Communities and Local Government CommitteeWritten submission from the National Housing Federation

1. Introduction and Summary

1.1 The National Housing Federation represents 1,200 independent, not-for-profit housing associations in England. Our members provide two and a half million affordable homes for more than five million people. Our members are the main providers of new affordable homes, they will be building 90% of homes delivered under the Affordable Homes Programme 2011–15 (AHP) and currently build around half of all new homes.

1.2 We welcome the opportunity to submit evidence to the Communities and Local Government Committee inquiry into the financing of new housing supply. The focus of the inquiry is on steps Government could take to ensure that resources are available to support future housing delivery.

1.3 In a difficult economic climate and with political focus on reducing the public deficit it is inevitable that there will be very tough decisions to be made about where and how best to target scarce public subsidy in housing in the context of rising housing need. We are supportive of the Government’s ambitions to deliver 170,000 affordable homes over the next four years and other steps it has taken to boost overall housing supply. However, we are concerned by some of the consequences of these policies on new supply and the erosion of the sector’s capacity.

1.4 Due to the considerable overlap in the committee’s questions we have set out the background of the AHP and the financing of new housing supply below, followed by a response to the questions. The key points in our response are:

We have a number of concerns about the implications of the new investment model and believe that the model is unlikely to be sustainable far beyond 2015 in its current form. Government needs to reconsider how Affordable Rent can work alongside a different model of investment.

Government needs to reconsider its approach to assessing value for money of revenue versus capital subsidy for the provision of affordable homes. We do not believe that a revenue based model offers best value for money for the taxpayer.

Government should focus on securing the best delivery environment for housing and helping to support stable lending. We have made a number of recommendations in this area.

Government should consider our recommendations to increase the capacity of housing associations to fund new homes and help attract institutional investment.

2. Public Subsidy For New Affordable Homes

2.1 In the 2010 Comprehensive Spending Review (CSR) the capital budget from Government to build affordable homes was slashed by 63%. The Government has allocated resources of £4.5 billion for the AHP over the next four year period to deliver up to 150,000 homes. The gap left by the drastic cut in capital grant will be filled, in part, through revenue from the introduction of a new affordable rent—up to 80% of the market rate—to be charged for most newly built homes and a proportion of re-let properties.

2.2 The new investment model leads to a much greater level of development risk being transferred to housing providers and requires much higher levels of borrowing to deliver new homes.

2.3 Before we turn to focus specifically on the financial implications of the new AHP it is first worth considering what will be delivered as a result of the proposals. We have a number of concerns about potential weaknesses of the new approach:

the model fails to support the delivery of a range of housing tenures to meet a range of local housing need;

the model makes delivery difficult in low value areas, in particular in regeneration areas, due to the limited additional financial capacity that can be secured through higher rents;

the exclusion of some small and medium sized provider, who unlike national organisations are unable to reinvest capacity from high value to low value areas;

the uncertain future for affordable home ownership products that remain in high demand and help people on moderate incomes to buy a home;

the impact of a number of fundamental weaknesses and risks inherent in a revenue based model of development for both government and providers;

the impact of welfare reform on the viability of the new investment framework and the conflict in policy especially around larger homes and under occupation;

affordability and work disincentive implications for tenants paying the new intermediate rent;

considerable local authority opposition to the new model and the impact that this could have on delivery; and

gradual erosion of housing association capacity and longer term sustainability implications.

2.4 We believe that a sustainable investment model should be underpinned by a number of key principles. For the sector and government it should:

support the development of affordable homes at scale, with a range of tenure options;

be viable for housing providers to deliver;

support flexibility and innovation;

offer excellent value for money for the taxpayer;

consider quality, tenure and need—not just number of units and average grant rates;

have a balanced approach to risk sharing between government and housing associations;

enable a range of providers to be able to develop, ensuring maximum use of sector capacity; and

offer genuine freedoms and flexibility to local government and their housing partners to meet local housing need.

2.5 For people in housing need investment in affordable housing should:

deliver homes at a scale that meets local need;

support the delivery of a range of affordable homes at difference price points and tenures;

deliver sufficient numbers of specialist and supported housing, larger and rural homes;

offer solutions for areas of the country which have lower land values;

enable regeneration activity to be funded;

be able to respond flexibly to local needs; and

support job creation and local economies.

3. Financing the Delivery of New Affordable Homes

3.1 Private finance going into housing supply has historically come from two sources; conventional corporate debt provided by financial institutions and bond finance either publically listed or privately placed.

