The Government's announcement of the first funding allocations from its £39 billion Social and Affordable Homes Programme could potentially be a significant boost for affordable housing delivery. However, the wider implications for the development sector could prove equally important.
At a time when the Section 106 affordable housing market has become increasingly challenging, long term funding certainty for councils and housing associations has the potential to address one of the constraints affecting housing delivery.
In recent years, many Registered Providers have faced financial pressures from build cost inflation, regulatory requirements and higher borrowing costs. This has contributed to a reduced appetite for acquiring Section 106 affordable housing from private developments, creating challenges for housebuilders looking to progress schemes.
George Fox, Director of Development at Newton LDP, said:
“The majority of our land sales over the last couple of years have been frustrated by the state of the Section 106 affordable housing market. When tendering the affordable housing element, we have not only seen a reduction in the number of parties bidding, but some of the bids received have not complied with the prescribed housing mix. In some cases, this has meant going back to the LPA to seek amendments to the agreed tenures.
“Whilst the full benefits are likely to emerge over several years, today’s news is welcome. The funding could provide an immediate boost to confidence within the affordable housing sector, helping to unlock Section 106 transactions, support strategic site delivery and improve the prospects for both market and affordable housing delivery across the country.”
What could this mean for housing delivery?
By strengthening the financial position of housing associations and councils, the programme could increase the sector’s capacity to acquire Section 106 homes alongside delivering additional grant funded affordable housing.
For housebuilders, greater confidence from housing associations in their acquisition of Section 106 units could help schemes progress more smoothly and reduce an issue that has affected development viability and delivery rates in recent years.
There could also be wider implications for strategic land. Increased capacity within the affordable housing sector has the potential to help unlock certain strategic sites, supporting the delivery of both market and affordable homes.
Could this influence the residential land market?
Greater confidence around affordable housing delivery should have positive implications for the residential land market.
Land values will always to be influenced by economic, planning, and site-specific factors, however, by reducing the uncertainty around the disposal and delivery of affordable housing, the hope is that it will provide greater confidence in the market when it comes to assessing development opportunities.
Taken together with the Government’s planning reforms and continued focus on increasing housing supply, the funding represents a potentially important intervention in the housing market.
Its significance may ultimately extend beyond the number of affordable homes delivered. If the programme helps restore confidence and capacity within a crucial part of the development process, the benefits could be felt by housebuilders, promoters, landowners, housing associations and local authorities alike.
If you are considering the sale or promotion of development land, or would like to discuss what the changing affordable housing market could mean for your site, speak to Newton LDP's Development team.
George Fox - Director, Development
george.fox@newtonldp.com
07721 260552
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