Build new, and re-new – its crunch time

In my White Paper, I laid out how we arrived at the situation where many of the homes we own and let out are in poor condition. I concluded that this is broadly the result of government housebuilding targets. Associations put their profits into building new social homes rather than investing in their existing portfolios.

Resolving this is especially challenging. Under pressure to eliminate damp and mould, reduce fuel poverty and upgrade the safety standard of homes, associations are getting their houses in order. Not necessarily efficiently, nor quickly, but there is a new urgency – and this can be seen in their soaring repair bills. In the most recent (22/23) RSH Global Accounts (published this January) spending on existing homes totalled £7.7bn, a 20 per cent increase on the previous financial year, (rent increases were held down to 7 per cent). Since then, spending has not been curtailed. In fact, further urgency in relation to damp and mould, fire and other safety compliance activity and regulator pressure on responding to the cases that hit the headlines is likely to have increased this figure.  It may be that much expenditure is badly targeted – longer term thinking might lead to a different investment plan (eg more major repairs, less papering over). And some of this may be inflation – but crudely: the lever has been applied by Government and the sector is responding. 

Over the same period, the spend on new homes also increased – to £13.7bn, an increase of around 10 per cent. However, the figure is deceptive: some of this growth came from the relatively new “For Profit” registered providers. During 21/22 the largest provider of new homes was For-Profit Sage, which built more new homes than either L&Q or Clarion (the biggest traditional housing associations). Clearly with no legacy stock and a strategy of rapid growth, their risk appetite differs sharply. But for most associations its risk off time, due to the increasing cost of borrowing and sales uncertainty on top of maintenance costs.  How deep is the hole? L&Qs starts last year were a measly 351 homes, while the entire G15 only started just 1769 new homes (compared to 7363 the previous year). 

Due to relatively small amounts of social housing grant (at about £60k a unit) compared to the cost to build, most of the larger, developing associations had been replacing lost Government grant with their own profits. When it is too risky and unprofitable to build for sale and market rent housing there is much less grant-substitute (profit) generated. 

So as the amount spent on repairs rockets, the spend on new build plummets. Housing becomes less affordable, and more people need help. Social homes continue to be demolished and sold off, and without a steady stream of new homes to replace them, the homeless crisis will intensify.

It’s the same problem as we had before only the other way round. It’s no use people saying cut one to do the other. The answer is that we need to both renew and build new if we are to make Britain a kinder and fairer country.