3.2 Debt finance has been the major source of private funding for the housing association sector. Banks have made long-term finance (for periods up to 30 years) available at exceptionally competitive rates. For housing associations whose balance sheets are modestly geared, this conventional corporate debt was the most cost effective way of funding the needs of their business in terms of financing growth through development and acquisition of new homes.

3.3 However, there are questions surrounding the continued availability of long-term debt finance and the cost of capital. Banks are coming under considerable regulatory pressure and are being encouraged to match the lifetime of their assets with their liabilities. Many lenders are of the view that that there will be an increasing move towards shorter or medium term finance of between five to seven years. Where long-term conventional corporate debt finance remains available, it is likely that lenders may demand an ability to reprice at intervals of five years. For many housing associations this may well represent a refinancing or repricing risk that they are unwilling to bear.

3.4 This suggests that the funding of the affordable housing sector may well be moving to a more polarised position with the banks providing short-term finance which could be on a individual project rather than a corporate basis, with the capital markets and a wider pool of institutional investors being the main source of long-dated debt.

3.5 Bond finance is well established as a mainstay of housing association financing, with over £8 billion of current bonds outstanding. Even in a volatile market. There remains good institutional appetite for bond finance from the current investor base.

3.6 Raising finance via the capital markets is not solely limited to the larger housing associations issuing in their own name. Institutions like The Housing Finance Corporation (THFC) acting as a conduit for the sector, enable smaller and midsized housing associations to access the capital markets by aggregating their individual funding requirements to an amount which is acceptable to the market. There is also an active private placement market, which enables smaller issues of debt to be placed with individual investors.

3.7 Having set out the background context underpinning the enquiry we now turn to answer the specific questions posed by the committee.

4. How and where the more limited capital and revenue public subsidy can best be applied to provide the biggest return on the investment, in housing supply terms?

4.1 In principle we believe that Government has the right approach in ensuring that limited public subsidy is targeted at providing affordable homes for those in greatest housing need and that the provision of market housing can best be facilitated through creating the right planning and operational environment.

Revenue Versus Capital Investment

4.2 Debates about the value of revenue versus capital often come back to the issue of how to measure value for money and the assessment factors that are incorporated into the model. Minimal changes in the assumptions used can produce very different answers.

4.3 The Federation does not believe a revenue investment model provides the best value for the taxpayer in the medium to long term. A revenue funded model looks to deliver best value if a short-term value for money assessment is used. Government typically uses the period of time that a household stays in an affordable home or is in housing need. However, a more sensible measure would be the lifetime of the property as, by definition an affordable home will always be used to house families in housing need.

4.4 An assessment using net present value (NPV) also fails to take account of wider costs or second order factors that cannot easily be given a financial value. For example, with rising demand for affordable housing and future demographic pressures, the majority of people living in new affordable rented homes are likely to rely on housing benefit to meet their housing costs. However, the impact on the housing benefit bill of the rent level of newbuild affordable homes being set at 80% of market rents, rather than at social rent, has not been factored into Government’s analysis.

4.5 Current NPV/Cost Benefit Analysis (CBA) approaches also fail to assess longer term risk and often underestimate revenue risk for the taxpayer. To continue with the example of housing benefit, housing benefit is paid to anyone eligible and the costs associated with this are not always easily predictable. This is compounded by the fact that housing benefit is one of the “automatic stabilisers” in the economy and costs rise during economic downturns.

4.6 A stark illustration of this is past experience when in the 1990s the then Conservative administration experimented with altering the balance of housing subsidies in favour of revenue support: a policy characterised as a move to “let housing benefit take the strain”. By 1993–94 the housing benefit bill had risen to £10.4 billion from £5.7 billion in 1990–91, an increase of 82.5% in just four years.1 In another unintended consequence general inflation in the economy increased as rent increases fed through.

4.7 Finally, value for money assessment also fails to recognise that housing associations still fund the majority of the costs of new affordable homes. To date associations have taken every pound of public grant for new affordable homes (34 billion in total) and matched it with nearly two pounds from their own resources (£60 billion in total). A revenue based model greatly increases the amount of their own resources that housing associations need to invest, which erodes their capacity to build homes in the future.

4.8 We believe it is short sighted of government not to give due consideration to the impact of the reduced capacity of delivery partners and the impact on the future housing supply chain.

