Workshop: The role of Housing Associations in accelerating residential development in London

On 27 May 2015—shortly after the general election—LSE London held a small, specialist workshop on the role of housing associations in accelerating development in London. Attendees included chief executives, finance directors, trade bodies, local authority officials and other stakeholders and commentators. The conversation focused on the possibilities, barriers and in particular the incentives and risks that Housing Associations perceive in expanding housing investment.

There was general agreement that Housing Associations had a major role to play in accelerating development in London – and that it was possible to do much more than was currently in the pipeline. The larger, more assertive associations were working with a range of different models to extend their capacity to develop through cross subsidy from more market oriented projects – involving both properties to rent and for sale. They were also working in partnership with other associations (including smaller associations who had borrowing capacity) and particularly with local authorities to speed up development and to achieve best value for the resources they were committing.

There was discussion about whether Housing Associations were taking a positive enough approach. Some thought that there is too much negativity among associations and perhaps inadequate recognition of the history of subsidy and support upon which the government now wishes to draw. But there was also agreement that a number of the largest associations were taking a range of initiatives that could increase output levels significantly in the next few years.

Major barriers

There are important continuing barriers to development, including particularly land availability; uncertainties associated with the planning process; the limited capacity of planning departments; and problems with partnership working both between housing associations and between associations and local authorities.

Land availability – and the impact on price of too many organisations competing for the land that is available – is a continuing issue for all major players. All wanted a mechanism for ensuring a secure ten year supply of land.

Linked to this was the problem around the certainty of the planning process. If developers think they can modify the planning permission in their favour then they will bid more for the land – and then say they cannot afford the obligations. A number of participants thought that, given how badly the system was now working, a move to a tariff system for all obligations including affordable housing would produce better outcomes.

Concerns about the lack of resources and experience in local authorities have arisen consistently during our debates and not just in the context of negotiating planning obligations. So far working together in groups of authorities has not produced savings or better/quicker decisions. More fundamentally while each site has to be treated individually and sometimes has to be further reviewed during the development process the resource time involved for all concerned is enormous.

A rather different issue for local authority departments is how many associations they have to deal with on a regular basis – in some central London authorities there are 80 plus associations, each with different missions and approaches. Equally, the very different stances of local authorities on planning and allocation issues mean that one association may be dealing with very large numbers of local authorities across the country. The great variety of objectives among both housing associations and local authorities is one of the major reasons why partnership working is more difficult than it might appear on paper.

Growing Risks

Perhaps the most important issue for housing associations in determining their development and ownership programmes in the immediate future is growing policy risk. Much of the discussion at the roundtable focused on the extension of Right to Buy to housing associations. Many felt that this would have an immediate effect on their capacity to deliver new investment, particularly because of lenders’ concerns but also because of the potential for any new investment itself to be sold off. There was a feeling that this risk was not yet understood and perhaps that kneejerk reactions were unhelpful. As the policy would be implemented in some form what has to be developed are strategies to mitigate negative impacts.

Most associations still have relatively few Affordable Rent properties but numbers would grow through the Parliament. Too little is known about who lives in these properties and how dependent they are on housing benefit. There was discussion about whether criteria should be established so that in the future these properties should form a distinct ‘intermediate’ niche to accommodate working households able to afford the rent.

A further risk involved the manifesto pledge to reduce the welfare cap so that in some areas it would start to impact not just on larger families but also on those with only two children in higher rent areas. Here again, the fear of many around the table was that development capacity would be reduced as a result of a less certain income stream.

(Since the roundtable the budget has confirmed the welfare cap reductions and put in place a standstill on working age welfare benefits. However the most important – and unexpected – change has been that housing association must cut their rents by 1% each year for the next four years. This both reverses an agreement made last year, increasing policy risk, and further reduces capacity to invest.)

Ways Forward

Attendees were asked for ‘game changers’ that would make a real difference in accelerating delivery. The three key suggestions were:

  • The role of the GLA should be extended so it becomes a full ‘enabling body’, focused on developing a long-term supply side strategy which can identify and guarantee land supply and provide staffing resources for overstretched local authority departments.
  • Concentrating resources on the Housing Zone model, which encourages local authorities to take the lead and consider the ‘whole picture’, including infrastructure has the best potential for generating a step change in output levels.
  • London’s green belt policy should be reviewed as a matter of urgency with the aim of ensuring the strategic release of land with low social value but good access to infrastructure and employment

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