Housing association difficulties give developers affordable housing ‘opportunity’

Private sector providers will fill any gaps left by housing associations struggling with fire safety costs on the new £11.5bn affordable homes programme, according to a senior Homes England executive.

Stephen Kinsella, the agency’s chief land and development officer, said he was confident the body would secure enough bids to hit its target of building  180,000 homes with the cash. Many housing associations have had to rein in their development programmes in the face of escalating fire safety costs.

In the second part of an exclusive interview, published today, Kinsella said any “difficulties” faced by the larger housing associations, which are also facing costs to upgrade stock to meet net zero targets, would provide “opportunities” for new entrants including private sector providers.

He also described grant rates as “generous”, despite complaints from some that more funding will be needed to meet targets.

Homes England last week opened bidding for strategic partnership deals on the £11.5bn 2021-26 affordable homes programme, on which councils, private developers and “for profit” housing associations are able to become strategic partners for the first time.

In the last round of the programme, Homes England allocated £1.8bn to 27 housing association “strategic partners” to deliver more than 40,000 homes.

However, in recent weeks, major developing associations including L&Q and Optivo have said they will be reducing their spend on development in the wake of expected necessary outlay on existing homes.

Earlier this year the G15 group of housing associations said its members had allocated £3bn to spend on fire safety costs by 2030, with the costs likely to have a big impact on development.

Kinsella said he was “completely agnostic” on what type of organisations delivered the homes. He said: “We’re confident that we’ve got the depth among the sector to deliver the step up in supply that we need from them.

“We can see a lot of those associations stepping up in the land market, delivering sites themselves and also in joint venture with housebuilders.

“While some individual associations might not be able to support the level of housebuilding that we were expecting them to, there are others that will step into their place

“With the difficulties for some housing associations comes opportunities for others, including private sector partners.

“We need all parties – whether housing associations, mainstream housebuilders, SME housebuilders, build to rent operators – all to be pulling their weight. So, it’s an opportunity for others if some housing associations aren’t able to deliver what they were originally expecting.”

Asked if Homes England would bend to calls from housing associations to increase grant rates, Kinsella said: “Have housing associations ever said anything different?

“We’ve got generous grant rates. We’ll always listen […] but we’re confident we’ve set grant rates that are deliverable.”

Kinsella also told Housing Today that Homes England was considering further measures to support the growth of offsite manufacturing facilities for housing.

In addition he set out some details of a new “dynamic purchasing system” which will replace the agency’s developer framework, known as the delivery partner panel, by which it procures development partners on its land.

He said the purchasing system will be similar to a framework, but will remain open to new entrants, in order to ensure new providers weren’t shut out of working with the agency.

The system is likely to be split up into three lots dependent on size of scheme, he said, with one lot for schemes of fewer than 70 homes, one for schemes of between 70 and 200 homes, and one for even bigger projects. Details of the system will be set out in June, in advance of the system going live in September.

For part two of the Stephen Kinsella interview click here, and click here for the first part.