4.9 Historically, when undertaking value for money assessments of Government capital support for affordable housing have been underpinned by a restrictive and narrow focus on average grant rates and number of homes delivered. This approach has failed to consider the type, location, quality and size of homes being provided and the longer term savings to the taxpayer. A realistic value for money assessment should take a broader view of the social impact of investment.

Housing as an economic stimulus

4.10 Investment in housing supply offers an especially effective way of stimulating economic growth. Research commissioned by the Federation in advance of the 2010 Comprehensive Spending Review indicated that for every £1 spent on housing, £1.40 of expenditure is driven in the wider economy. The added advantage of using housing as an economic stimulus is that spending can be committed very quickly in comparison with investment in major infrastructure projects such as road and rail where the planning and approval process means it may be many years before money can be invested.

4.11 The Federation has recently called for Government to invest £1 billion in building shared ownership over the next three years. This would deliver:

66,000 shared ownership homes.

99,000 jobs directly in the construction industry.

396,000 jobs within the wider supply chain.

Generate £15.25 billion within the wider economy.

In addition it would pump £342 million into local economies through the purchase of furnishings and local services such as surveying.2

4.12 The Federation believes that greater Government investment in shared ownership would not only represent an enormous boost to first-time buyers who are able to sustain home ownership, but unable to raise a deposit; but would stimulate a wider, faster economic recovery.

Failing Housing Markets

4.13 The Government must ensure that they do not evaluate the efficacy of public subsidy with a “one size fits all” approach. Many parts of England are struggling with the impact of failing housing markets. Whilst there has been substantial progress in regeneration initiatives over the past decade backed by significant public investment, this is now threatened by the recession and drastic cuts in public subsidy. In these areas the evaluation criteria is not just new supply, but reversing housing market failure and supporting wider economic growth. The Federation’s detailed response to the CLG select committee inquiry into regeneration sets out our views on this area and we look forward to the forthcoming response of the select committee.3

4.14 We believe that the Government could consider the following options:

Review the approach to assessing value for money when evaluating future funding models and include second order factors such as impact on the housing benefit bill.

Ensure that housing policy and welfare reform policy are aligned.

Help ensure long term funding at reasonable terms by extending the current formula for social rent increases (RPI + 0.5% plus or minus £2) until 2020. This would also make the sector more attractive to potential institutional investors, discussed in more detail below.

Confirming a mixed funded approach to support development post 2015. Whilst we accept that the government will be unable to confirm future spending settlements offering reassurance of a future programme would enable housing associations to secure future pipelines and reassure lenders.

Introduce a reduced VAT rate of 5% for labour intensive services consumed by housing associations in the delivery of key activities such as repair and maintenance of social housing stock. The extension of the reduced rate of VAT specifically for the repair and maintenance of social housing stock would release funding within the sector of £623 million a year.

Invest £1 billion into a national shared ownership scheme to deliver 66,000 new affordable homes.

5. What the role is of state lending or investment, as opposed to grant funding, and the appropriate balance between them?

5.1 Given current economic and fiscal constraints the Federation’s view is that Government should not be looking to lend directly to housing providers and their focus should be on ensuring that the operating environment for housing associations and other providers is conducive to investors and banks being willing to continue to provide funds to housing providers at a reasonable cost.

5.2 Areas where Government can support housing supply include ensuring their proposals for welfare reform support housing delivery. Changes to Housing Benefit and the introduction of Universal Credit, including withdrawal of the option for tenants to have their housing support paid directly to the landlord, threaten to substantially increase the cost of finance for housing associations.

5.3 Other supply side measures that the Government could take include ensuring that banking regulation alongside the FSA’s ongoing Mortgage Market Review does not restrict the availability of mortgage finance for first-time buyers. If mortgage supply for first-time buyers is significantly restricted, this is likely to slow the pipeline of new housing developments being brought to the market.

