Housebuilding is a notoriously fair-weather game. Since the Brexit vote, we have seen share prices go down and up, confidence plummet and return and land buying put on hold until some certainty returns.
If this was a property bubble burst it was the shortest in my memory! However, underpinning the good news lie some clear patterns. At the bottom, the Help to Buy subsidy is clearly pushing the market while at the top, more expensive homes are sticking. In London and the South-East, the second-hand market is a lot slower.
The downsides are all about uncertainty and confidence, sentiments that can turn the market very quickly. With a lack of clarity around what Brexit means, that confidence will continue to fluctuate. So what is the opportunity for housing associations? With greater flexibilities could our model develop to keep momentum going?
In London, Sadiq Khan was elected mayor on a pledge to increase affordable housing. He is seeking to impose a minimum percentage of affordable homes on new developments, pushing the affordable elements up as high as 50% under their section 106 commitments. While this could provide more housing, developers are bound to argue that this provision will damage profitability to the point where schemes may not be delivered.
The steady creation of affordable housing is at present essentially dependent on a buoyant private housing market. When residential development slows down, the entire sector suffers as a result. We cannot allow this to continue as it simply isn’t sustainable. While the planning system determines that affordable housing is inextricably linked to the private sector, all it takes is one hiccup in the economic cycle to make the targets even more unrealistic. For these reasons, affordable housing is in a perpetual state of undersupply.
The way to give the sector a stronger sense of independence is by diversifying sources of income and allowing subsidy to be used more flexibly, thus allowing housing associations to build different types of homes through good and bad markets. Alternative sources of revenue and flexibility can strengthen the position of housing associations, encouraging them to innovate and respond quickly to change. Investing in commercial ventures and partnering with private organisations means that we can generate revenue to be reinvested into much-needed social housing. At Thames Valley Housing, we are very open to trying new things. Creating profit-driven joint ventures such as Opal with Galliford Try and Fizzy Living has helped us increase turnover and secure record financial results and numbers of new homes for a range of people on different incomes.
While housing associations must do what they can to shore up revenue and create efficiencies, the evolution of government policy also has an integral role to play in supporting housebuilding. Last month, David Orr, the chief executive of the National Housing Federation, called for more flexibility on how government grants can be used. Instead of earmarking different sections of the government’s £7bn in housing funding - currently £2.3bn for starter homes and £4.7bn for shared ownership - let’s give housing associations the autonomy to make adjustments to the allocation of spending on projects on an ad hoc basis.
The diversification of housing associations over the past decade has left us more flexible and stronger than ever in the face of future challenges. Moving forward, we should engender a more stable environment that encourages housing associations to pursue creativity and trusts them to make the right decisions with their funding.
Geeta Nanda is chief executive of Thames Valley Housing