An increasing number of associations are striking deals with developers to deliver much-needed homes and Carol Matthews, Riverside’s Chief Executive, argues that this is one vital way to tackle the housing crisis.
England needs four million new homes. Last summer the National Housing Federation and Crisis published groundbreaking research showing that as a country we need to build 340,000 homes every year until 2031 to tackle this backlog of homes and keep up with new demand.
More than two-fifths of these – 145,000 a year – need to be affordable homes.
That is a big task, and many of us in the sector have been making clear to the government that these numbers don’t stand a chance of being met unless there is substantial additional investment in affordable housing.
Last month came further evidence that grant funding is needed to enable providers to step up supply. Homes for the North, along with the National Housing Federation and the G15, published research by Savills showing that even the government’s own target of building 300,000 new homes a year is unlikely to be met.
And the Ministry of Housing, Communities and Local Government appears to agree. Permanent secretary Melanie Dawes has told the Public Affairs Committee that they don’t yet have all the ingredients in place to achieve their target.
So it’s imperative that as a sector we continue to make the case for more grant funding, and do all we can to make sure the Treasury takes heed in this year’s Comprehensive Spending Review.
However, we will only be able to make a credible case for more subsidy if we can also show that, as a sector, we continue to do all we can to maximise our own capacity as co-investors.
At Riverside we have challenged ourselves about what we should do to build more homes. We have set ourselves an aspiration in our corporate plan to build up to 20,000 homes between 2017 and 2027.
But like many other housing associations, we have had to take a new look at how we can deliver in a challenging operating environment. How best can we tackle the barriers to building more?
The Savills research found that joint ventures between housing associations and private sector developers will help to get more homes built, especially for large and complex schemes or when there is market uncertainty.
We agree. So much so that we have decided to invest our own money into a new joint venture with Bovis Homes.
We will be working together to develop more than 1,800 homes at Stanton Cross in Wellingborough, Northamptonshire.
Our joint venture will also oversee the infrastructure for the wider site, including industrial, leisure, retail and office space; community facilities; and road and rail links. The end result will be a brand new community with 3,650 market sale and affordable homes.
Although the majority of the new homes at Stanton Cross will be for open market sale, this does not mean that we are losing our focus on affordable housing.
In addition to affordable homes built as part of the scheme, the joint venture will become a vehicle for investing our own resources to generate a significant return to plough back into the provision of even more affordable housing elsewhere, profits which otherwise would have been returned to our partner’s shareholders in their entirety.
Of course we’re not the first to do this.
Joint ventures have been used successfully between associations and private sector house builders for some time. In fact, our first joint venture – Compendium Living, with Lovell – dates back to 2005.
However many developers are now looking for new opportunities to partner with housing associations, and we at Riverside are certainly keen to explore further opportunities of this nature.
Joint venture arrangements allow associations and house builders to take an active and equal role in decision-making on schemes, and make the most of complementary strengths.
In particular housing associations can bring a long-term perspective on placemaking and neighbourhood development skills, together with the ability to manage tenure mix through the lifetime of the development programme.
House builders can bring building, site assembly, infrastructure, and commercial sales expertise.
Are there risks in this approach? Of course.
Needless to say we’ve done lots of stress testing and scenario modelling of Brexit effects and a housing market slowdown.
And we’ve also found it essential to ensure there is a fit between our ethos and values and that of our partner house builder. We had to do the right deal, with the right house builder.
Looking forward, we should see the opportunities for joint ventures with private sector house builders as an important ingredient in getting more homes built, but they cannot be a substitute for government-funded and subsidised affordable housing.
As Savills’ research pointed out, there are limits to market capacity to deliver 300,000 new homes annually. This also constrains housing associations from expanding the number of affordable homes we can cross-subsidise from mixed-tenure development.
It can’t be either/or, or them and us. We will need government, housing associations and private developers to work together if we are to build the homes the country needs.
Published in Inside Housing on 23 May 2019.