Much has been said in response to the funds made available to housing as part of the Government’s Autumn Statement. However, three further developments in January 2016 could and most probably will prove to be a further catalyst for housing investment. The first was the introduction of new provisions into the Housing and Planning Bill 2015 intended to implement the announcement by the Government in December 2015 setting out their proposed measures to deregulate housing associations. The second was the announcement by the Prime Minister of the setting up an advisory panel on estate regeneration chaired by Lord Heseltine. This announcement came with the promise of new £140m worth of funding in support of estate regeneration. The third was by way a reiteration by the Government to develop a handful of Government owned sites using a direct commissioning model.
The deregulation proposals arose from the decision by the independent Office of National Statistics last autumn to classify housing associations as public sector bodies. This re-classification was due to the social housing regulator’s decisive statutory controls over housing association; land disposals, constitutional changes, use of proceeds of sale and, in certain circumstances, board appointments. The provisions in the Bill remove these controls. If Housing Associations are charities they will remain bound by other restrictions and they will continue to be monitored by the regulator under the sector’s regulatory framework. However, housing associations can use their new freedoms to; secure investment for development, achieve prudent diversification and undertake wider partnerships.
Two announcements earlier last year relating first, to enlarging housing association tenants’ right to buy and secondly, to a one percent per annum reduction in social rents over a four year period had already resulted in housing associations re-evaluating their business plans and seeking to increase their income from diversified housing development. Housing associations already benefit from long term funding and returns and these new freedoms (especially if used in partnership) can make more significant contributions to housing numbers (both market and affordable).
Housing estate regeneration
The announcement on housing estate regeneration was previewed in the autumn statement that £2.3 billion in loans would be made available for infrastructure and regeneration of estates (although it would be fair to say that most people considered the vast proportion of the funding would be available for housing infrastructure probably through an enlarged HCA Large Sites Infrastructure Fund). The announcement had three elements, the establishment of an advisory panel chaired by Lord Heseltine, a £140m fund and the results of a report by Savills which revealed significant benefits in housing numbers should there be a return to traditional street grids. The immediate linkage between the three elements have yet to be made clear. Whilst the £140m fund is welcomed and would roughly double the current HCA Estate Regeneration Fund it would seem at best “a challenge” to stretch it across the 100 estates in priority need of regeneration. Clearly there will be a significant dependence on private funding. The challenges will be, to mould the housing offer into a steady income stream, to maximise housing equity investment and cross subsidy within the constraints of the local authority housing finance regime.
Direct commissioning model
The announcement re-iterating the use of a direct commissioning model on certain public sector sites is an opportunity to diversify the housebuilding industry by taking some of the financial strain from housebuilding SMEs and by introducing new investors and contractors. We know this will be a public and private joint venture contracting approach to raise funding for housing development and to apportion risk and reward where it can be best managed. The model is likely to relieve SMEs from the heavy burden of securing significant development finance whilst transferring construction and ancillary service risk. However, such a public sector intervention will need to be structured to conform to EU public procurement and state aid rules whilst also being able to demonstrate faster housing outputs and no less value for money than traditional delivery methods.