Think Tanks
Printable version E-mail this to a friend

Policy Exchange - Government will miss its housing target unless Housing Associations are given more freedoms to build

Government will miss its housing target unless Housing Associations are given more freedoms to build

  • Think tank report proposes wave of Housing Deals for housing associations – top performers should be exempt from social rent reductions so they can borrow to build more homes
  • Housing association tenants should be offered the ‘Right to Part Buy’ to encourage higher levels of homeownership

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.

A new report by leading think tank Policy Exchange and supported by five of the country’s leading housing associations 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; and
  • 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, author of the report, said:

“The government needs to urgently move away from a one size fits all policy towards housing associations if it is to meet its target of 1 million new homes by 2020.

“While it is true that reducing social rents – which make up 90% of housing association income – will force poor performing organisations to have to make efficiencies or exit the sector, the policy also makes it harder for well-run housing associations to build the homes they want to build.

“A new settlement will give well run housing associations freedom to run their own organisations in the most efficient manner, incentivising them to borrow to build and providing opportunities for people on low incomes to become part of the property owning democracy.”

Carol Matthews, Chief Executive at Riverside:

“We are genuinely excited by the devolution deals unfolding in the places where we work. That is why we are particularly drawn to extending the concept to housing associations. Rather than the ‘one size fits all’ inflexible regulatory system that currently frames our work, we believe that time-limited, bespoke ‘deals’ are more suited to a hugely diverse sector operating in a rapidly changing environment.”

Neil Hadden, Chief Executive at Genesis:

“Our job must be to build more homes to tackle the housing crisis, but to enable us to do so as effectively as we can, the government must reduce the burdens we contend with and which often get in the way. The report rightly supports consolidation in the sector too – and despite some high-profile attempts which have not succeeded, this is the right approach to sharpen the sector’s focus and efficiency.”

Paul Tennant, Chief Executive at Orbit:

“Housing associations have a critical role to play in delivering the homes this country needs and this report challenges both us and government to think differently about how we could achieve more together.”

Ann Santry, Chief Executive at Sovereign:

“I firmly believe it is through stronger partnerships that we can increase homebuilding, helping those who want to buy as well as supporting those who need a stable, affordable home.”

A new settlement between government and independent housing associations 

Policy Exchange argues that Housing Associations should be given more freedoms to build so that the Government can meet its housing target.

Latest News from
Think Tanks

Download your copy of the full 2016 Survey Report now...