We need affordable rural homes

RURAL areas mustn't lose out on the provision of new affordable homes, argues independent housing consultant Stuart Davies.

RURAL areas mustn't lose out on the provision of new affordable homes, argues independent housing consultant Stuart Davies.

The latest round of bids for new development were finalised by housing associations and the Homes & Communities Agency (HCA) on 3 July.

The HCA will be hoping that bids match the target to deliver 150,000 new homes over the next four years. Recent reports in the housing media suggest associations will get somewhere close to that figure in their bidding at around 125,000.

These bids have been based upon a completely different set of rules to those that housing associations have grown used to over the last 20 years. Grant rates are reducing from around 55% to closer to 20% on average. The compensation being higher rents based on 80% of market levels generating revenue growth to support additional borrowing.

That additional extra borrowing is though likely to be time limited, a once only opportunity which matches the government's four year programme, thereafter in my view many Housing association business plans are likely to struggle to repeat the delivery without putting their viability at risk. So this new model may only be a short-term solution.

And what are the consequences of the changes? Well this remains speculation to some degree but there is I believe an impending 'car crash' if as bidding guidance suggests Associations target their homes to their traditional and often benefit-reliant client group. The new rent levels will impact adversely on housing benefit figures acting against another key target for public spending reductions. Many in the sector feel longer term 80% rents coupled with short term tenancies will have to lead to re-housing a different group of residents the so-called "inbetweeners" who are priced out of owner occupation and have currently only the choice of market renting.

And there may also be particular consequences for rural communities who may be net losers in the delivery of affordable homes. Why would that be?

Well firstly in many rural areas market rents and market values are higher than in urban locations. Modeling would suggest the best way to maximise revenue and create capacity for new homes is to target relets in rural high value areas. And whilst market rents might be higher on average local incomes may not be and in many cases may well be significantly lower than in urban locations particularly when you consider the low wage employment base of many rural areas in agriculture and tourism.

A second risk is potential sales in rural communities for years the housing regulator looked very dimly on sales of assets where these were aimed at propping up or enhancing Housing association business plans. This examination was very often greatest in communities with limited if any affordable housing left and there remained a view that any such sales needed to see rural communities benefiting from the reinvestment capacity generated.

Now there is active encouragement of disposal programmes to create further capital to bring down grant rates and achieve targets. Homes in rural locations are likely to be worth more on the open market than those in urban locations and many Associations have factored in considerable disposal programmes. You cannot deny the logic you sell a house in a rural location and are able to invest to create between one and a half and two new homes from the receipt.

And while associations may try to deliver new development in rural areas, planning restrictions, on going and often organised opposition, and higher land values may push them to opportunities which are more readily delivered and seemingly palatable in towns and cities.

I remain convinced associations and the Homes and Communities Agency see value in delivering homes in rural communities and will seek to maintain programmes but the fear is they may struggle and ultimately to play the numbers game and ensure business plans stack up may move away from delivery in rural communities.

Let's hope not and let's see what comes, we indeed live in interesting times!


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