Free housing associations could deliver 100,000 more homes

Red tape is holding housing associations back from building 100,000 homes a year – a third of the total housing supply needed to keep up with demand – a centre-right think tank says. A new report by Policy Exchange says England’s 1,500 housing associations are bound by multiple rules and regulations that prevent them from choosing their own social tenants. This leads to a situation where some of the most anti-social tenants are effectively “dumped” on housing associations that can do nothing about it, the report says. It adds that this, and other restrictions, increases their costs, which inhibits them from raising and spending an extra £1bn a year on developing or acquiring new affordable homes.

It proposes a new plan where housing associations could effectively opt-out of their historical government grant which binds them to these rules. The Policy Exchange report, Freeing housing associations: Better financing, more homes, calls for a new class of ‘free housing associations’ to be established, which would buy out their historical grant from the government at a discounted cost in return for the removal of regulatory restrictions. The report says that a combination of sale proceeds along with debt interest savings could raise over £300m a year for the Treasury by the end of the next parliament and £550m a year within 30 years.

The paper’s recommendations for new grant-free housing associations include:

  • Allowing them to sell off expensive social homes in order to build a greater number of new affordable homes without having to get permission from the Homes and Communities Agency
  • Extending the Help to Buy scheme for new homes beyond 2020 for housing associations to allow them to build more market homes for sale. Profits could be used to cross subsidise affordable homes
  • Allowing housing association to set their own rent policy. Instead of having a number of different rents for similar properties inhabited by similar households, as dictated by government, grant-free associations could set a single rationalised rent or cheaper rents to reward good tenant behaviour.

Free housing associations could then be free to double the number of new homes built every year from 50,000 to 100,000, the paper finds. Currently housing associations build 45,000 affordable homes and 5,000 private homes every year. The paper expects that number to increase to 60,000 affordable homes and 40,000 private homes if they had more freedom from the regulator, the Homes and Communities Agency (HCA) and local authorities.

Polling of 15 housing association leaders for the project found support for the idea, with 67% in favour of writing off the government grant.

Neil Hadden, chief executive, Genesis Housing Association, co-sponsor of the report, said: “Housing associations are already a key part of the solution to housing supply issues, but the sector could achieve even more if it was unshackled from excessive financial and regulatory constraints”.

David Orr, chief executive of the National Housing Federation, said: “Housing associations provide homes for local people and are committed to helping those who are most in need. They have a key role to play in ending this country’s housing crisis – by building thousands more homes and investing more in communities. But to realise this ambition, housing associations need more freedom and genuine control over their own futures”.

Policy Exchange housing infographic

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