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Over the last 30 years, demand for new housing has
increased by 30% whilst the rate of house building has fallen by 50%.
Household growth is being driven by the fact that people are living
longer, marrying later and divorcing more, which is increasing the
number of one and two person households. Housing has also become
unaffordable to a rising number of people such as nurses, teachers,
policemen, first time buyers and young families. In the late 1980s, 46%
of new households could afford to buy their own home compared to just
37% by 2004.
Social housing provision has therefore
become an increasing area of focus for the government with the market
having risen rapidly during the mid 20th century, before
beginning a spiralling decline in the latter part of the 20th
century and early 21st century. The cause of such a decline
can be attributed to limited public sector finance and the loss of
dwellings to tenants under ‘Right to buy’ schemes. Furthermore, there
has been an ongoing shift in mix, with Housing Associations taking on a
greater role in social housing provision and Local Authorities (LA)
reducing their activity in the market primarily through Large Scale
Voluntary Transfers (LSVT).
Currently,
the UK social housing market accounts for just over 19% of all UK
housing stock.
The total number of properties in the
overall social housing sector has declined from almost 5.7 million in
1994, to just under 5.0 million in 2004. Figures for 2005 are yet to be
released by the ODPM, but based on a combination of RSL new build and LA
housing stock sales and transfers figures, an estimate for 2005 of
around 4.8m can be made revealing a continuation in the market shift
which is predicted to be the ongoing trend for the future.
As a result, the role played by
Registered Social Landlords (RSLs), or Housing Associations (HAs) has
increased significantly over the same period accounting for an estimated
43% of the UK social housing stock in 2005, up from just 16% in 1994.
This can be primarily attributed to the increased popularity of
transferring LA stock to the RSL sector. Furthermore, RSLs now have the
primary responsibility of developing new homes within the social housing
sector, adding almost 23,000 properties between 2004 and 2005, compared
with less than 200 dwellings completed by Local Authorities in the same
period.
The increased use of Large Scale
Voluntary Transfers (LSVT) by LAs comes as a direct result of continued
public funding shortages essential for repairs, maintenance and
development of LA housing stock. The result of this has been the
gradual degradation of social housing stock and a backlog of repairs
estimated at around £19billion. LSVTs offer Local Authorities the
chance to hand over responsibility of their stock to Housing
Associations who have more freedom to raise finances from sources other
then public funding. With a current transfer rate of around 100,000
units per annum, the shift in the social housing mix will continue to
lean towards RSLs who will eventually become the leading provider of
social housing – probably within the next 3-4 years.
Furthermore, for the first time the
government and the Housing Corporation have opened up public finance
previously only allocated to RSLs, to private organisation bids.
Seventeen successful bidders for grant under the Housing Corporation's
New Partnerships in Affordable Housing (NPiAH) programme have been
selected. Four of the successful bidders are private developers -- the
first non-Registered Social Landlords ever to receive grant directly
from the Housing Corporation - and 13 are housing associations, with
bids to a total of around £140 million.
With a lack of available public sector
finance has come the increasing requirement for private finance, which
currently stands at around £33billion committed in loans by private
financiers to date. Of this amount around £23billion, or 73%, has been
already drawn. However, in contrast to previous years, the amount
allocated from private finance to fund LSVTs has dramatically reduced
from around 40% in the previous year to just 17% indicating the transfer
process is slowing down.
In addition to LSVTs, the need for
local authorities to improve their housing stock at reduced risk, has
led to the introduction of the Private Finance Initiative (PFI) scheme.
However, although predicted to be an increasing trend amongst LAs to use
PFI, it has been slow on the uptake with Arms Length Management
Organisations (ALMOs) taking the forefront.
The trend towards LSVTs has produced a
change in the structure of the RSL sector, with a significant increase
in the number of newly established RSLs. With larger organisations
forming as a result of LSVTs it has become more evident that smaller HAs
are struggling to keep up and therefore the market is seeing a gradual
increase in the amalgamation of RSLs to form consortia of multiple Has,
particularly to attract significant funding.
The increasing number of larger RSLs
has brought a stronger sense of competition to the market with
contractors moving from open tender bids to partnerships and procurement
frameworks. Coupled with this, new government guidelines have
influenced the new-build specification process making new development
more complex and requiring greater consultation between contractor and
RSL. The primary result of this has been the creation of separate
development departments and Technical Specification Manuals with which
the contractors have to work with. Furthermore, the use of tenant
participation has also become a focus with methods including tenant
surveys, interviews and even registering tenants as RSL board members,
becoming common practice.
Finally, Modern Methods of
Construction (MMC) are seen as the future for alleviating some of the
pressure on the social housing market and although slow on the uptake,
MMC is becoming an important influence in the new-build market,
primarily though the National Affordable Homes Programme (NAHP).
The continuation of the NAHP in
2006-08 will provide massive new investment to tackle the under-supply
of affordable housing in England. The Housing Corporation anticipates
that this will be their largest ever investment programme, surpassing
the £3.3billion of the previous 2004/06 round, and still aiming to build
or renovate around 30,000 dwellings per annum. | 
