Housing association development spend 23% lower than forecast

Housing associations spent 23% less than expected on development in the final quarter of 2021, as they battled supply chain problems and planning delays.

The Regulator of Social Housing’s quarterly survey shows spending on the acquiring and development of properties totalled £3.8bn in the three months to December 31, lower than the £4.9bn previously forecast.

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, which in turn have led to price increases.

“Several providers have also reported planning approval delays, affecting scheme development start dates.”

The £3.9bn figure is however a record high for a single quarter since RSH started collecting the data in 2011. In the two years before the coronavirus pandemic, development expenditure averaged £3bn a quarter

The increase was driven by eight associations spending more than £100m in the quarter on development and a for-profit provider “participating in an intercompany purchase.”

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For the next 12 months a further £18.0bn of investment is forecast, down from £18.3bn previously expected. A total of £11.8 billion is contractually committed.

RSH said: “Forecast expenditure includes an element of catch-up works from schemes that were delayed during lockdown periods, or for those currently impacted by material and labour shortages.”

Associations’ sales of market homes totalled £561m, higher than the three-year quarterly average of £547m, while shared ownership sales were £494m, higher than the three-year average of £432m.

RSH said: ”Providers need to remain alert and ready to respond to further changes in the operating and economic environment.

”They will need to ensure that risks are monitored including the potential for increasing interest rates, the rising pressures on repairs and build costs, and changes to the market affecting the supply of labour and materials. Forecasts will need to be closely monitored and updated, and flexibility will need to be included to allow any growing risks to be effectively managed.”

The survey includes data from 209 providers in England with more than 1,000 homes.