Category Archives: social housing

Mayor signs off two major new rental projects

London mayor Boris Johnson has selected developers for two residential sites in east London, with 40% of the proposed new homes destined for private market rental.

The sites at Silvertown Way and Pontoon Dock will deliver around 1,200 new homes, of which 480 will be for private rental. The land is owned by the Greater London Authority, and is part of a tranche of sites taken on by the GLA in 2012, with the aim of bringing them into use quickly.

“These schemes will be built faster than conventional methods, by providing a US-style private rented model alongside traditional tenures,” said mayor Johnson. “It’s important for London’s economy to support the growing rental market, providing top quality homes and management, together with the reassurance of longer term tenancy agreements. I also want to entice more institutional investors to come forward and invest in quality homes for Londoners.”

The developments will include a restriction to ensure that the private rented homes cannot be sold off for a minimum period of ten years.

The larger of the two sites, at Silvertown Way in Canning Town, will accommodate 1,000 homes. It has been awarded to Galliford Try, working with Opal Land, itself a joint venture between Thames Valley Housing Association and Linden Homes. The project split will include 347 private rented homes, 232 for affordable rent, and 154 for affordable home ownership, along with 86,000 sq ft of commercial space. Thames Valley’s PRS specialist Fizzy Living is to manage the private rented homes within the development.

AA Pontoon Dock 1

Homes for rental at Pontoon Dock have been designed by Assael Architecture

At Pontoon Dock the development will include 137 private rented homes, 42 affordable rented and 31 shared ownership homes on a site next to Thames Barrier park. Here, the project will be delivered by Bouygues Development, Grainger and funding partner the London Pensions Fund Authority.

The Pontoon Dock project will be majority funded by the LPFA. Said the authority’s CEO Susan Martin: “Investing directly in the redevelopment of the Pontoon Dock site will not only deliver essential housing for London, but will also provide LPFA with the attractive, liability matching, long-term returns we need to provide for our pensioners.”

Who rents their home? Report breaks down demographics

The numbers of private renters in the UK now tops the number of social renters. The private rental sector has continued to grow in recent years, doubling in scale from 2 million households in 1980 to 4 million today. The growth means they are now more important as a group than social renters, whose numbers have subsided to 3.7 million today, from 5.4 million in 1980.

Three quarters of private renters are under 45 years old. As a group, renters are younger than both social renters and home owners. A quarter of them are couples with no children and 20% are single occupiers under 60. Just over a third are parents – 23% are couples with dependent children, while 12% are lone parents. Just 14% of rental homes are occupied as multi-person households.

The report also reveals that, despite the media’s frequent stories about “rogue landlords”, private renters are actually happier than social renters. Of private renters, 84% of those surveyed were either very or fairly satisfied with their accommodation, compared to 81% of social renters. They were also happier with the local area they lived in – 87% of private renters said they were satisfied, compared with 82% of social renters.

“Landlords are an easy target in the media with stories of rogue behaviour, revenge evictions and poor accommodation,” commented Graham Kinnear from Landlord Assist. “However, this survey shows that more landlords than ever before are providing good quality accommodation for their tenants.”

Unsurprisingly, given the need to save for a larger deposit nowadays, the average age of a first time buyer is increasing, and 25% of these buyers are now in the 35-44 age range.

Housing associations make record profits from renting homes

Britain’s housing associations are making more profits than ever from social renting, while looking for alternative options to broaden their business base. Yet despite many of them being charitable organisations, they are gouging tenants with rents higher than they need be – and failing to build as many new homes as the marketplace needs.

In contrast, private sector renters are seeing rental growth pinned down, as struggling working tenants live in an unsubsidised world where pay rises are barely keeping pace with inflation. And private sector landlords generally have to pay tax on any profits they generate.

The actions of the housing associations are laid bare in a new report that suggests housing association chiefs need to reconsider their organisation’s mission; and recommends the regulator keeps a closer eye on profit levels within the sector.

