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Opinion: Affordable Homes Programme 2015–18…more of the same?

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Opinion: Affordable Homes Programme 2015–18…more of the same?

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Published by Max Salsbury for 24dash.com in Housing and also in Central Government, Finance

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By David Shelton, chairman, SDS

So, the 52 page 2015-18 HCA bidding prospectus has arrived. It heralds another frenetic bout of financial soul searching for registered providers, but will this just be a repeat of previous bids, or are there subtleties which we should note?

In the main it is more of the same, with no surprises, bar one! SHG will be paid not on an averaged programme basis as at present, but at the rate required by the scheme. Also on the plus side there are some welcome provisions regarding bidding on indicative schemes, acknowledgement that scheme timings may have to be adjusted and the withholding of grant to enable future schemes to come forward.

Other key messages include a drive for more one and two-bedroom homes, encouragement to LAs to donate their land and a welcome to anyone who can deliver new supply on a competitive (grant) basis. There is also, as expected, pressure on RPs as well as on LAs, to dispose of high-value void stock, along with injunctions to sell stock where reasonably sensible to do so (e.g. rationalisation) to release more resources for new supplies.

But a few other cautionary observations are worthy of note.

There is a strong expectation that RPs will make more cost savings and other efficiency improvements (a beloved euphemism of government). It is expected that an active asset management strategy will focus on properties at unit level. And subsidy from the RP will be required in ever larger doses – no surprise there. All this featured in previous prospectuses, but this time the message sounds louder and is repeated more often.

Of these observations, two are worth commenting on.

Effective asset management has been a message from the HCA for some time, but the emphasis on applying this at a unit level is, we believe, new. It cannot be a coincidence that many of our customers are showing interest in the SDS StockProfiler which does exactly that.

The second observation concerns the HCA’s (i.e. government’s) encouragement for RPs to engage in private speculative development. Profits from this activity can provide a significant source of subsidy, but RPs should be aware that this kind of operation is a quantum leap up the development risk scale. A decent profit is necessary; not just to keep investors and shareholders happy, but for the more practical reason that profit provides the essential cushion against the risk that sale prices may not be achieved. So using profits from speculative activity is good, so long as the profit is assured.

So, now we know. The prospectus contains ‘something old and something new’… more of the same maybe, but those 52 pages contain a number of key cautionary messages. They also contain some that are encouraging. The need for increasing the supply of housing, including social housing, is at least being taken seriously by this government.

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