Written evidence submitted by Lloyds Banking Group [FSS 054]

Lloyds Banking Group is the largest lender to social housing in the UK and has been for decades. Since 2018 we have provided nearly £15 billion in financing to the sector, supporting more than 200 housing associations across the country. This submission should be considered in addition to the response to the inquiry provided by UK Finance to which we have also contributed to.

1. The £15 billion of financing provided by Lloyds Banking Group to housing associations during the last five years has been supported by high regulatory standards, zero credit losses and the ‘A’ credit rating of the vast majority of associations. However, housing association balance sheets have come under increasing pressure from the need to prioritise capital expenditure on building and fire safety remediation, the repair and maintenance of existing stock to address damp and mould defects, and the transition to net zero.

2. Against the backdrop of below inflation rent rises, these developments have reduced incomes, increased debt levels, raised interest bills and downgraded credit ratings. This has and will continue to have an impact on the numbers of homes being built. Absent the ability to raise equity, the sector’s debt finance is provided by banks and the capital markets. It is critical that this access continues and that the Government takes the action necessary to maintain the ‘A’ rating of the sector. Without this, the ability of associations to borrow will be constrained and the cost of finance will increase.

3. On 18 April Lloyds Banking Group launched a partnership with the national homelessness charity Crisis and joined them in calling for one million homes for social rent to be built over the next decade. The Committee will be familiar with this figure as it builds on Crisis and the National Housing Federation’s own assessment of social housing need from research by Graham Bramley of Heriot-Watt university, which estimates that the target level of social housebuilding required across Britain is about 100,000 per year.

4. Given that only 7,500 new homes at social rent were built in 2022, we recognise that achieving these figures would require a radical departure in the volume and tenure of housing that has been built across the country over recent decades. But we believe a target based on evidence at least provides a reminder of the challenge. Nearly 1.5 million households across the country are stuck on social housing waiting lists, 300,000 households are predicted to experience the worst forms of homelessness in 2023 and 1.8 million households on low incomes are forced to live with damp, mould or in over-crowded accommodation and other poor conditions. The UK needs to address the chronic shortage of social housing.

5. As Lloyds Banking Group is also the largest mortgage lender and lender to first-time buyers, we want to use our capabilities, scale and relationships to help shape a housing market that works better for everyone, whether they rent or own. We have committed to using our influence to convene leaders from central and regional government, housing associations, housebuilders and other private finance providers to develop a shared understanding of how to overcome the barriers to the adequate provision of quality and affordable homes for households with low incomes. We will ensure the Committee is kept to up to date as this initiative progresses.

6. Through shared ownership schemes social housing providers play an important role in providing a secure path from renting to owning, as set out in the Levelling Up White Paper. However, if shared ownership is to achieve its potential as the so called ‘staircase’ for partial owners, it must offer greater choice to customers by addressing pain points in the customer journey caused by a lack of consistency and transparency.

7. Despite the pledge that the “vast majority” of the 50pc of homes delivered for affordable ownership through the multi-year Affordable Homes Programme will be via shared ownership, comprehensive data on the tenure - such as how many homeowners have moved from renting to owning or the average incomes of buyers - is not collected by the Government. This data gap acts as a major impediment to private and institutional investment, at a time when adverse economic conditions will lead to a shortfall in new grant funded affordable homes.

8. As part of the “cross-industry initiative calling for a new framework to revitalise the shared ownership offer to consumers” referred to in the UK Finance submission to this inquiry, we are collaborating with housing associations and our industry partners to develop a framework that relaunches shared ownership and improves the experience of homeowners in the tenure. If this can increase demand and demonstrate the clear value of the tenure, investment will be unlocked from both the private sector and the Government necessary to stimulate competition, innovation and grow the sector.

May 2023