“Housing association profits soared to a record £1.93bn last year, nearly ten times bigger than five years previously,” said Calum Mercer, one of the authors of A Better Deal for Nation Rent. “The excess profit has been made by housing associations raising rents above inflation, while costs, management, maintenance and debt service interest payments have been broadly flat in real terms.”

And report co-author Natalie Elphicke added: “Housing associations need to follow their guiding principles and not become bedazzled by the prospect of greater and greater profits.”

The report notes the following facts about housing associations:
many are charities and pay little tax on their earnings
profit margins on social housing average 26% and are set to rise to average 30% by 2018
between them they own 2.7 million homes
housing association profits have increased tenfold in five years
the largest 25 associations own 1.1 million homes between them, and are the size of FTSE250 companies

This site will carry more from this research in the near future, in the meantime the report, and its predecessor report Nation Rent, can be downloaded at:
www.millionhomes.org

Berlin shows London the way to build rental market

The residential rental market in Berlin is growing rapidly, with potential lessons for those looking to improve the situation in London and other UK cities.

Like London, Berlin has been seeing a growing population, which increased by almost 50,000 from June 2012 to June 2013. Like London, the delivery of new homes is failing to keep up with demand – and rental prices are rising as a result.

Unlike London, the market and city authorities in Berlin are reacting, and new supply is being delivered. New building starts in the city in 2013 equated to 0.7% of the total stock, a figure fully 40% ahead of London.

A new report identifies a pipeline of 13,900 new homes for rent currently under development across 191 construction projects. Further projects are expected to come into the development pipeline, spurred on by local government. City authorities calculated 137,000 more new homes will be needed by 2025, or around 10,000 a year.

Breaking down the participants in the Berlin market, the research by Howoge and BulwienGesa identifies 63% of the projects originated by the private sector, 29% by municipalities, and 7.5% by cooperatives.

Rental remains the predominant home type in Berlin, with 86% of the city’s 1.9 million homes currently rented.
One way the city authorities have directly helped promote more building is by adding extra staff to district offices, and paying a bonus for each new approved home. Urban development contracts are used to help share the burden of local infrastructure, and the benefit of increased land values after development. More herer on how Berlin authorities are planning the growth of their city.

Genesis plans further private rented sector growth

Housing association Genesis is one of the small numbers of organisations from that sector that has committed to growth into the private rented sector.

The group is looking to build around one third of its 1,000 homes output a year for outright sale, or market rent, according to chief executive Neil Hadden. The balance will be its traditional affordable home format, or some form of intermediate tenure, usually shared ownership. It is already building projects to the private tenure formats in Chelmsford and Barnet, and is looking to exploit the government’s Build to Rent funding programme to advance projects.

Housing associations are – as a group – suffering. The grants being offered to develop homes for rental in the subsidised sector – to those on local authority lists – are reducing. They can borrow from the financial markets, but that has a greater cost long term. Or there are alternative parts of the housing market they can get into, to create additional revenue streams.

Among its peers, it appears that currently the majority of housing associations are shy of taking such a directly commercial move such as moving into the development and management of private rented sector homes. However, some others are getting involved, such as Thames Valley, which has set up arms-length subsidiary Fizzy Living to develop a private rented sector brand and portfolio of property.

Genesis looks after 33,000 homes across London and the south east, including 401 market rent apartments in the Halo tower development in Stratford, which the group sold to investor M&G in a sale and leaseback deal in 2012.

“The reduction in public subsidy for affordable housing has meant we’ve had to look at different ways of providing that subsidy,” Hadden told Property Week recently. “Getting involved in more commercial activities is one way of providing funding to bridge that gap.”

Genesis has already successfully tapped into the government’s Build to Rent funding pot, winning a £45.5 million bid in April this year, to help fund the development of 485 private rented homes – more here.

Sutton council sets up house building company

A south London borough is to set up its own housing development company, building private rented homes as well as affordable housing for local people. The move is one part of a three pronged strategy by the council to get housebuilding going at a faster rate in the borough.

