Social Housing Speed Read – Budget 2018: the implications for social housing

Lifting local authority borrowing cap

As previously discussed, the PM’s announcement on 3 October 2018 of plans to remove the borrowing cap on local authorities’ Housing Revenue Accounts was met with a largely positive response. Many within the sector had been campaigning for a removal of the cap since its introduction in April 2012.

The Chancellor confirmed that the cap was lifted with effect from the date of the Budget (Monday 29 October), and therefore more councils are now able to borrow against their HRA accounts to fund affordable housing. At the time of the PM’s announcement, Savills estimated that this move could see local authorities building a minimum of 15,000 homes a year. This is particularly significant in light of the fact that in 2017/18 local authorities built only 1,730 houses.

Housing Infrastructure Fund

The Chancellor also announced an additional £500m for the Housing Infrastructure Fund, claiming that this would ‘unlock 650,000 homes’. The Housing Infrastructure Fund aims to encourage the building of new developments in areas with high housing demands by contributing to the funding of infrastructure; including transportation, schools and energy supplies.

Ian Shrubsall, head of Strategic Planning at WSP, stated that it was ‘great to see increased investment’ into the fund, and agreed that ‘a focus on the funding of delivery of infrastructure and servicing would unlock land for development more quickly’. Whilst Geeta Nanda, Chief Executive of Metropolitan Thames Valley, also acknowledged that this funding would ‘help boost housing supply’, she expressed disappointment that there was still a lack of ‘targeted investment in housing at social rent levels’.

The Chief Executive of the National Housing Federation, Kate Henderson, argued that the Budget ‘missed a real opportunity to overhaul how land is sold’. Ms Henderson commented that the rising cost of land made it extremely difficult for organisations who wanted to purchase land for social housing, and argued that ‘the housing crisis will never be solved until the price of land radically changes’.

New partnerships with housing associations

The Chancellor allocated £653m of grant to aid a further seven strategic partnerships with housing associations to deliver an additional 13,475 affordable homes by March 2022. Homes England later revealed these providers as being Vivid, Orbit, Platform Housing Group, Optivo, Thirteen, Southern Housing Group, and a partnership between Guinness Partnership and Stonewater. This marks the second wave of the partnership scheme, after Homes England announced eight strategic partnerships to deliver 14,280 affordable homes in July 2018.

Paul Hackett, chief executive of Optivo stated that although housing associations ‘require about three times the current annual rate of grant funding to deliver the homes we need’, the measures announced in the Budget were helpful, and that Optivo welcomed the opportunity to work alongside the Government and ‘get more affordable homes built together’.

Terrie Alafat CBE, the chief executive of the Chartered Institute of Housing praised the extension of strategic partnerships, adding that this approach provides ‘the longer term certainly needed to plan for building new homes at scale’.

Moving forward

The general consensus throughout the sector seems to be, as the chief executive of housing association L&Q, David Montague, stated, that there were ‘no big fireworks’ for social housing. Indeed, the most significant announcement for social housing seems to be the lifting of the local authorities’ borrowing cap, which was already expected following the PM’s announcement at the Conservative Party Conference in October.

The Budget may not have been, as Sinéad Butters, chair of PlaceShapers, opined, ‘the bold budget required to help end the housing crisis’ – particularly given the Government’s aims and targets in order to ‘fix our broken housing market’. However, the Government has provided increased funding and new approaches which were sought after by many within the sector. In light of these announcements, it appears that housing associations and local authorities will have additional tools with which to provide attractive, good quality affordable homes.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.