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Housing associations call for more freedom to meet government's housebuilding targets

Policy ExchangeA think tank report has proposed a wave of Housing Deals for housing associations (HAs), suggesting top performers should be exempt from social rent reductions so they can borrow to build more homes.

HAs would be allowed to sign individual Housing Deals with the government – which provide greater freedoms and flexibilities, including fewer constraints over rent setting – in return for using their billion pound surpluses and borrowing capacity to build tens of thousands of new affordable and market homes.

Five of the country's leading HAs including Orbit have worked with think tank Policy Exchange on the report, which argues that private housebuilders will currently only be able to build 140,000 new homes a year due to planning constraints and their ‘build to sell’ model which limits their housing delivery.

Alongside Orbit, the report is supported by Genesis Housing Association, Home Group, Sovereign Housing Association, and The Riverside Group.

The report suggests that to meet the government’s aspiration to build a million homes by 2020, HAs will need to be incentivised to build 100,000 homes a year - double the number they are currently building. Between 2010/11 and 2014/15, developing HAs built around 50,000 homes a year on average with only 10% of these for market sale.

The paper proposes that HAs - or consortia of HAs - with a stock of more than 4,000 homes should be eligible to sign Housing Deals that commit them to building specific numbers of new affordable and market homes in areas of demand, within a five year time period.

The HAs taking part would: 

  • Maximise their investment capacity by running themselves more efficiently, seeking out merger opportunities with other housing associations, attracting alternative investment from the markets, including equity investment from pension funds, and developing around 50% of homes for the open market to further boost their revenues;
  • Prioritise housebuilding by using their investment capacity to borrow more to sustain annual building rates at 3% to 4% of their housing stock, build homes where they are needed most aligned with national and devolved strategies and build a significant number of these homes for shared ownership; and
  • Extend homeownership to lower income households by moving beyond the Right to Buy extension to embrace a new Right to Shared Ownership and giving all housing association tenants not only the Right to Buy but also the Right to Part Buy.

As part of the Deal, government would give the HAs signing up complete discretion over the use of the social housing grant from housing asset sales and allow the HAs to set their own rents for its social housing tenants, within an overall rental envelope that could rise in line with CPI for some Deals. This would build on the deregulatory policies in the Housing and Planning Act (2016).

Paul Tennant, Chief Executive at Orbit, said: “Housing associations have a critical role to play in delivering the homes this country needs and this report challenges both us and government to think differently about how we could achieve more together.”

Chris Walker, author of the report, said: “The government needs to urgently move away from a one size fits all policy towards housing associations if it is to meet its target of 1 million new homes by 2020.

“While it is true that reducing social rents – which make up 90% of housing association income – will force poor performing organisations to have to make efficiencies or exit the sector, the policy also makes it harder for well-run housing associations to build the homes they want to build.

“A new settlement will give well run housing associations freedom to run their own organisations in the most efficient manner, incentivising them to borrow to build and providing opportunities for people on low incomes to become part of the property owning democracy.”

Carol Matthews, Chief Executive at Riverside, said: “We are genuinely excited by the devolution deals unfolding in the places where we work. That is why we are particularly drawn to extending the concept to housing associations. Rather than the ‘one size fits all’ inflexible regulatory system that currently frames our work, we believe that time-limited, bespoke ‘deals’ are more suited to a hugely diverse sector operating in a rapidly changing environment.”

Neil Hadden, Chief Executive at Genesis, said: “Our job must be to build more homes to tackle the housing crisis, but to enable us to do so as effectively as we can, the Government must reduce the burdens we contend with and which often get in the way. The report rightly supports consolidation in the sector too – and despite some high-profile attempts which have not succeeded, this is the right approach to sharpen the sector’s focus and efficiency.”