Alongside the development company, Sutton will also start building its own council housing; and it has already launched an initiative to work with the private sector to encourage housing developments locally.

The initiative echoes moves being taken elsewhere in the country, which are seeing councils and local authorities moving to play an increasingly proactive role in housing provision. Birmingham councillors recently approved a feasibility study into the creation of a development company to build open market homes for rent, on the council’s own land. And in Manchester, the city council recently announced it will work with Abu Dhabi investors who already own one of the city’s football teams, to develop sites for housing.

In London and the south east, Sutton is the first authority announcing an active move into development. But it is not alone in seeking to speed up the provision of private rented homes in its patch. Last month, Wandsworth borough approved a project at Nine Elms that will see private housebuilder Bellway deliver open market rental apartments, albeit reserved for local people. In Wandsworth’s case, the deal was made via planning agreements rather than a direct financial intervention.

Sutton says it is going back to building homes directly for the first time since 1989. It has promised a variety of council and open market homes, in a variety of sizes, with rental only open to people who have had a connection with the borough for the previous two years. It is hoping to deploy council borrowed funds at low rates, and bring forward development sites that have been stalled for a variety of reasons.

“There is a huge demand for new homes that isn’t being met in our borough and we are determined to do something about it,” said councillor Jayne McCoy, who heads Sutton’s housing, economy and business committee. “We want to build new council housing and new private housing with a social purpose at its heart. It will give people more choice and a greater chance of getting on or moving up the housing ladder.”

“By being involved in the development of new homes, we can stipulate that they are only for Sutton residents and make sure there is a focus on the housing we want such as family homes, rather than expensive studio flats. We can also ensure high standards of development, generate funds to reinvest in housing and create new employment and training opportunities in the construction sector. It shows what a council can do, despite ongoing government cuts.”

Sites have already been identified for around 140 of the proposed council houses, with Sutton planning a search for development partners this summer. And it says its work to encourage the private sector, under the banner Opportunity Sutton, has already helped bring forward 644 new homes across three sites.

Wandsworth leads in promoting private rented homes

London borough Wandsworth has started delivering on a promise to provide more private rented sector homes. A planning permission granted this week for a site in Nine Elms includes 114 private rented apartments within a development of 510 homes, to be developed by housebuilder Bellway.

The redevelopment of the Christies Fine Arts warehouse site will include two blocks of apartments, one of which will include 72 affordable homes, plus the 114 units for rental at open market prices, to a restricted audience of tenants who will need to have a connection with the borough. There will also be the opportunity to sign longer leases of up to five years, while rent rises will also be moderated.

As well as the private rented homes, and the 72 affordable units provided on site, Bellway will contribute an additional £10 million towards the building of affordable housing elsewhere in the borough. A manager for the rental homes has yet to be appointed, but it is expected the open market and affordable homes will be handled by the same management organisation.

The project’s private rented homes are the first fruits of a promise made less than a year ago by the council. Last summer, Paul Ellis, the cabinet member for housing promised: “We want to do even more to support those living in the private rented sector by offering development incentives to boost the number of homes being built in Wandsworth for private rent, and in the process agree with developers that local people are given first refusal over the new housing.”

“We know that people sometimes feel they lack security in the private rented sector due to things like short-term tenancies or the possibility of unexpected rent hikes, and this can stop them from feeling like they can settle in a particular place. So, the council hopes to boost the confidence of those living in this sector by arranging with housing developers for local people to be offered tenancies for new homes built specifically for private renting that provide a greater degree of stability and security, with rents that are not subject to unexpected rises.”

The Christies scheme will see Bellway deliver rental homes as well as affordable units and flats for sale

The Christies scheme will see Bellway deliver rental homes as well as affordable units and flats for sale

“Under such an arrangement, the tenant could confidently call the borough home for the long-term.”

