A [new era] of partnering

The CEO of Homes England recently tweeted that the agency wanted to grow the range of Strategic Partners it worked with to bring more innovation into the supply of affordable homes.  

The term Strategic Partner has had a very specific definition in the UK social housing sector over the last few years, referring to a handful of the biggest housing associations who receive a share of just under £500m of government money to deliver new affordable homes.  The recent announcement indicates that Government wants to broaden that list and to encourage more organisations to help it deliver its ambitious and much needed affordable housing targets. But is this the right approach and, importantly, do the strategic partners themselves need to think about their own capacity and expertise and if it needs to be strengthened to do the job of really unlocking the affordable housing conundrum?

For years, the UK has found itself in the grip of a housing crisis. That crisis is most acutely felt by those who sit on waiting lists, often for year after year, in the desperate hope that they will be offered an affordable home.  Government data estimates that there are 1.2m people on that list, but industry body, the National Housing Federation, thinks that there are as many as 1.6m people waiting. The solution hitherto has been for the national housing agency, Homes England, to provide capital – typically grants, but increasingly loans – to large housing associations with a mandate to build more homes, more quickly. The industry has tried hard to rise to the challenge and in 2019-20 over 57,000 new affordable homes were built; although some experts argue that this is still way short of the number needed to make a dent into the crisis (short by as much as 90,000 according to the Guardian’s analysis of government housing statistics). The story in 2020 is unsurprisingly even worse; fewer than 20,000 new affordable homes were either started or completed in the year of lockdown.  As the UK emerges from the crisis with perhaps the biggest government debt since the war, the pressure to deliver, but to do so with innovation and less reliance on government subsidy, will be greater than ever.  

For generations, the approach to affordable housing delivery has been quite sequential: ministers set housing targets, Treasury releases the money, RSLs draw down that money and contractors build new homes. Whilst this undoubtedly does create new homes, it is a process that is flawed in several ways. First, the targets are never met. Second, the process is far from financially efficient. Numerous experts have opined that the subsidy far from leading to more efficient housing delivery, it actually inflates the price of delivery, which is then baked into the contractors pricing, land values and, ultimately, the private sectors profit margin. The third, and perhaps more critical, fault in the approach though lies in this: it totally overlooks the underutilised capacity that already exists across the extensive real estate that housing associations already have: their existing housing estates.    

There are over 500 large former council housing estates in the UK. Most are old, built through the lens of previous visionaries or under the auspices of post war governments wanting “house our heroes”. But few are actively being modernised and even fewer are being critically scrutinised to see if they actually hold the key to the supply of new affordable homes, at scale, cost effectively and quickly. Over 4 million households live across these housing estates and, whilst nobody is proposing that they should move out to create space for more families, what is needed is a critical examination of that housing stock to see if it is capable of doing three important things: 

  1. Being modernised and refurbished to make the homes more appropriate to the needs of modern affordable renters. Most people on the housing waiting list need relatively small properties (one or two bedrooms) but most of the existing stock was built to house traditional family structures that are far from the mainstay of demand today.  There is an oversupply of larger housing stock that is under occupied by an ageing demographic, many of whom want something better and more suited to their lifestyles;  
  1. Being renewed from a carbon footprint perspective. Hundreds of thousands of council homes in the UK are underperforming from an energy perspective, which leads to expensive bills for some of the poorest households, and from an carbon reduction standpoint. Doing nothing is not an option, but piecemeal grant led initiatives are far from the answer, especially for the thousands of properties that are known as being hard (i.e. impossible) to treat: again, often the only real solution is in remodelling and rethinking what is there.
  1. Being densified. Many housing associations are so busy overpaying contractors to build new properties on classic “land and build JCT contracts” that they fail to notice the extensive real estate that they already own that could perfectly lend itself to new homes.  his is not simply “in fill” land but, again, space that is created by radically remodelling or using architectural innovation to repurpose what’s already there.  Lightweight timber framed roof top extensions to maisonette blocks, densifying on underutilised local authority land that often sits redundant within or at the edge of the Council estates are just some of the many options.

So, whilst government wants to broaden the scope and range of its strategic partnerships, the partners themselves must broaden their thinking and methods of delivery. The post pandemic world of affordable housing is going to be one that, perhaps far more than ever before, needs genuine and radical innovation as the needs remain high but the cash is likely to need to go much further.

Place Capital Group has been helping Local Authorities and housing associations to unlock the potential of their housing estates through its strategic development partner product where risks and rewards of regenerating and improving the UK’s housing estates are shared. To find out more visit www.placecapitalgroup.co.uk/about

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