Social housing landlords face an array of competing priorities between building new homes and improving the existing stock. We can navigate them by putting people and purpose at the centre of investment decisions, say Mark Astbury and Steve Cooper from the Residential and Housing team at Ridge

The new Labour government’s first budget is a great start – but, after so many years of underinvestment, rejuvenating the housing sector and kickstarting delivery is going to be a huge task.

At Ridge, we work across the residential sector, supporting developers, housebuilders and social housing landlords to build new schemes and manage their existing assets. We’re anticipating even more competition for resources in business plans, and difficult choices, especially about the existing stock. Funding for upgrades and new homes will all be coming out of the same, finite pot – so by making well-informed investment decisions and spending only where it makes sense, the affordable housing sector may be able to create some headroom to build much-needed homes.

 

Big focus on new build

This budget was very much focused on delivering new homes: the 1.5 million that the government has committed to build during this parliament, is equivalent to 375,000 a year. That is a massive target, and a far higher number than has ever been delivered in the past.

There was some limited money for planning graduates and apprenticeships to increase capacity, and to open up sites blocked by nutrient neutrality, but planning is only one element of the resources required to meet that target. Crucially, it will take place against the backdrop of higher material prices and post-Brexit skills shortages that are already constraining the industry’s capacity to deliver. Where are the plumbers, the electricians, the bricklayers who are going to build these new homes, even if the government does succeed in unblocking the planning system? How do we attract the next generation into the housing sector? At Ridge, we believe part of the solution is increased investment in routes such as apprenticeships and graduate training to plug the skills shortages we face now and, unless addressed, into the future.

Where are the plumbers, the electricians, the bricklayers who are going to build these new homes, even if the government does succeed in unblocking the planning system? How do we attract the next generation into the housing sector?

Over the last 12 months, we’ve seen a decrease in housebuilding by housing associations and local authorities in particular – post-Grenfell, the focus understandably shifted to the existing stock. The £500 million top-up to the Affordable Homes Programme is very welcome as a mechanism to get them building again, but as less than 1% of the target, it’s just a drop in the ocean of what’s needed.

 

What about the existing stock?

There was less emphasis on the 27 million existing homes across the UK that will need to be retrofitted in order to meet the Net Zero Carbon target by 2050. For this, we may have to wait until the spending review next spring. The government confirmed it was committing £3.4 billion to kickstart the Warm Homes Plan over the next three years, which will upgrade 350,000 homes, including 250,000 low-income and social homes. But social housing landlords will also be considering how to fund the other challenges they face, such as implementing tougher post-Grenfell fire safety regulations, continued investment in the stock and maintaining decent homes (due to be revised during the course of this parliament) and Awaab’s Law, which will require them to fix problems like condensation, damp and mould within specific timeframes.

There was less emphasis on the 27 million existing homes across the UK that will need to be retrofitted in order to meet the Net Zero Carbon target by 2050. For this, we may have to wait until the spending review next spring.

A consultation will be undertaken into a social rent settlement agreement of CPI +1% for five years. Making a longer commitment and extending this to ten years would provide much greater certainty and confidence to support investment. On the other hand, housing organisations will also be affected by increases in Employer’s National Insurance and the minimum wage, which will further squeeze budgets, particularly in social care where there are a significant number of lower-paid employees.

 

Managing competing priorities

With so many competing priorities, the number of new homes the sector can deliver will be directly related to how efficiently it can resolve the challenges of the existing stock.

At Ridge, we work with social housing landlords to help them gain a clear picture of their assets, and weigh up the options, from refurbishment and extension, to change of use or demolition. From this, we know that high-quality, recent stock condition data is the foundation of good investment decisions. It may sound obvious but it is surprising how many landlords don’t have this, even though the Housing Ombudsman and the Ministry of Housing, Communities and Local Government (MHCLG) have both made it clear that best practice is to have no stock data that is older than five years.

At Ridge, we work with social housing landlords to help them gain a clear picture of their assets, and weigh up the options, from refurbishment and extension, to change of use or demolition. From this, we know that high-quality, recent stock condition data is the foundation of good investment decisions.

This is particularly important when we consider the lessons of the Decent Homes Standard, a once-in-a generation programme of investment carried out under the last Labour government. This succeeded in dramatically improving the UK’s social housing stock but, in hindsight, not all of the funding was well-targeted. Rather than installing new windows, kitchens and bathrooms in buildings with weak structural capacity or very poor thermal performance, it may have been better to take a step back and rebuild them instead.

 

Making better investment decisions

This time round, we need to take a more joined-up approach. A good rule of thumb is to ask: who lives in these houses, and what is their experience like? For example, when we’re preparing a business plan, we don’t just look at energy data, fire safety and whether future rental income justifies the investment required. We also look at health and safety ratings, which cover damp, mould and condensation, void turnover rates, resident satisfaction surveys, indices of deprivation – there’s a whole range of information that we can draw on to make better, more informed decisions. A scheme may stack up on paper, but when you look beyond the financial data, you realise that no one wants to live there. On the other hand, just because the improvements cost more than the expected income, it doesn’t mean those homes are not fulfilling a useful social purpose.

Keeping people and purpose at front of mind will be key to navigating the challenges the housing sector faces. We need to start with a clear picture of how the stock is working for residents today, as only then can we be sure that we’re delivering what the UK needs for years to come.

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Steve Cooper, Mark Astbury and a team from Ridge will be at the Homes UK and Unlock Net Zero event at ExCel, London on the 27 and 28 November 2024 (Stand H520) and would love to connect with any attendees before or at the event.

 

Mark Astbury is the Property Consultancy lead for the Residential and Housing team at Ridge. He is speaking at Homes UK on 28 November: “Achieving a culture of compliance as a standard in a world of changing legislation and regulation”.

 

Steve Cooper leads Building Surveying for the Residential and Housing team at Ridge.

 

You can contact our experts below:

Yusuf Siddiqui – Property Consultancy, London

Neb Augustinov – Retrofit Lead

Becky Hutton – Property Consultancy, Data Management

James Smith – Town and Country Planning

Dan Hubberstey – Property Consultancy, Stock Survey data