“In order to make this new approach to the creation of private rent homes attractive to the developer, the council plans to investigate whether developers could contribute a lower community infrastructure levy as an incentive to provide this type of housing.”

“Support will also be given to developers looking to build privately let properties in locations that traditionally suit such developments – such as town centres and near to transport links.”

“The possibility of introducing requirements that newly-built private rented housing is initially marketed to local residents with longer tenancy terms than the normal six months will also be explored through Section 106 agreements.”

The project will include a linear park and limited commercial and community space

The project will include a linear park and limited commercial and community space

Speaking this week, after the scheme was granted planning permission, committee chairman Sarah McDermott said: “The scheme provides some of Wandsworth’s first homes built specifically for the private rent sector. They will be reserved for local residents and offered on tenancies of up to five years to give more security than can usually be found on the open market.”

Wandsworth’s approach, using a negotiated planning settlement with private developers, is commendable in the speed with which it has been established in practice. It goes some way towards demands from private rented sector developers, such as Harry Downes of Fizzy Living, for the planning system to give the sector a helping hand to prevent the regular loss of sites to residential developers. Unless planning authorities intervene, he argued recently, then a private developer building for sale will always be able to outbid others, in London’s current “hot” residential market.

The use by Wandsworth of a restrictive covenant, limiting access to the homes to those living or working in the borough, on reasonable incomes, is also similar to approaches being taken by other authorities, in connection with organisations including Pocket and Dolphin Living. It is a model other local authorities would do well to check out.

Fixing the housing crisis – Anthony Hilton

Councils need to be put in a position where they build more homes. The boost would help deliver more housing, and reduce demand  pressure on the private sector, dampening price rises.

That is the recipe from Anthony Hilton of the London Standard, who in a recent column noted that last year, London councils built barely 1,000 homes. “That… is why we have a housing crisis,” he declared, pointing out that in the 1970s the country delivered more than 300,000 new homes most years, of which half were built by councils. The peak, 1970, saw councils build 176,000 homes.

Yet the current government has spent just £5 billion, mostly via housing associations, on building new homes; while it has spent £95 billion on housing benefit, “which is a welfare subsidy to families to help them meeting housing costs”. Almost a fifth of households are receiving this subsidy in some form.

More money invested with councils and housing associations, to help them to build more, would help to bring down rental costs – and so cut the housing benefit bill, argued Hilton.

He also poured scorn on government suggestions that self builders could help solve the supply shortfall. Ideas that 50,000 homes a year could be built this way are crazy, he said: “I am all for people being encouraged to build their own home, but the idea it could provide a solution to Britain’s housing crisis is risible and what is truly depressing is that someone in charge of policy seems to think it could.”

Self builders face massive challenges, he points out. They have to afford to buy a suitable piece of land, paying cash up front in competition with better funded developers; get planning permission; obtain a mortgage from banks and building societies who are wary of self-build; and find a builder with the skills to carry out the project – when many have closed or lost their skilled tradesmen in the last recession.

Fixing the housing crisis – Toby Lloyd of Shelter

Toby Lloyd, head of policy at housing charity Shelter, suggests a five point plan to help deliver more homes to the British market, which were outlined in a recent article published by the Financial Times.

A restricted land supply means that housing supply is also restricted. This is rational market behaviour by developers, rather than, as is often perceived, some perverse reaction. A shortage of land – and therefore houses – means every house a developer builds, will be sold, he argues; so there’s no incentive to innovate, the market is hard for new entrants to get into, and every sale should generate profit.

He notes that the last few years have seen a concentration of the market, as larger firms come to dominate, and they like to build large, lumpy sites out. The combination of all these factors means, he warns, the market “is not delivering the homes we need”.

