For all the positive noises about the recent announcement of the £3bn Affordable Homes Guarantee Scheme, with regards to its potential to generate jobs and boost productivity, the key question is whether the fund will generate 30,000 genuinely affordable homes. Further, the irony of pushing the benefits of productivity, given the current lack of labour, cannot be ignored.
The scheme will in effect reduce the cost of lending for housing associations, allowing them to increase output, with the Chancellor insisting that ‘the only sustainable path to higher wages and rising living standards is to boost productivity’. He linked this to the Office for Budget Responsibility’s (OBR) expectation of the UK seeing 600,000 more jobs by 2023. At a moment of economic uncertainty in which the government, let alone developers, are struggling to identify long-term investment opportunities, the security of rates at a fraction of those in the debt capital markets is certainly a measure to be welcomed.
Up-take on the scheme will no doubt be strong, as it was for the 2017 £1.4bn affordable homes fund. Demand for affordable housing remains overwhelmingly high and it marks a positive step towards the Chancellor’s aim to raise housing supply from 220,000 new homes a year to 300,000, by the mid-2020’s. It also represents an opportunity to inject some variety into the UK’s desperate need for housing stock. Giving this opportunity, affordable housing providers will ensure that the onus going forward isn’t all on volume-centric developers, instead offering a scheme which has the potential to attend to demand in a variety of tenures.
Ensuring that such a generous sum and the inevitable upturn in productivity the Chancellor predicts it will bring doesn’t have an inflationary effect on prices, will also be vital. This potential by-product of the scheme could actually prevent the benefits from being passed down to those whose who need lower-cost housing the most.
Supply of land is also a key issue. Valuable steps have been taken this year; Homes England secured former Ministry of Defence land on 7 military bases across the country, freeing up space for 10,000 plots. Whilst the Chancellor did also mention planning reform to release land for development, whether or not there will be a joined-up approach to this with the new scheme remains to be seen.
It is, of course, too early to judge the impact this policy will have on working towards the ambitious 2020’s output target. Whilst 9,909 homes started between 1 April and 30 September 2018 were for affordable housing, up 42% on the same period in the previous year, this made up 63% of new starts delivered by programmes through Homes England managed schemes. Stimulating the social housing and retirement markets will also be vital to reaching the goal, and we are yet to find out when the scheme will begin, who will manage it and a timetable for delivery.
Paul Butterworth is a Partner in the Real Estate practice at Ashfords. He advises housing clients on major regeneration and development projects, as well as on private and public finance in the sector.