Housebuilding stimulus to be unveiled next month

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Finance, Local Government

The Government is set to unveil yet more housebuilding measures next month designed to increase the supply of new homes.

According to the Financial Times, it is set to relax section 106 requirements on developers to include social housing in schemes - a move expected to be recommended in the forthcoming Montague Review - and would underwrite bonds issued by housing associations to reduce borrowing costs.

It is understood, however, the spirit of the Montague review is not a blanket replacement of social housing but about local authorities taking a more “strategic review” of what they need locally – this might be social housing, private rented or home ownership options.

The new plans, according to the FT, would see housing associations and private housebuilders urged to “sit around the table” and agree to work together on large sites.

The moves would chime with the Government's ambition to see more institutional investment in the sector, as it scales back its role in providing grants to build new homes.

It also chimes with a report by the Resolution Foundation, published last month, calling on housing associations to kick-start build-to-let developments by building new units which could then be sold onto an investment fund enabling providers to build more new homes. This would see housing associations utilising their status to build homes cheaper than private developers.

The Foundation is currently working with a group of five registered providers to model the returns that would be generated from this approach - the details of which will be published this autumn.

Relaxing requirements on section 106 agreements - where councils typically require developers to provide a percentage of affordable homes in new housing schemes - would be twofold.

Allowing more homes to be let at market rents would create higher returns for investors and could also make more housing schemes viable.

Yesterday the Department for Communities and Local Government launched a consultation on plans to allow developers to request the renegotiation of section 106s on schemes awarded planning prior to April 2010.

Although the Government said this won't automatically reduce affordable housing numbers in those schemes it did say that some obligations agreed prior to April 2010 which include a high level of affordable housing, “may now be so unviable that development may not occur at all under the current terms”.

The latest housebuilding measures are being drawn up by Oliver Letwin (pictured) - the prime minister's head of policy - along with Grant Shapps and Treasury chief secretary Danny Alexander, according to the FT.