5.4 It has been difficult in the past to bring forward a mechanism where Government through its agencies can make equity type investments into housing supply. Previously the Homes and Communities Agency (HCA) have proposed providing equity type investment into new low cost home ownership (LCHO) homes. The Government has previously recognised that equity sharing does not work for social rented homes. Social rented housing is, to all intents and purposes a loss making activity, especially when costs of housing management, maintenance and long term stock investment are taken into account. As a result there is no value uplift to share. Equity sharing for LCHO is also problematic. Previous proposals have stopped short of a full risk sharing approach and while Government wanted to take a share of any uplift in property values, there was no intention of sharing any falls in property values.4

6. What the role is of the public sector in providing support in kind—for example land or guarantees—as opposed to cash, and what the barriers are to this happening

6.1 We strongly welcome the announcement by Housing Minister Grant Shapps on 5 October 2011 announcing the plans of government departments with significant landbanks to use them to support the delivery of up to 50,000 new homes. Public bodies should be encouraged to evaluate the disposal of public sector land against a wider framework than simply reverting to “best consideration.” This should include the wider long-term benefits that can be delivered for the local community, including the provision of affordable housing.

6.2 The HCA should also move swiftly to use its landbank to support housing delivery, including recent land transferred from RDAs, to support the delivery of new affordable homes. This should include being flexible about mechanisms to support viable development. As such we welcome the housing Ministers’ commitment to make as much of this land as possible under the Build Now, Pay Later model and hope that government will prioritise the delivery of desperately needed affordable homes.

7. How long-term private finance, especially from large financial institutions, could be brought into the private and social rented sectors, and what the barriers are to that happening

7.1 Securing institutional investment into residential property has been a “holy grail” of innovation in financing new housing supply for a number of years. Despite a number of government and housing sector initiatives institutional investment has never been unlocked in significant amounts. However, the tide may be turning—the turbulent financial markets have lead to investors seeking lower but safer returns. Forthcoming measures contained in the 2012 Finance Bill should help create a better environment and changes in the housing markets are combining to make securing large-scale institutional investment more likely.

7.2 Unlocking institutional investment in the residential property market has failed for three main reasons—low return on investment and insignificant scale, volatility and viability issues from a provider and investor perspective and an unfavourable legislative and fiscal environment.

7.3 Institutional investors, in particular pension funds and life companies, but also potentially sovereign wealth and opportunity funds, typically require a yield of around 7% on their investment. However, indications suggest that investment performance for residential let properties in England has provided a yield well below this rate, at approximately 3.5%. However, recent volatility in the financial markets and diminished opportunity for such high level returns on investment have resulted in an increased appetite for lower yield, but more secure returns. In particular an interest on long leased properties preferably with RPI linked leases as liability matching assets.5

7.4 Issues with low yields have been further compounded by the volatility of rental yields from private sector rents and general development viability risks that have resulted in institutional investment models being potentially high risk for both investors and developers. With the fragmented nature of the private rented sector market it is very difficult to generate economies of scale needed to secure institutional investment.

7.5 Recently government has announced a number of measures including revisions to stamp duty on bulk purchases and changes to REITs regulation that could help attract institutional investment.6 There are also factors that are leading to more demand for PRS accommodation, and therefore more secure returns and opportunities for “build-to-let” large scale landlords.7

7.6 We believe that the Government could consider the following options:

Establish an expert advisory group of investors and housing associations to review barriers to the development of social housing REITS. In 2007, a consortium of over 20 housing associations attempted to establish HA REIT, the first social housing REIT. However it failed due to the high risk and intensive start up costs.8 Current changes mean that now is the right time to establish a mechanism for taking this model forward.

Help increase investor appetite by piloting “build-to-let” REIT model on a number of HCA land sites. Large scale “build-to-let” models are relatively untried and untested and demonstrating their viability and potential investor return could create a crescendo effect by making the market more attractive to more investors. The value of piloting it on HCA sites would be the opportunity to de-risk the development by providing the land up-front at no cost and the HCA taking either an equity stake or build now pay later approach to ensure a return on the public asset. The HCA would also have the opportunity to do this across a number of sites helping to achieve the “critical mass” that would be needed.

Work with housing providers to support and establish a housing investment fund. Government support and underpinning of a pilot housing investment fund run by housing associations, would enable the development of mixed tenure sector schemes at scale and would attract investors and create confidence in the market hopefully acting as a prelude to it increasing in scale. Housing associations could reach an agreement with government around underpinning the risk and guarantee on investor return, but the clear backing and support of government would attract and reassure investors and government could play a role as broker.

8. How housing associations and, potentially, ALMOs might be enabled to increase the amount of private finance going into housing supply?

