HC 1652 Communities and Local Government CommitteeWritten submission from G15
The G15 is a group of London Housing Associations. We are independent social businesses which invest our profits back into building new homes, improving existing homes and delivering services to our residents and neighbourhoods. Between us we house one in ten Londoners.
The G15 are all major developers of new homes. Under the Affordable Rent Programme we have been asked to deliver 60% of the new social housing homes in London but we have interests in all housing tenures.
The National Housing Federation has provided a separate submission to the Select Committee which we support. However, there are additional London issues that we wish to make you aware of:
1.The biggest issue for London is supply. The need for additional housing in London is far stronger than any other part of the Country. The shortage expresses itself in many ways:
Increasing property prices.
Increasing rents in the private rented sector.
Increasing homelessness.
Increasing overcrowding.
These problems are not going to go away. We are genuinely concerned about where the young Londoners are going to live.
Urgent action is needed to encourage development of new homes of all tenures to meet these needs.
2.Welfare Reform, and in particular the £26,000 cap on benefits, threatens to drive existing residents out of the private rented sector and turn landlords against letting to those who are on benefit or at risk of being on benefit. This is a huge risk to the structure and future of London. In social housing it is also leading to the new affordable rents being higher for smaller homes than larger ones. Housing & Welfare strategies need to be aligned.
3.London is the heartbeat of the UK economy. The lack of Housing gets in the way of the economy growing. Social housing in particular helps make London a collection of mixed, diverse communities with people able to live near where they work. Without this supply of homes where will the low paid workers and the unemployed of London live?
4.There are lots of sites in London with planning consents but many of these are undevelopable. This is because:
(a)The consents were granted prior to the crunch and the recognition by developers that there was an over supply of flats in some locations; and
(b)Many are high density and/or high rise schemes where the developer has to build out the whole site before receiving any sales income. Not many developers can fund such schemes and the banks no longer provide 100% funding for any schemes.
The supply of genuinely developable land is low and action is needed to increase the supply. The Government often talks of releasing its own land supply but action on this has been minimal.
Making Government land available at a time when it is difficult to borrow and there is a shortage of grant funding is even more critical.
5.The Affordable Rent Model is positive as it keeps the supply of homes at a time when the Government does not want to invest much money in housing. However, it is not a sustainable model because:
For every £1 of grant, housing associations have to provide £6 of private finance. Within the G15, this is estimated at £2 billion between now and 2015. This uses up the capacity of many housing associations and they will not be able to repeat the Programme post 2015. There must also be questions about the supply of private finance to fund the programme nationally.
The move to higher rents is working counter to attempts to reduce the cost of welfare. We can only see the benefit bill increasing under the new model.
Genuinely affordable homes need more subsidy than is being provided at present.
6.Many have talked about the need to get the Pension funds and other institutional investors into housing to help create a large, professional private rented sector. We would welcome this too, but to date they have not seriously entered the market because of their need for higher yields and their desire to avoid development risk and buy completed products.
If it is not the pension funds, the developments will need support from the banks, and as stated above this is restricted. Some housing associations may be able to play a role but this will be limited as our financial capacity is reducing rapidly under the Affordable Rent Model.
7.In the owner-occupier market, 60% of sales are to people based overseas. We would not want this stopped as it enables the provision of some supply, but the availability of mortgages is a key barrier to housing sales and especially the high cost of deposits in London. A plan to support first time buyers back into the market is desperately needed.
Within the sales market, shared ownership continues to play an important role. Without it, more would become dependent on social housing.
8.Some have suggested the conversion of Government grant into equity as a solution to our capacity challenge.
There are different views on this within the G15 but equity investment has to be repaid. It can increase capacity but it will also increase cost. This is no replacement for grant investment.
In conclusion, urgent action is needed by the Government to help increase homes for sale and rent. There is no free solution for Government. New money is needed to help people access owner occupation, encourage a bigger better private rented sector and provide more social housing.
October 2011
