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Build more houses, stupid!?

Written by Dan Townshend, Research Manager in Madano's Insights and Intelligence practice

Those working in the housing sector are unlikely to take much heart from this year’s party conferences, which were sorely lacking in substantive policy proposals to address the systemic housing crisis that exists in the UK today.

Lots of talk and not much substance.

However, one area of government policy that may be kick-starting a renaissance (whatever you may think of the policy levers or their consequences) is in the housing association sector, where HA’s are beginning to ramp up their development activity (either solo or in partnership with private sector developers).

The way that housing associations are doing this, particularly in London, is often through the development of mixed tenure developments – integrating social housing with private sale properties.

On the face of this is a sensible approach. Housing associations can gather extra funds through private sales that have been taken away as part of the government public spending cuts, while providing much needed new homes for social rent.

And yet, having worked on a number of schemes and analysed the segment carefully, we believe that three major challenges emerge from the mixed tenure development approach.

Challenge 1: Does this redefine the purpose of the modern housing association?

The first issue is about how housing associations define their purpose in this context.

Yes, of course they develop new homes so that they can continue to deliver on their foundational social purpose - but is this purpose ultimately watered-down when they feel pressure from their stakeholders simply to build more and more homes?

We know from our own research with housing associations’ key external stakeholders that they are attaching more and more importance on developing new homes, flexing their balance sheets.  Not because they can continue to deliver on their core social purpose, but because those stakeholders believe they should be ‘doing their bit’.

Is it inevitable that the more attention you put into this, the less you can give to social housing management? There is an evident tension that is being magnified in mixed tenure solutions.

Challenge 2: Finding the right buyers, in the right places?

To account for the loss in government funding, many of the homes housing associations develop are of premium quality often at the same price point as private developers.

Yet in a recent 1000 person survey of homebuyers in London, we found that the majority believe housing associations develop properties that are cheaper than those developed by private developers.

This ‘fact’ is true of both those prospective buyers with both smaller and larger budgets.

The association is so strong that even those who have recently purchased from housing associations (who we spoke with in focus groups) wrongly believed they paid less than they would have done had they purchased from a private developer.

Contrastingly, some of those with higher budgets are ignoring housing associations, even when the location and the quality may be every bit as comparable as the private sector.

All of this means that the right type of buyers are often looking in the wrong places. Those with lower budgets are looking to housing associations even though the property is no more affordable and those with higher budgets are ignoring housing associations, even though the quality of the property and setting may be spot on.

Amidst that buyer confusion, it also begs the question, where can those would-be buyers with smaller budgets go to get a foot on the home ownership ladder?

Challenge 3: Overcoming the sentiment barriers?

While the role of housing association as developer may be ramping up again and starting to gain some traction, buyer sentiment towards housing association development, and mixed use schemes in particular, continues to be beset with barriers.

Research shows that both willing purchasers and unwilling purchasers both attach negative connotations towards such developments.

The biggest concerns included not wanting to share with social housing tenants, a feeling that they were more likely to be victims of anti-social behaviour and doubts about the resale-ability of the property.

Cynics may argue that these preconceptions will just shift as these schemes become ever more the norm (what choice do you have?). A more hopeful interpretation is that the true notion of place-making and community development will come to the fore, not just as words but as real actions.

So, while we are beginning to see the revving up of the housing association development bandwagon, there remain some tricky challenges to overcome.

It is clear that in the short to medium term, housing associations do need to do more to educate and mollify homebuyers out of their negative preconceptions. We do need to start getting the right buyers looking in the right places and there remains a tension between the role as developer for private sale and delivering social rent to those whose access to the housing market remains limited.

As is often the case, it’s not as quite as simple as ‘build more houses stupid…..’

Madano works with several companies in the Built Environment sector.