PRESS RELEASE: Radical Changes Critical for Future Affordable House Building

Published: 23 September 2011 | Author: Colm Quinn

Housing associations must radically review their business operations, including the way they raise private finance, to ensure they continue to build sufficient affordable homes, says a report published today.

At the Heart is Housing - Making Affordable Rent Happen, published by The Housing Forum, says the sector has reached a ‘tipping point’ where thousands of new homes are urgently needed and the process of finance, delivery, planning and regulation requires simplification.

It calls on housing association boards and senior management teams to take a robust approach to the challenges they face in the new financial climate where government grant is far lower than in the past.

In many cases, this will mean taking their associations in new directions, managing financial risk and developing ‘commercially viable solutions’ to house building while retaining their social values and objectives.

Shelagh Grant, chief executive of The Housing Forum, said an important part of operating successfully in the climate would be partnerships with contractors and other house builders. “Working closely with the supply chain is vital to achieving a coherent approach to housing delivery,” she said.

The report was published today by the forum, a professional network representing housing providers and firms that make up their supply chains, at its Northern Networking Conference in Leeds.

Reductions in grant have already triggered a review of values and priorities within some associations, it says. Value for money is more critical than ever - especially for the largest developing associations - with efficiency and more effective regulation becoming woven into the new operating environment.

“Meeting greater financial obligations requires a balance between commercial outlook and the traditional social business,” says the report. “This forces housing associations to look differently at priorities in the long term and to look again at priorities in day-to-day management.”

Maintaining the confidence of lenders remains crucial with associations having to allay concerns over the payment of housing benefit under the new universal credit system. Associations will become less reliant on bank loans and instead develop financial models based on funding from long-term capital and equity markets.

“New innovative use of funding is critical to the challenge of meeting the affordable housing need in the UK,” says the report, adding that funding from institutional investors such as pension funds is becoming a clearer prospect and should be explored further.

John Cross, board member of The Housing Forum and chief executive of bpha, who chaired the working group that produced the report, said we were about to witness the next stage in the evolution of housing associations where they could no longer depend on government subsidy to protect their balance sheets and guarantee growth.

“We have to face up to how we manage the critical issues of our balance sheets and our relationships with funders,” he said. “We need to get the balance right between commerciality and retaining a social ethos.”

While associations were undoubtedly up to the challenge, some need to manage the tension between commerciality and other objectives very carefully. “The whole house building industry is behind associations as they change the way they operate and respond to the challenges ahead,” he added.

The report calls on associations to work closely with local authorities over the use of public land and provision of affordable homes through local planning policy. Any move away from funding homes though section 106 planning agreements should be phased, to avoid detrimental effect on house building, it adds.

It also highlights the economic benefits of house building, with 92p in every £1 that is spent on construction remaining in the UK, while the same £1 generates £2.84 in further economic activity.

For further information contact Shelagh Grant at The Housing Forum (tel: 07989 575 160) or John Cross (tel: 07759 108721)

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Notes to editors

1. The Housing Forum is a unique cross-housing industry network that brings public and private sector organisations together to influence emerging policy and promote excellent practice.

2. Copies of the report At the Heart is Housing - Making Affordable Rent Happen are available at www.housingforum.org.uk/knowledge/publications.

3. The Housing Forum’s Northern Networking Conference is being held at Weetwood Hall, Leeds, on September 21st. It is an opportunity for house builders and their suppliers in the north of England to discuss recent developments in the construction industry.

4. Construction in the Economy, published in October 2010 by the UK Construction Group, found that house building not only creates job opportunities locally, but also has a massive stimulus in the supply chain, materials and white goods. It showed that 92p of every £1 spent in construction stays in the UK while the same £1 invested in construction generates £2.84 in economic activity

ENDS

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