September 19, 2016

A new settlement between government and independent housing associations

Housing associations should 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.

Policy Exchange’s new report is supported by five of the country’s leading housing associations and argues that private housebuilders will only ever realistically build 140,000 new homes a year due to planning constraints and their ‘build to sell’ model which limits their housing delivery. To meet the government’s aspiration to build a million homes by 2020, housing associations 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 housing associations built around 50,000 homes a year on average with only 10% of these for market sale.

The paper proposes that housing associations – or consortia of housing associations – 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 5 year time period.

The housing associations 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;
  • 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 housing associations signing up complete discretion over the use of the social housing grant from housing asset sales and allow the housing associations 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).


Chris Walker

Head of Housing, Planning and Urban Policy

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