8.1 While the sector has a history of providing low risk returns to funders with no credit defaults, and credit ratings agencies continue to have a positive view of the sector, there is a need to acknowledge that if supply of private finance at a competitive cost is to be retained a number of factors need to remain in place. A recent report by Standard and Poor’s on housing associations summarises these risks well “Across the sector we believe that there may be some weakening in creditworthiness, due to the exposure to the various risks [increased debt, higher rents, welfare reform etc]. That said, we believe the political importance of housing associations’ role is likely to ensure sufficient government support that the vast majority of the sector will retain its investment-grade credit quality”.9

8.2 Areas of Government policy which impact most directly on the availability and cost of private finance include:

Welfare reforms including cuts to housing benefits and movement away from direct payment of rents to landlords under the Universal Credit proposals.

Reductions in the availability of capital investment which may mean that associations become involved in high-risk commercial activities in an effort to fund development.

9. How reform of the council Housing Revenue Account system might enable more funding to be made available for housing supply

9.1 We are supportive of the principles underpinning the ongoing reform of the HRA system, though unless there are revisions to the rules surrounding public sector net cash requirement (PSNCR) we are doubtful that there will be substantial increase in funding available for housing supply. It has also been suggested that continued borrowing constraints after reform has been completed could result in further large scale voluntary transfers (LSVTs) to housing associations.10

10. How effective the Government’s “Affordable Rent” proposals are likely to be in increasing the funds available for new housing supply, and how sustainable this might be over the medium to long term

10.1 The impact of the new funding model will be to increase the amount of resources that housing associations need to invest to support the delivery of affordable rent homes, which in turn will limit future funds available to support new housing supply. Modelling by Social Housing Magazine and Savills has indicated that associations will need to find an additional £10 billion to finance the 2011–15 development programme.11

10.2 The higher rents were anticipated to provide housing associations with a greater capacity to take on more debt. However, because of lender concerns over higher turnover and increased voids, currently valuers have been unwilling to factor in the higher rental streams into the valuation of housing association stock. This impacts significantly on Loan-to Value (LTV) ratios that lenders use to assess housing association debt capacity.

10.3 As developing housing associations take on increasingly more debt their businesses will become more highly geared. This will not only diminish the ability of developing housing associations to persuade lenders to continue to provide the additional funds they will need, but as levels of debt increase, it is likely that housing associations will find it increasingly more difficult to service debt from their rental income.

10.4 Going forward, housing associations’ ability to service debt may be further exacerbated by an increased cost of capital. Historically, housing associations have had plentiful access to funds at exceptionally low rates. It has been usual for many business plans assume that the long-term cost of capital will be 6%.

10.5 For the multitude of reasons listed below, it is possible that housing associations will struggle to borrow at the low rates they have done in the past and many members are now assuming future costs of funds at around 7.5%, because:

Stronger regulation of the banking industry through the Basel III proposals.

Increased costs of funds for the banks.

Re-financing risks.

The ongoing risk of bank back-book re-pricing.

The potential separation of UK retail and investment banking as recommended by the Independent Banking Commission.

In the medium term, possible competition from local authorities for bond finance Bank of England rates and LIBOR are at historically low levels. When these rates rise, housing association cost of funds will also rise.

10.6 The Federation has undertaken some modelling to evaluate the impact of a repeat of the same investment model in 2015 to illustrate this point further. Whilst we have used the best available data and robust assumptions, any future financial modelling by its nature is inexact and is used here for illustrative purposes only. Our analysis suggests that:

to support the delivery of one new build affordable rent home, nearly three existing properties need to be used as security to support higher borrowing requirements, rapidly eroding the sector’s borrowing capacity;

AHP 2011–15 and additional nil-grant delivery will result in the sector using 46% of total sector loan capacity, this will severely constrain future development capacity and reduce the amount of resources that can be invested in supporting wider neighborhood investment; and

if the same investment model was used for development of new affordable homes post 2015 the security capacity of the sector would be exhausted after 11 yrs. Whilst our sector has always been the key partners of government in affordable housing delivery, and will deliver 90% of homes delivered under the AHP no sector would accept such a medium term erosion of its asset base.12

10.7 Our modeling and analysis has not accounted for the recent Government announcement to revitalise the Right to Buy (RtB) policy and sell up to 100,000 new homes. These are to be replaced on a one-for-one basis with homes which are likely to be let on affordable rents ie at up to 80% of the market rent. The policy will apply to housing association tenants who hold a tenancy which grants them a Preserved Right to Buy (PRtB) following stock transfer.