Lloyd’s five suggestions are:
Establish New Homes Zones, specifically set aside to help promote lower cost development and reduce land speculation
Start charging council tax as soon as planning permission is granted – to encourage construction to be carried out fast
Publish ownership details of sites, along with option agreements – enabling greater market transparency
Increase public investment in housing, using a national housing bank similar to that used in Holland
Allow councils to borrow more, to invest in affordable homes

“Ultimately we should be aiming not only to boost supply, but to transform our housing supply system once and for all,” says Lloyd. “With the right intervention and investment we think we can launch house building into a new era, in which competition can function properly, builders can build more homes – and consumers can finally start getting a better deal.”

Will these work? Do comment.

The article is in full on the FT blog.

Affordable housing policy – good from afar, far from good?

A recent United Nations report on UK housing conditions concluded that the country is facing a critical situation in terms of availability, affordability and access to adequate housing. Indeed in England, it is estimated that 250,000 new homes a year are needed to meet demand, while figures from the DCLG show that construction was started on just 122,590 new homes in 2013. Affordable housing is described in the report as ‘especially scarce’.

The Government’s official line is that it is seeking to rigorously address the need for more affordable housing as a major priority. However the consequences of its planning initiatives, far from delivering as much affordable housing as possible, seem to be largely undermining its provision. In this article, John Bosworth, a partner at Ashfords LLP,  examines why.

Community Infrastructure Levy (‘CIL’)

The introduction of the CIL charge has brought with it a possible blow to affordable housing in downgrading the importance of the Section 106 Agreement. Up to now these agreements have been used to secure both affordable housing and infrastructure contributions: in future, where an authority has adopted CIL, the section 106 agreement is most likely to deal with just affordable housing and other on site matters.

Local authorities must apply CIL to the funding of “infrastructure”, the definition of which expressly excludes affordable housing provision. Section 106 agreements in theory therefore should continue to operate alongside CIL, driving the delivery of more affordable homes. There is an obvious problem, however, in that if an authority’s CIL level is too high, the development risks becoming unviable – and affordable housing under a Section 106 Agreement will become extremely difficult to secure. With no flexibility to reduce the amount of CIL on these grounds, the result will invariably be a trade-off between CIL funded infrastructure and affordable housing, compromising provision of the latter.

John Bosworth of Ashfords - planning policy is failing affordable homes delivery

John Bosworth of Ashfords believes planning policy is failing affordable homes delivery

 

The problem is exacerbated by the National Planning Policy Guidance’s stance on viability. The NPPG provides that such considerations are “particularly relevant” for affordable housing contributions, which should not be sought without having regard to individual scheme viability. Where there are issues of viability, it is affordable housing that will take the hit.

National policy

As well as the NPPG’s unhelpful position on viability, there are other aspects of national planning policy which contradict the Government’s assertion that affordable housing is a major priority.

When negotiating planning obligations, the NPPG states that authorities should be “flexible” in their affordable housing requirements and have in place a clear policy that such obligations will consider specific site circumstances.

Another concern is the NPPF’s introduction of the concept of affordable rented housing, a form of tenure which allows tenants to be charged up to 80% of local market rent. Given the current strength of the private rental market, in many areas these rates risk rendering the “affordable” tag meaningless.

New and proposed legislation

The implementation of CIL is not the only recent legal development to seemingly undermine affordable housing provision. Firstly, new permitted development rights have been introduced over the last year allowing buildings previously used for office, retail and agriculture to be converted to residential dwellings. Shockingly, no affordability requirements accompany these new rights.

Secondly, last year, legislation introduced a fast track option for the affordable housing elements of a section 106 agreement to be renegotiated (and appealed) where viability issues have arisen following the completion of the agreement. This is already leading to existing commitments being relaxed on appeal. And in the 2013 Autumn Statement, a national ten unit minimum threshold was proposed for sites before affordable housing contributions can be sought, which will undoubtedly worsen the affordable homes shortage in rural areas.

The Government has pledged to deliver 170,000 new affordable homes by 2015. However, with numerous planning initiatives hampering such provision, serious questions should be raised as to whether this target will actually be met.

John Bosworth, partner, Ashfords LLP