Freeing Housing Associations: Better financing, more homes

Nov 12, 2014

Housing associations are being stifled by unnecessary red tape that prevents them from building 100,000 new homes a year – a third of the total housing supply needed to keep up with demand.

England’s 1,500 housing associations are currently bound by multiple rules and regulations which prevent them from choosing their own social tenants. This leads to a situation where some of the most anti-social tenants are effectively “dumped” on housing associations who can do nothing about it. This, as well as other restrictions, increases their costs which inhibit them from raising and spending an extra £1billion a year on developing or acquiring new affordable homes.

Under a radical new plan proposed in the paper, housing associations could “opt-out” of their historical government grant which binds them to these rules. A new category of what the report calls ‘Free Housing Associations’, would buy out their historical grant from the government at a discounted cost in return for the removal of regulatory restrictions. Paying off the government grant would raise significant cash for the Treasury. The report shows that a combination of sale proceeds along with debt interest savings could raise over £300million a year by the end of the next Parliament and as much as £550million a year within 30 years.

The paper makes a number of recommendations for new grant-free housing associations including:

  1. Allowing them to sell off expensive social homes in order to build a greater number of new affordable homes without having to get permission from the Homes and Communities Agency.
  2. Extending the Help to Buy scheme for new homes beyond 2020 for housing associations to allow them to build more market homes for sale. Profits could be used to cross subsidise affordable homes.
  3. Allowing them to set their own rent policy. Instead of having a number of different rents for similar properties inhabited by similar households, as dictated by government, grant-free associations could set a single rationalised rent or cheaper rents to reward good tenant behaviour.

Free Housing Associations could then be free to double the number of new homes built every year from 50,000 to 100,000. Currently housing associations build 45,000 affordable homes and 5,000 private homes every year. The paper expects that number to increase to 60,000 affordable homes and 40,000 private homes if they had more freedom from the regulator, the Homes and Communities Agency (HCA) and local authorities.

The report predicts that the housing waiting list would fall from its current level of 1.7million households as a result of these changes.

The idea is also popular. Polling of housing association leaders for the project found widespread support for the idea with 67% in favour of writing off the government grant. 47% of respondents said they were happy to pay off the grant themselves, if there was a discount.

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Testimonials

Housing Minister Brandon Lewis said:
“I welcome this report which adds to the ongoing debate about how we can help get housing associations to build more homes.

“Since 2010 we have got England building, with housing associations playing a crucial role in helping deliver over 200,000 new affordable homes during that time.  That includes having a say over who is allocated the homes they build working with the local authority to help identify those in real need.

“We have also given housing associations the option to sell vacant, higher-value homes to help build more affordable homes in their communities, as part of wider efforts to better manage their stock.”


Neil Hadden, Chief Executive, Genesis Housing Association, co-sponsor of the report:

“We are delighted to support this valuable and very timely contribution to the debate about the future of housing associations, which rightly underlines the pivotal role that the sector has to play in leading the UK out of the grips of a housing crisis.

“Housing associations are already a key part of the solution to housing supply issues, but the sector could achieve even more if it was unshackled from excessive financial and regulatory constraints.  Giving well-performing providers independent status and the green light to buy out historical grant would free them up to do what they do best: delivering much-needed new homes and services to their residents and surrounding communities.

“Enabling providers to act in a more commercial way to support their social purpose would also boost momentum for future housing supply.  Genesis has found that this approach has strengthened our self-sufficiency and fostered a very healthy development pipeline responsive to local need, but the Government needs to loosen its grip to help the sector to continue in this direction of travel.”


David Orr, chief executive of the National Housing Federation, said:

“Housing associations provide homes for local people and are committed to helping those who are most in need. They have a key role to play in ending this country’s housing crisis – by building thousands more homes and investing more in communities. But to realise this ambition, housing associations need more freedom and genuine control over their own futures.

“It must include the ability to set their own rents and decide who their homes are let to. This would enable them to provide homes that are genuinely affordable, reflect the demands of different local housing markets and ensure people are provided with places to live that truly meet their needs.

“These sorts of changes need to be part of a long term plan for housing from government which will help end the housing crisis within a generation. Whilst some of this report’s proposals are more controversial than others, we welcome this critical debate about how housing associations can build more homes.”

Author

Chris Walker

Chris Walker
Head of Housing, Planning and Urban Policy 

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