Post general election - Unlocking the UK's housing potential

Housing has always been a ‘big ticket’ item on any party’s political campaign. The latest general election placed housing and regeneration under the microscope with all the running parties promising to deliver increased numbers, quicker, in the right places, for the right people (with all metrics translating into slightly different things whether the party is red, blue or yellow).

In this article, we talk through some of the issues facing areas ‘on patch’.

Housing Secretary Angela Rayner has announced a series of reforms to deliver on Labour’s manifesto pledge of delivering 1.5 million homes. As part of that shake-up, she has promised more grant funding and greater certainty around rent setting for affordable homes. A promise of more grant funding is both encouraging and to be welcomed as the social housing sector has been facing huge costs with rising interest rates, high construction costs and an increased focus on bringing existing stock up to standard to deal with fire safety, net-zero targets and Awab’s Law.

Registered Provider Focus

In London in particular, the development of high-rise buildings has become challenging due to a whole range of viability considerations. It is estimated that the inclusion of second staircases alone will cost the industry £2.7bn over the next decade not to mention the loss of floor space, which will impact unit numbers and rent and sale levels. These requirements will no doubt influence the type of development being undertaken in London with a focus on low rise development.

Another obstacle likely to jeopardise housing delivery in London is the Residents’ Ballot requirement. This is mandatory for any development in London subject to GLA funding which requires the demolition of social housing and the construction of more than 150 homes. In the past the government has openly criticised this requirement as being onerous. Others have criticised the work, which must be completed before the ballot process as it is time consuming and requires significant investment, all of which has to be done at risk before it is known what level of support residents will receive.

Grant funding alone cannot assist in achieving the government’s ambitious target of 80,000 homes for the capital, which is more than double last year’s target. Whereas traditionally registered providers have relied on private finance to support their development plans, accessing debt in the current economic environment is expensive. If registered providers don’t look for more innovative solutions there is a risk that there will be a slowdown in development and the delivery of affordable housing.

Are partnerships with equity investors the solution? Equity investment in affordable housing is continuing to grow despite the challenges faced by the sector. and there are an increasing number of registered providers partnering with for-profit registered providers (FPRP)/equity investors. Rayner’s announcement on rent settlement and the certainty it brings will attract additional private investment into the sector. For an equity investor, registered providers are seen as a safe investment opportunity with a large asset base and guaranteed income stream from rents. Partnerships with equity investors provide an opportunity for greater growth for registered providers and development of a greater number of new social homes forms part of the charitable objectives of a registered provider.

It has been six weeks since the election and we have seen many comments from the Labour Government around the housing agenda with a focus on affordable housing.  One of the main changes which has been announced is the re-instatement of mandatory housing targets which has also seen an increased target of 1.5 million new homes over the next five years. Whilst this will be seen as welcome news to many, the targets will need to be backed up by large scale funding and a focus on where the homes will be built.  Many registered providers are anticipating the new Affordable Homes Programme due to commence in 2026 and confirmation that Labour will provide the much-needed funds through this scheme via Homes England. One of the most important considerations for registered providers is that interest rates start to fall which will quickly bring the cost of borrowing down on their existing stock, as well as unlocking much needed capital for re-investment into efficient affordable homes.

There have been mentions of ‘grey-belt’ areas being unlocked and it will be interesting to see where these areas are. Individual councils will ultimately decide which areas will be in the ‘grey belt’, which could slow down the process. There has also been commentary in the market suggesting the sites are mainly in the south, with just over 40% within the London green belt area. Labour has outlined that 50% of homes built in these areas should be affordable, but this may be difficult for developers to achieve on these types of sites due to remediation costs.  

The challenges with delays in planning applications for development have been well-publicised in recent years. Many developers and registered providers see this as one of the main hindrances to development alongside build cost inflation.  Many have welcomed the changes to the planning system and government proposals to increase planning personnel. It will be interesting to see if this comes to fruition and helps unlock some key schemes for the country.

Public Sector Focus

The delivery of new housing by the public sector in the UK post the July 2024 general election is fraught with challenges. Financial constraints, regulatory hurdles, logistical issues, community opposition, environmental concerns, and political uncertainty all contribute to the complexity of addressing the housing crisis. While the new government’s initiatives and reforms aim to tackle these issues, overcoming them requires a coordinated and multifaceted approach. Engaging stakeholders, securing adequate funding, streamlining regulations, and fostering community support will be crucial in achieving the ambitious housing targets set forth by the new leadership.

The role of local government (and its attitude to risk, innovation, funding and collaboration) has never been so important. Homes England, with its strategic oversight role, and local authorities, with its on-the-ground implementation responsibilities, must work closely together to adapt to these changes and maintain momentum in housing delivery. Working alongside local authority colleagues, and colleagues from Homes England (whose role as the government's housing and regeneration agency is only going to expand), here at TLT we are looking to take an active part in discussions to accelerate delivery whether that be through the use of more innovative delivery models, the introduction of new funders to housing schemes or the smoothing of the development/conveyancing process using a ‘golden thread’ approach to the provision of services.

TLT’s housing and regeneration team is embedded in the sector and boasts the in-depth market knowledge required to provide a best-in-class service for our clients, tailored to their needs and requirements. Our clients are almost exclusively in the housing and public sectors, which means we frequently speak to policy makers, and leaders to obtain insights into how the sector is operating, allowing us to anticipate future challenges and prepare our clients for what comes next.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.