Our recent blog on housebuilding demonstrated how statistics recently released by the Office of National Statistics show just how woefully short of its targets on house building the Government is.
However, in the detail of the figures there was further cause for concern. The number of homes being built by housing associations is falling. The DCLG data also shows that as an annual figure, housing association completions were 15% down from the same quarter last year.
The forecast for housing associations looks somewhat gloomy. Looking at ‘starts’, housing associations were 10% down on the April-June quarter from last year. And before this, the previous four quarterly releases show that housing association starts fell compared with the preceding year; by 13% January-March, 5% October-December 2015, 12% July-September 2015, and 8% April to June 2015.
This trend in reduced housing association starts is worrying, and points to funding pressures that have put the brakes on the sector’s ability to get houses built. Government funding to build social homes was cut by 60% in 2010 and the impacts of welfare reforms mean that housing associations now need to operate in a more cautious manner.
In the face of this funding precipice, housing associations have been compelled to diversify their business models and increase the share of market and/or shared ownership homes that they build, in order to subsidise the delivery of affordable homes. Housing associations are facing financial pressures like never before.
And adding further pressure to housing associations are the Government’s social rent reductions, brought in under the Welfare Reform and Work Act 2016, at 1% each year for four years. This may seem like a modest cut, but in view of the long-term business models that housing associations operate under, it is having a real effect, not least since housing associations had been planning for ‘guaranteed’ increases, as promised by the previous Government.
The pressures facing rural housing associations are particularly acute. For a start, they are fewer in number compared with urban settings and those that are operating are finding viability more challenging than ever.
The Government has provided support to Community Land Trusts by way of a £60 million fund for community-led housing developments, for rural and coastal communities, brought in under the 2016 Budget. This may be an indication that the Government would like to see the third sector play an increased role in meeting rural housing need, yet the extent to which CLTs will be able to plug the gap remains to be seen.
Additionally, the extension of right to buy to housing association tenants will particularly affect rural housing associations (although they do have the right to opt out as it is a voluntary arrangement, and some notable rural housing associations are exercising this option). While the Government claims that every house sold will be replaced on a ‘one-for-one’ basis – this will be hard to achieve in rural areas, where the costs associated with small scale developments are higher. Plus, local authorities will need to sell their high value homes to fund the right-to-buy discounts being offered and many will sell their rural houses as these attract higher prices compared with flats. The Government promised to address this issue but have, at time of writing, failed to set out a genuine solution, yet is toying with changing the definition of ‘rural’ to help assuage the difficulty.
However, most rural associations are resisting this anyway as only 8% of housing stock in rural areas is affordable, compared with 20% in urban settings. Once lost, the homes would be very difficult to replace. The right-to-buy policy has also introduced uncertainty; with a lack of confidence spreading throughout rural communities, as well as for landowners, who will now be in two minds as to whether they can actually trust associations not to exercise the right to buy on homes they have ‘sponsored’.
This affordability crisis is also exacerbated in the countryside because rural incomes are lower and property prices relatively higher.
So although the decrease in housing association starts is worrying, we need to pay particular attention to the rural implications of increased pressure on housing associations. The problem of housing affordability is acute in rural areas, but far too often this issue is overlooked by politicians, who are preoccupied with ensuring that houses are built and houses are bought – while failing to address the causes of the housing affordability crisis specific to rural communities.
Unless rural housing associations get the support they need – and soon - a thriving countryside will become that much harder to achieve.