The housing sector was waiting for the apocalypse when the Autumn Statement was announced in the House of Commons by George Osborne. The FT had lead the way with the 2% rent reduction cut rumour, this seemed to have spread stoicism and downright despair in equal measure throughout the sector. But what of the apocalypse? Well, it never quite happened, and one director, we spoke with, summed up the mood quite succinctly, with ‘Is that it?’ But the dust has settled and has anything been missed?
Well housing played a central role in statement, and the positive was that the chancellor doubled the housing budget to £2bn a year, with the aim of delivering 400,000 affordable new homes by 2020. Mobysoft sponsored the housing Chief Executive Conference which happened to be the day after Autumn Statement, happy coincidence or fantastic planning, I’m not sure, but the 400,000 figure was derided by many in the room. Clive Barnett, Managing Director and Head of Housing Finance at Royal Bank of Scotland stated they can fund the development of 450,000 homes and Housing Associations can build them but this target is unreachable because of the current planning policy, as we tweeted below.
Is this target realistic, well in 2014 Housing Associations built 40,000 homes so that is increasing that by 2.5 times each year for the next four years. The funders and house builders have lobbied Government about transforming the planning process with, it appears, limited success.
However some commentators expressed concern that housing associations would not be able to meet this target due to the housing benefit cap that the Chancellor announced. “The rate of Housing Benefit in the social sector will be capped at the relevant local housing allowance – in other words, the same rate paid to those in the private rented sector who receive the same benefit.”
Anthony Lee, Head of Financial Viability Advisory Services at BNP Paribas Real Estate, explained to the BBC that he had concerns over the viability of new developments because of the cap. “Limiting housing benefit will reduce the amount that housing associations can pay to developers for new stock delivered through Section 106 agreements. This will adversely impact on viability of developments and result in a falling percentage of affordable housing.”
So the mood is already bleak about achieving that target, due to planning and other reforms so in four years’ time expect more conflict between the Government and Housing sector about missed targets.
There was plans to cut tax credits to reduce the amount people can earn before benefit was withdrawn, on which the chancellor made a much publicised u-turn, but let’s not forget this will still happen under universal credit. So when universal credit is fully rolled out, many associations could well find more of their tenants are finding it more difficult to make ends meet resulting in more pressure on rent. These are not insignificant amounts either ,a single parent with 2 children could lose in excess of £2,000 a year as resultof these universal credit cuts, even if they work full time.
So when will Universal Credit be rolled out? The below chart shows revision after revision, and yes it has been delayed on several occasions.
However Housing Associations should be looking not so far down the road after the Chancellor’s u-turn on tax credits for a squeeze on income for some of their tenants. It is now that Housing Association’s need tounderstand the make-up of their tenants, how many will be affected by these coming changes in Universal Credit? Because the 1% rent reduction means many are already questioning the services they offer, now their tenants will experience an acute change in their circumstances too and social landlords need to address this before Universal Credit is fully deployed, as the tax credit u-turn is simply respite not a reprieve.
The budget carried other points of interest such as the right to buy (RTB) trial starting with five associations and the London help-to-buy housing scheme, but what will this statement be remembered for? The tax credit u-turn, but lest HA’s forget that is only suspending the pain, but the main point will be the target of building 400,000 new affordable homes for rent or sale by 2020. If already the set targets are being derided on the start line and finance commentators point to different issues that could prevent the400,000 being achieved then you can expect an almighty fall out in 2020 and fingers being pointed by all parties.