Building better after COVID

By John Perry | 17 June 2020

Among the many hold-ups resulting from the current pandemic, one that it is particularly frustrating for many local councils is the delay to their housebuilding programmes. These have been hit by the general halt in construction work just at the time when – in many cases – programmes were starting or were poised to achieve new levels of output.

A study carried out by the Chartered Institute of Housing (CIH) published in January showed that councils were gearing up to build more than 10,000 homes a year. This was the Treasury’s tentative target when the Government decided in November 2018 to lift the caps which – since April 2012 – had limited councils’ ability to borrow to build new housing.

Stoke-on-Trent City Council, which had originally planned to build 500 homes within its 30-year business plan, had set a new target of building approximately 1,500 units in just four years.

Delays can also be expected in programmes being developed by councils in partnership with local housing associations.

The Chartered Institute of Housing’s (CIH) earlier study, Building Bridges, found that in several areas these partnerships were very ambitious. For example, Homes for Brighton & Hove is a partnership between Brighton & Hove City Council and the Hyde Group, aimed at building 1,000 homes split equally between renting and low-cost home ownership.

Planning permission had just been granted for the first scheme when the COVID epidemic began, with construction due to start later this year.

In the North East, Gateshead MBC is working with Home Group to deliver more than 2,000 homes across 16 allocated sites over a 15-year period. Several schemes have been completed and some are currently on site.

The strongest message to come from the recent CIH study (jointly with the National Federation of ALMOs (arm’s-length management organisations and ARCH (the Association of Retained Council Housing) was that councils need a stable financial environment in which to implement the ambitious plans that many have taken on since the lifting of the borrowing caps.

Unfortunately, even as the research was being finalised, the Government made a key decision that affected them adversely – to increase the interest rates on new lending from the Public Works Loan Board by one percentage point. Some councils, including two London boroughs, immediately reported difficulties resulting from the higher rate. The Government then had a change of mind in March, restoring borrowing costs for social housing schemes to their previous level.

The CIH study showed that councils’ ability to raise their rents from 1 April this year, after the enforced cuts in rents that began in 2016, was another vital factor in facilitating newbuild programmes.

Councils were hoping that the new rents policy, intended to last for five years, would be extended further to give them even greater certainty. What happened was that all councils and their areas were hit by the economic effects of the coronavirus epidemic. Many decided not to go ahead with the rent increases planned in the current year, so as not to hit tenants whose incomes may have fallen.

Despite such action, rent arrears have risen, with a HouseMark study suggesting social landlords are already £100m worse off than at the same point in 2019.

Six months after the CIH study was published, the picture could hardly have changed more drastically, with not only councils’ finances, but even their ability to carry on building homes hampered by the pandemic and the precautions that have had to be put in place.

The picture is not all gloomy, however. Cheltenham Borough Homes, the ALMO which is in partnership with its parent council in a £100m housing investment programme, started a 27-home scheme in February which had to be stopped when lockdown began. It has now restarted after a four-week delay, with social distancing measures in place, and is due for completion next year.

Oxford City Council has begun a small, but innovative, zero carbon building project via its own housing company OCHL and its wholly- owned construction specialists, ODS. The eight-unit scheme of homes for older people will be chiefly constructed off-site, making it easier to comply with social distancing rules.

Councils across the country will be keeping a watchful eye on their housing revenue accounts and drawing up new forecasts for the current financial year, hoping the economic crisis will only have a short-term impact on their building plans.

They will all be hoping that council housing investment forms part of any recovery plan the Government eventually adopts. CIH will be pointing out to Government that many schemes are on-site or ‘shovel-ready’ and able not only to provide new homes quickly, but also to add to local employment and stimulate local economies.

John Perry FCIH is a policy adviser at the Chartered Institute of Housing

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