10.8 The Department for Communities and Local Government (DCLG) estimate that 700,000 housing association tenants hold the PRtB. To avoid a repeat of the past erosion of social housing stock, housing association will need to be able to replace stock sold on a one-for-one basis. To achieve this housing associations will need to be able to retain all receipts and any capital shortfalls borne by associations when delivering replacement homes should be met by Government. This will help avoid additional capacity being sucked out of the sector, at a time when balance sheet capacity is already being put under pressure by the affordable rent model.

October 2011

1 Steve Wilcox, UK Housing Review 2009-10, Chartered Institute of Housing and Building Societies Association, 2009.

2 This is based on our figures quoted above. Also The Home Builders Federation state that every home built creates 1.5 fulltime jobs plus up to four times that number in the supply chain. Research carried out for Kate Barker’s review of housing supply concluded that 1.5 workers per dwelling were directly engaged in the house building process, including office staff and wider professional support associated with development. Source: Ball Michael, The labour needs of extra housing output: can the house building industry cope, and CITB – Construction Skills and the Home Builder Federation, December 2005.

3 The Federations response to the CLG select committee enquiry into regeneration is available from:

4 It is also exceptionally difficult to develop a way of devising a workable equity type investment model for the delivery of affordable rented homes. Government has no responsibility and plays no role in longer term property management, maintenance and post construction works. Any significant increase in property values are often driven by wider neighbourhood work funded by housing associations. As businesses housing associations also invest heavily in having the staff expertise and organisational capacity to manage the development programme – a substantial business expense which enables associations to assess and take market risk.

5 Williams, P et al, Opportunities for institutional investment in affordable housing: Report the HCA Housing Finance Group 2011, Cambridge Centre for Housing & Planning Research.

6 The 2011 Budget announced a revision of stamp duty on bulk purchase, meaning that stamp duty on the purchase of more than one property will be calculated by the average value of the properties, not the bulk value. Whilst this won’t automatically result in more institutional investment it will make a considerable difference to the potential rate of return and help make the market more attractive. Housing associations could have a strong role to play in securing institutional investment. Their considerable expertise in understanding local housing markets could help ensure investment in the right locations, in terms of a secure rental market – helping to secure investor returns whilst minimising development risk. Greater and more secure returns can be offered through minimising voids through the use of longer term tenancies and management at scale – both of which play to the skills and strength of associations. For example, in recent weeks Derwent Living have agreed a £45 million deal with Aviva Investors to fund the purchase of 839 properties from Home Group through the asset manager’s REALM social housing fund. Investment manager M&G is also on the process of raising money for what it hopes to be a £1 billion social housing fund. The diverse ownership role states that 35% shared of a REIT have to be in public hands.

7 Despite being a “home owning democracy” owner occupation levels have fallen from a peak of over 70% in 2003 to its current level of around 67%. This decline is not unique to the UK, but is a global trend. In a corresponding shift, the proportion of people in the private rented sector (PRS) has risen to 16%. This has been matched by some early indications, amongst younger generations in particular, that tenure aspirations are changing and the PRS is perceived as a more desirable tenure choice than it has been in the past. At the same time ongoing falls in numbers of first time buyers and lack of housing supply also indicate that in many housing markets private rents will continue to rise, recent figures commissioned by the Federation from Oxford Economics that suggest that rent levels will increase by 40% by 2020.

8 Northern Ireland Assembly, Alternative Financial Delivery Models for Affordable Housing, April 2010.

9 Standards & Poor’s, Report Card: U.K. Housing Associations face New Age of Austerity and Innovation, 2 February 2011.

10 Williams, P et al, Opportunities for institutional investment in affordable housing: Report the HCA Housing Finance Group 2011, Cambridge Centre for Housing & Planning Research.

11 Social Housing Magazine, Vol 23 No 10, October 2011 “£10 billion finance needed to deliver development plans”.

12 Our modelling has evaluated the value of the sectors assets base and the asset based cover this could support and looked at the implication of delivery of the AHP. We have used figures from Savills who recently conducted an exercise to estimate the consumption of sector property assets as security for finance to fund the AHP programme 2011-15. Savills assesses that the average value (EUVSH) of a housing association property as £55,000. The most up to date assessment of the average cost of developing a new housing association property from government data is £145,000. We have assumed that members will deliver an additional 10% of units beyond those delivered via the AHP, based on a conservative estimate from nil-grant development since 2000 as reported in the Regulatory Statistical Return.

Prepared 4th May 2012