Written evidence submitted by the Ministry of Housing, Communities and Local Government [SAH 038]
Introduction
The Ministry for Housing, Communities and Local Government welcomes the Select Committee’s inquiry into increasing the supply of Affordable Homes to rent.
This Government is committed to increasing the supply of Affordable Housing. Since 2010, we have delivered over 430,000 new Affordable Homes, including over 308,000 Affordable Homes for rent.
We are already investing over £9 billion as part of the Affordable Homes Programme, which is supporting Housing Associations, alongside Local authorities and other providers to deliver approximately 250,000 Affordable Homes by March 2022. We have also re-introduced social rent into the programme, specifically targeted at areas of acute affordability pressure.
We have stabilised the investment environment and encouraged the building of more new homes through: increased the size of the Affordable Homes Programme, re-introduced social rent to the programme, removed the Housing Revenue Account (HRA) borrowing cap for Local authorities, and have set out a long-term rent deal for councils and Housing Associations in England from 2020. We have announced an additional £2 billion for long-term strategic partnerships, ensured supported housing stays in benefits system, and secured an additional £3.24 billion in Affordable Housing guarantees.
Q1 - How can the Government ensure the sustainable delivery of social and affordable rented housing to meet long-term need and contribute to the Government’s overall housebuilding targets?
The Government has an ambition to build 300,000 homes a year by the mid-2020s, and Affordable Housing will play a crucial role in meeting that figure. This means a step change in the delivery of Affordable Housing and sustaining that over the long term.
Creating a stable investment environment, and funding certainty to the sector over the long term is essential in enabling them to invest in a pipeline of delivery that will boost the overall supply of Affordable Homes and help us reach our overall supply ambition.
As we set out in our Social Housing Green Paper – A new deal for social housing- we are providing more certainty to providers by:
We also want to give providers the certainty they require to develop a long-term pipeline of delivery. We have already announced 23 Strategic Partnerships between Homes England and Housing Associations, which will deliver over 39,000 additional Affordable Housing starts by March 2022. These are alongside the Greater London Authorities’ own strategic partnerships with Housing Associations in London that will deliver 54,000 Affordable Homes.
Financial Investment
Historically grant for Affordable Housing has been short term, focussed on delivery within discreet programmes, with often varied objectives and focus. This has led to delivery with big peaks and troughs, making sustained high levels of delivery in the long term impossible.
In September 2018, the Prime Minister announced an additional £2 billion of long-term funding certainty for Housing Associations. This extra funding will deliver more Affordable Homes and stimulate the sector’s wider building ambitions, through strategic partnerships. Our ten-year funding commitment through strategic partnerships marks the first time any government has invested in housing over spending review cycles. Bidding is now open for the first £1 billion of this through Homes England, and we are working closely with the GLA to open bidding in London as soon as possible.
This demonstrates the Government’s commitment to providing longer-term funding certainty for Affordable Housing, which we will consider further as we approach the upcoming spending review.
The Government has also provided financing support to providers of Affordable Housing through Government backed guarantees. The Affordable Homes Guarantee Scheme opened in 2013 and provided £3.24bn of loans to Registered Providers for eligible projects. We estimate that the guarantees will have delivered an interest saving of 100-125 bps over the 30-year tenor of the loans. The scheme provided access to long term, low cost and fixed rate capital market debt to enable borrowers with latent capacity to grow and will support the delivery of around 35,000 Affordable Homes.
At Spring Statement 2019 the Chancellor announced a new £3bn Affordable Homes guarantee scheme which the Department will procure over the coming months. As part of this work MHCLG is considering ways further to increase the delivery of Affordable Housing supported by the scheme.
Planning system and land
Grant is not the only way in which we ensure the delivery of Affordable Homes, developer contributions under the Planning system also play a key role. In 2016/17 Affordable Housing made up 68% of developer contributions compared to 53% in 2007/08. £4 billion of developer contributions were allocated to Affordable Housing, which is the equivalent of enabling 50,000 new affordable dwellings to be built.
Recent reforms to Section 106 and viability assessments were introduced in the National Planning Policy Framework in July 2018 and through amended Community Infrastructure Levy regulations which were laid and debated in June 2019.
Under the new policy framework, plans should set out the contributions expected from development, including the levels and types of Affordable Housing provision required.
Having clear policy requirements in Local Plans will ensure that landowners and site purchasers know the likely costs upfront and can take this into consideration when agreeing land transactions. This will help to reduce the renegotiation of Affordable Housing contributions based on the price paid for land.
Data on Affordable Homes that are expected to be delivered on surplus public sector land sites is currently being collected with the aim of publishing the data on a bi-annual basis alongside other programme data. We expect to publish the data this winter.
Q2 - What the role of (a) local authorities – as enablers and providers, (b) Homes England (c) Housing Associations and (d) other providers should be in that long-term delivery?
Local authorities
Local authorities have a key role to play in the delivery of social and affordable rented homes, both as providers and enablers, and we want all councils to get on and deliver the homes that their communities need.
The revised National Planning Policy Framework makes it clear that plan-making authorities should set out the levels and types of Affordable Housing provision that is required in their areas. These policies should be informed by an assessment of the housing needs of those that require Affordable Housing, including social rent and affordable rent. When setting these policies, the deliverability of any policy requirements will need to be considered. The Government are making a number of interventions that will help support the deliverability of Affordable Housing through local authorities, which are set out below.
