The report, ‘Where next? Housing after 2015’, suggests that even with substantial business efficiencies allowed for, housing associations will need to borrow around £15 billion by 2015 to build 150,000 homes and meet stock reinvestment and refinancing commitments.
It says the sector’s capacity to continue developing will diminish swiftly and it would be very difficult for housing associations to manage a further large affordable housing programme under the same rules.
The report calls for a model to be introduced which recognises and tackles the growing housing crisis facing people trying to access good homes in both the market rented sector (MRS) and the affordable housing sector.
The key features of the proposed new investment model would include a new form of rented housing, extending the reach of the Government’s new flexible tenancy so it can straddle the affordable and market rented sectors and offers longer term renting options for people who are likely to need to stay living in the MRS for several years.
Also new financial incentives to encourage much greater institutional investment into the market rented sector to achieve delivery of new homes at scale, including delivering improved affordable options within the MRS, in partnership with housing associations.
It also recommends additional freedoms and flexibilities for housing associations to allow them to take on further measured risks and create extra financial capacity to deliver more new rented housing in both the traditional affordable sector and the MRS. The potential £20 billion plus capacity created would be captured and accounted for transparently through a new ‘social equity fund’, held on housing association balance sheets.
A stronger, more effective collaboration between local authorities, housing associations and private investors is needed to limit the expected debt burdens of the current Affordable Rent model and take maximum advantage of the potential for new homes created by the reform of the Housing Revenue Account and other new flexibilities for local authorities.
And a re-design of the regulatory environment for housing providers to open the door to new private sector investment and involvement, while maintaining assurance for government and consumers over viability, governance and housing quality standards.
‘The time to start thinking about the post 2015 housing settlement is now. It is important that government, local authorities and housing providers all understand well in advance how the next substantial programme of new affordable housing will be delivered or there is a serious risk of a major downturn in development which the country can ill afford,’ said Richard Parker, a partner at PwC.
‘Our proposal is an attempt to kick start that debate to ensure a new model is established in good time,’ he added.
According to David Montague, chief executive of L&Q, housing associations are in an ideal position to play a leading role in developing a broader offer across the rented housing market because of our ability to operate cross-sector and in response to market circumstances.
‘We are seeking a way for housing associations to think and act differently within the housing market to ensure that people who cannot afford to buy or rent in the open market have even more flexible and affordable choices,’ he said.
‘Housing associations will never lose their social mission, but we do need to be able to move with the times and to find ways to deliver more affordable homes in a situation where public spending is likely to remain tight for many years to come,’ he added.
