The Government could gain an additional £20bn private capital with a ten-year rent settlement, according to the British Property Federation
Evidence was submitted to the MHCLG by the BPF in response to the Future Social Housing Rent Policy consultation, which closed on 23 December.
The BPF argues that a five-year settlement does not go far enough
The British Property Federation says that the current proposed settlement doesn’t allow the conditions required for the current target of 1.5m new homes.
Their submission argues that the construction of social housing is currently at 43,400, while the target requires 145,000 new homes per year, and furthermore, 1.29m homes sit on waiting lists.
A social housing rent policy involving a ten-year settlement and rent increases at Consumer Price Index (CPI) + 1% would attract longer term institutional investment, boosting supply.
This is due to that policy offering improved income stability, supporting the valuation of existing social housing, and increasing the impact of Government subsidies, allying with the greater private sector investment and improving delivery of affordable homes.
The evidence provided by BPF also accounts for a mechanism of rent convergence, allowing cheaper rents to rise more rapidly and ensuring alignment between rents on comparable properties.
Their analysis found that £20bn of private capital is ready for social housing and is waiting for the right policy to flourish. If investors use 50% debt financing, and assuming an average unit cost of £250,000, ten-year rent settlements could help build 240,000 additional units over five years.
“It is critical that we achieve a step-change in delivery”
Ian Fletcher, policy director at the British Property Federation, said: “Ambitious housing targets require ambitious policy.
“This Government has already made positive steps in committing additional grant funding, with the prospect of more to come, but there is more it can do to shape market sentiment and attract supportive private capital into the sector.
“Announcements on rent policy send a signal to investors. Ten-year rolling rent settlements would demonstrate a long-term outlook and would have significant benefits, not only in attracting private investment but also raising the valuation of existing homes and therefore increasing the capacity of housing associations to invest. A five-year policy would not deliver the same boost, and delivery would continue to be restricted, particularly as providers face challenges around upgrading older stock and meeting building safety requirements.
“With over a million people on housing waiting lists it is critical that we achieve a step-change in delivery. Increasing the provision of social housing will mean less people are forced into the private rented market, where both tenants and Government bear much higher costs.”
In March last year, the NatWest Group announced a new £5bn lending plan to further support the social housing sector.
Their own report found that 1.3m households are on the waiting list for social housing, and that in 2023 there was a net loss of 12,000 social homes. The lending plan is intended to aid housing associations to deliver new homes and improve living conditions, as well as increase energy efficiency and environmental solutions.