To help, we have provided a wide range of tools. The Housing Revenue Account (HRA) borrowing cap was abolished on 29th October 2018 freeing up councils to double delivery to around 10,000 new homes a year by 2021/22. Removing the borrowing cap will help to diversify the house building market, with councils better able to take on projects and sites that private developers would consider too small.
To further help councils to build, we are providing a longer-term rent deal for 5 years from 2020 enabling them to charge rents of up to CPI +1% each year, providing a stable investment environment to deliver new homes. Additionally, councils can bid for funding from the £9bn Affordable Homes Programme to deliver Affordable Homes. We have also announced that we will seek to repeal legislation that would have required councils to make payments in respect of their vacant higher value council homes. Additionally, through funding for the Local Government Association’s housing advisors programme we are ensuring access to skills and capacity support to help councils to boost their housebuilding capabilities. Together, these measures add up to a comprehensive range of tools to help councils to deliver a new generation of council housing.
Even councils that do not have a Housing Revenue Account (HRA) can get on and build. They can borrow in line with the Prudential Code to build up to 200 council homes, subject to requesting a Direction not to account for these homes in an HRA from the Secretary of State. Then, once it has built 200 homes, it must open an HRA and can build at scale.
We also want to see councils working in partnership with others to ensure the delivery of Affordable Homes, including for instance Housing Associations.
Housing Associations
Housing Associations will continue to be a big part of the housebuilding sector. They are responsible for the majority of new Affordable Homes in the country. In 2016/17 and 2017/18 they were responsible for the delivery of just over 80% of all new Affordable Homes
Housing Associations are already forecasting large increases in development of a range of tenures, but in particular homes for outright sale (both market sale and shared ownership) in order to support the delivery of affordable rent properties through cross-subsidy.
Other Providers
Local Housing Companies can be an effective way to deliver new housing supply where the private sector is not delivering or whether the council is not delivering through its HRA. However, the Government’s believes that any affordable properties built this way should be transferred to a registered provider of social housing (such as a housing association) once complete. Where a council decides to manage affordable properties through a company, the Government would expect there to be a homeownership offer available to tenants.
Over the last couple of years, we have seen a rise is the number of for-profit providers entering the market, for example Legal and General, Sage, and most recently Heylo Housing. The amount of stock held by for-profit providers has increased faster in a single year than all previous years combined. For-profit providers owned 2,171 units in 2018; up greatly in percentage terms from the 873 held in 2017.
For-profit Providers appear to be particularly focussed on affordable home ownership acquired through Section 106, rather than land-led new developments of mixed tenure. The Department is working with this emerging sector to see how best they can support the delivery of Affordable Housing.
Q3 - How does the Government ensure long-term provision (a) meets the needs of tenants and (b) is adequately regulated?
The regulatory framework for social housing is set out in the Housing and Regeneration Act 2008 and amended by the Localism Act 2011 and Housing and Planning Act 2016. This Act gives the Regulator of Social Housing – a Non Departmental Public Body of MHCLG with operational independence – two fundamental objectives: an economic regulation objective, which is about ensuring landlords are well-run and financially viable; and a consumer objective, which is about protecting and empowering tenants. These are underpinned by seven outcome-focused and high level standards that the Regulator sets. Landlords have flexibility over how they meet the requirements in these standards, and the Regulator has a range of monitoring and enforcement powers to take action where required.
The Social Housing Green Paper published in August 2018 set out proposals to rebalance the relationship between social housing landlords and residents and tackle stigma, as well as increasing the supply of Affordable Homes. It contained a range of measures to strengthen the existing regulatory framework so that it not only focuses on the governance and financial viability of Housing Associations, but also on how residents are treated and the level of services they should expect. These proposals will enable the Regulator of Social Housing to take a more proactive role to drive up performance. We are currently considering the responses to the consultation and our action plan and timetable for implementing wide-ranging reforms of social housing will be published in September.
Alongside the Green Paper, we launched an in-depth review of the regulation of social housing to ensure it remains fit for purpose, reflects changes in the social housing sector and drives a focus on delivering a good service for tenants. We want to ensure that there is a coherent and consistent approach to social housing regulation to deliver these objectives and achieve the best deal for tenants and landlords. So, alongside the Green Paper we published a Call for Evidence which sought views on how the current regulatory framework is operating. We will publish the results of the review in due course.
Q4 - How can the Government’s approach to delivery best meet the different needs of individual regions and areas?
Tenure-mix
Continuing to offer a mix of different tenure types will be vital to meeting the specific needs of local areas, allow the sector to build the right homes in the right places.
All these tenures will form part of our £2 billion investment in long term strategic partnerships to ensure that Housing Associations have a range of tenures available to them to address the needs of different regions.
Land availability
Alongside a range of tenures we provide funding towards, we are looking to increase the amount of land available in local areas to deliver Affordable Housing. The Public Land for Housing programme has commissioned departments through the Strategic Asset Management Plan (SAMP) process to provide an indication of surplus sites located in areas of low affordability, with a view to implementing a targeted place-based approach to the future 2020-25 PSL programme.
Q5 - What lessons can be learned from alternative approaches to social and affordable rented housing delivery in other countries and jurisdictions?
The Department is interested in understanding how Affordable Housing I successfully delivered in other areas and works to understand how these can be applied to England. We regularly engage with the Devolved Administrations on their housing programmes and work with wider jurisdictions where necessary.