The Savills Housing Sector Survey

The Savills Housing Sector Survey
 
Meeting future needs

27 June 2017, by Savills Research

Strong social roots ensure that housing vulnerable households remains a priority for housing associations. But developing housing in the open market has an increasing part to play in financially supporting the sector’s core purpose

 

Despite the variety of developments that are coming into the sector, the perception of housing associations’ core purpose remains in its social roots.

The priority for most respondents is to offer housing to vulnerable households and working families unable to access the private market. Few see the priority as accommodating those able to access market housing, whether for rent or purchase (see charts below).

But in a world with restricted grant, developing housing in the open market has an increasing part to play in generating the capital receipts and cash flow surpluses to financially support the sector’s core purpose.

What’s in the pipeline?

The government has loosened its position on the proportion of the £7 billion-plus pot of funding that will be allocated to shared ownership, yet it continues to be encouraged at unprecedented scale. So, it is driving the development programmes of many of our survey’s respondents.

As the political focus shifts to a wider range of tenures, there is more support for affordable rent and the build-to-rent sector. Attracted by its ability to generate ongoing profits that can cross-subsidise their core charitable objectives, 37% of respondents say their association plans to deliver market rent in the next five years. Importantly, the sector has vast experience developing and managing stock for rent. Given the strong growth of demand in the private rented sector, this presents a major opportunity.

An even greater proportion, some two-thirds of respondents, plan to develop stock to sell on the open market in the next five years, with sales receipts providing much-needed capital for expansion. This reflects that, as a rule of thumb, four or five market sale homes are required to fund one new social rented unit.

Respondents are happy they have the ability to deliver their current programmes: less than 10% mentioned skills as a barrier. The problem comes if and when there is a housing market downturn.

Relatively few respondents see the prospect of a downturn as either an existing constraint on this kind of delivery or as a future risk to expansion.

That risk is amplified where land is acquired after planning consent is achieved, at its full development value. That requires a change in the way land is secured for development, one which enables more control over delivery and opens up the possibility of flexing tenure to suit market conditions.

FIGURE 3

Future funding – As the political focus shifts to a wider range of tenures, housing association development programmes are responding

 
Figure 3

Source: Savills Housing Sector Survey 2017

 

 

FIGURE 4

Who should the sector be trying to house? – For most respondents, it is most important to offer housing to vulnerable households and working people unable to access the private market

 
Figure 4

Source: Savills Housing Sector Survey 2017

FIGURE 5

Which housing products should providers deliver to meet current and evolving needs? – Sub-market rental tenures remain the top priority

 
Figure 5

Source: Savills Housing Sector Survey 2017

Plans for extra care

Vulnerable households emerged as a key priority for the sector according to our respondents. They are planning accordingly: more than half will deliver some form of specialist housing during the next five years. This was split almost equally between supported and extra-care units, but the majority of programmes were relatively small compared to other housing types.

In addition to the general challenges in developing affordable housing, building and managing these homes can present other obstacles. Many respondents mentioned the looming Local Housing Allowance (LHA) cap and uncertain rent policy as major issues for their future plans in this space. We spoke to one of our respondents, Bruce Moore, chief executive of Housing & Care 21, for his view on the subject (below).

Downsizer demographic

Our current report also makes for interesting reading alongside our recent Spotlight: Housing for Older People which looked at the existing supply of this housing and the potential scale and nature of the opportunity. It concluded that there is a growing gap of 300,000 potential downsizer households in the mid-market between social rented and market homes, and that much of the existing stock is tired and failing to attract the next generation of retirees.

 

 
Q&A: Bruce Moore

 

 
placeholder

Subscribe to Savills research

 

Would you like to be notified via email about new research?