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The Housing White Paper: Getting the most from housing associations and local authorities

The Government has signalled its intentions to tackle the housing crisis through the publication of the Housing White Paper.

Its aims are clear: we need to build more housing – between 225,000 and 275,000 new homes a year – if we are to keep up with population growth and tackle years of under-supply.

Previous governments, particularly the last Conservative administration, have long championed private home ownership as the answer to our housing needs. Since the late 1970s/early 1980s, we have failed to come close to meeting the country’s needs. Despite a high of 170,610 new homes in 2007/08, levels of development have typically been far lower and last year was only 139,840 dwellings – some 37% below the ‘minimum’ target of 225,000. This depressed rate of delivery compared with earlier eras is underpinned by a shift in tenure, with an almost total reliance on the private sector, with levels of ‘public’ build becoming a far smaller element of the overall delivery.

The statistics are startling and support a need for a fundamental change in culture, if we are to deliver significant housing growth at the levels needed. When interviewed about the Housing White Paper on Radio 4, the Secretary of State for Communities and Local Government Sajid Javid accepted that it should not all be about home ownership as some people want, but also the choice to rent. He made it clear “the reality is we need more homes, whether to rent or buy”.

The Housing White Paper’s answer to this is to diversify the house-building industry and have more players, who together can support the levels of delivery that are needed.

Build to Rent represents one obvious opportunity to increase housing delivery, which we will pick up shortly in the Housing our Nation series. The role of housing associations and local authorities is also fundamental. 

Housing associations

Housing associations have a track record of delivering a relatively small but consistent contribution to the supply for the past 10 years, ranging between 18,160 and 27,460 dwellings per annum. The Housing White Paper embraces housing associations as developers of a ‘range of new homes’.

To increase delivery significantly the White Paper urges all housing associations to build more homes and expects them to make every effort to improve their efficiency. In return, a rent policy for social housing landlords will be introduced allowing housing associations to borrow against future income. In addition, a stand-alone social housing regulator will be created, together with a commitment to deregulation and allowing housing associations to be classified as private sector bodies. Such a move should drive innovation within housing associations, with an increase in entrepreneurial skills, and construction and development expertise. This can only help in delivering more housing. 

So far the White Paper has been well received by housing associations which welcome the measures to drive up the standards of the rental market; however concerns remain as to whether the Government will provide sufficient funding and resources to match its ambition.

Local authorities

Perhaps more symbolic of the shift in the Government’s approach is the Housing White Paper’s ‘call to arms’ to local authorities. Up to the late 1970s they were collectively building 100,000 homes a year. Indeed, between the late 1940s and late 1950s local authorities built more homes than the private sector. However, following the election of Margaret Thatcher in 1979, local authority house building significantly decreased, and fell as low as 60 dwellings in 1999/2000 and 2001/2002. Some local authorities have now started to build housing again, but since 2010/11 this represents approximately 1% of the total dwellings completed.

Birmingham City Council has been a leading light in restarting the council housing production line and is set to introduce further innovative measures to increase delivery, such as bonds encouraging banks, pension funds and investment funds to back housing in the city. The Council has its own sites on which it delivers housing through its house-building programme, the ‘Birmingham Municipal Housing Trust’. 

The Housing White Paper includes a commitment from the Government to work with local authorities to understand all the options to increase the supply of affordable housing, as well as bespoke housing deals with authorities in high-demand areas. This, together with other measures such as increasing planning fees, strengthening the tools to drive build out and land assembly powers, and the Housing Infrastructure Fund will give local authorities the tools they need to get building.

At this stage, the White Paper is only a vision and will need to be supported by new policy and legislation. It is noted that the thrust of the Paper is geared towards local authorities being enablers rather than builders, with limited measures identified as to how the Government will assist councils with building houses. This potential for a partnership approach is intriguing and opens up new opportunities for a breed of house builder that is aligned with local authorities.

If councils are to increase house building then they require financial flexibilities to scale up housing development, both in partnership with the private sector and directly. This includes changes to how housing revenue accounts are recorded to enable councils to borrow against their assets and fund new house building. Councils also want powers to replace council homes that are sold off under Right to Buy. Currently the Government allows local authorities to keep only 30% of the cost for replacement council homes.

Summary

The Housing White Paper certainly represents fresh thinking as to how the Government intends to tackle the housing crisis and a change in its approach. It provides a vision of a diversified house-building market where the priority is not solely on home ownership, as has been the case with previous administrations. It has been well received by the housing industry, including housing associations.

The Government does need to consider how best to assist housing associations. It will also be necessary to provide councils with the right financial tools they need if they are to be more proactive and make a genuine and significant contribution to meeting our housing needs.

If you have any questions regarding the Housing White Paper, please contact Tom Armfield.

2 March 2017