI + 1% for social and affordable rents from 2020, as per the initial rent settlement, to allow housing associations and councils to invest in new homes with confidence
  • The government provides a clear and sustainable funding solution to supported housing as a matter of urgency, with a supported housing allowance set at a higher level than the Local Housing Allowance, and sheltered accommodation removed from the proposed policy changes.

Research for the report was carried out over June-August last year based on 171 responses from councils and 142 responses from housing associations.

Responses were representative by region, type of council – excepting upper tier counties, which are not responsible for housing – and whether councils are stock-retaining or not.

A report recently released by Sigma Capital highlighted the need for dedicated vehicles to now accelerate the delivery of private rented family housing.

Some of the UK’s leading institutions have already invested in Sigma’s The PRS REIT plc – including Aviva, AXA, Hendersons, Deutsche Bank and Homes England.

The report; ‘How local authorities can foster investment by corporate landlords in new private rental housing’, prepared by university professors, Tony Crook and Peter A. Kemp, pitched councils as ideally placed to create a modern, private rental offering by working closely with investors and developers.

This report pitched the potential for residential property companies to bring development expertise and development finance to working with local authorities, which can use planning powers, land banks and long-term pension funding to cut housing shortages.

The report makes the case for a ‘more modern’ form of private landlordism that involves corporate owners operating on a substantial scale and investing long-term in purpose designed and built homes let on long-term tenancies – but meeting the needs of both short and long-term tenants alike.

To the report, many of the barriers that once prevented the emergence of this corporate sector have now been removed.

The long-term income returns that can be earned from an efficiently constructed and managed newly built sector are attractive to many developers and their funders, including pension and life funds because the long-term returns match their liabilities.

Most of the tax and legal impediments to the emergence of this corporately owned PRS sector have been largely removed and the government has set up a special fund to help ‘kick start’ new building for the PRS.

But potential investors cannot find the large scale well managed portfolios they need to make their investments work.

Nor do they want to take on the tasks and risks of creating these new developments themselves.

What they want instead is to be able to acquire newly built and fully let portfolios producing the income returns they want.

The report pitches a partnership take on development risk – something it says residential property companies and councils are well placed to do.

Working together, councils and property companies are said to have the opportunity to create a portfolio of newly built PRS accommodation, meeting a wide range of housing needs – helping councils meet their strategic housing requirements and assist households who are unable to buy their home and are not a priority for social rented housing.

A new-build PRS sector constructed through such partnerships is said to reduce overall housing shortages and subsequently ease increases in house prices, rents and housing benefit payments.

By adding to the housing stock in this way, councils are seen as better placed to remove the poorest PRS properties owned by rogue landlords because their tenants will have somewhere else – higher quality, more secure and better managed – in which to live.

Write a comment
Your email address will not be published. Required fields are marked *