Associations’ development spend 35% below forecast as supply chain issues bite

Housing associations in England spent 35% less than they expected on developing or acquiring new homes in the last quarter of 2021/22 amid continuing supply chain pressures and cost increases.

The Regulator of Social Housing’s (RSH) latest quarterly survey shows associations spent £2.9bn on development in the quarter to 31 March. This was 35% below the £4.6bn they had originally envisaged spending.

The survey, which collects data from 205 associations owning 1,000 homes or more, also found 87% of providers underspent against development forecasts while nearly two in three (64%) reported an underspend against committed development forecasts.

RSH said: “In addition to general scheme delays and slippage, providers have reported development works being affected by the continued supply chain issues and pressures in the contractor market across the construction sector.

“A small number of providers have also experienced delays with developers signing contracts whilst they re-price works, due to increasing costs. Providers have also reported planning approval delays affecting scheme start dates.”

Housing associations also underspent on their development forecasts in the previous quarter, their spending 23% less than expected in the three months to 31 December, which the RSH again put down to supply chain problems and planning delays.

Despite the underspend in the three months to March, the total expenditure on development, £2.9bn, was broadly in line with pre-pandemic levels of spend. In the two years before the covid-19 pandemic, housing association development expenditure totalled £3bn per quarter.

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Housing associations are also forecasting £17.5bn of investment in development, of which £11.5bn is contractually committed. This would be an increase of 38% compared to the previous 12 months.

RSH said the forecast spend “includes an element of catch-up works from schemes impacted by material and labour shortages.”

Will Perry, director of strategy at RSH, said: “The social housing sector remains financially strong and continues to recover from the pandemic. Providers forecast even greater investment next year on new and existing homes.

“Looking ahead, providers will need to manage significant economic and practical headwinds while continuing to make substantial capital investment. It is crucial that boards maintain a clear understanding of their existing stock, while closely monitoring rising inflation, interest rates and persistent supply chain challenges”.