SPONSOR SEGMENT – COVID-19 AND AFFORDABLE HOUSING

Thursday 6 August 2020

There is no doubt that the pandemic has had a major impact on everyone, but how has it affected the number and need of affordable housing? 

The Government has recently pledged to ‘build, build, build’ and to increase construction and infrastructure spending in a bid to boost the economy, as well as halting stamp duty land tax on property purchases under £500,000 until 31 March 2021.  

There has also been the introduction of the Business and Planning Bill, which contains provisions for varying planning permission, although not for extending the timescale for implementing the permission. However, it has been reported that the London Property Alliance, real estate representatives, have written to the housing and communities secretary, Robert Jenrick, calling for a two-year extension to existing planning permissions in order to ensure they don't expire during the current lockdown of the industry. Which on the face of it seems reasonable; however, they have also called for a re-introduction of flexibilities, which was last seen during the global financial crisis in 2008, that would enable developers to renegotiate S.106 obligations such as the provision of affordable housing. This could result in a fall in the number of affordable houses being built. 

Now more than ever increased numbers of affordable housing is needed. Affordable housing is important as it is needed to not only create certainty in the housing market but also to help reduce the level of homelessness. More support should be given to those in need and it is disappointing that it has taken a pandemic for some people to take the homelessness crisis seriously. There is a need for continued sustained commitment and although steps are being taken to reduce homelessness, the pandemic has made a challenging situation more difficult. Calls to homeless charities have increased during the pandemic, with people concerned about losing their homes or being unable to support themselves with the risk of redundancy. 

Even before the pandemic, the UK housing market was not necessarily affordable to a large amount of people, with the need for high deposit amounts for mortgages or increasing rent prices, a lot of people were living hand to mouth with increased risk of food banks and so the risk of redundancy or homelessness will be a scary time for people. 

The pandemic has already had a massive impact on the economy, with gross domestic product (GDP) showing the economy shrank by two per cent in the first quarter of 2020, and with staff being furloughed, at risk of redundancy and greater financial hardship being felt by a lot of people, the need for affordable housing is greater than ever. Which is why it is concerning to see such a request from the London Property Alliance. Now is not the time for developers to be trying to increase profits at the expense of those who are most vulnerable and in need and use the pandemic to potentially further decrease affordable housing stock. Instead, they can assist by providing more discounted units to registered providers of social housing under S.106 agreements. 

It is also important to consider the types of affordable housing that is needed, shared ownership tenure is not accessible to everyone who is in need of affordable housing, in particularly to those on zero hour contracts who are unable to obtain a mortgage, which adversely affects those of the BAME community who are statistically at a higher rate of being on a zero hour contract.  

Registered providers of social housing, including local authorities given the recent lifting of the Housing Revenue Account (HRA) borrowing cap, are working hard to provide affordable homes. However, it is reported that the numbers of affordable homes delivered with funds from Homes England and the Greater London Authority have dropped for the first time in five years, revealed by new figures for the year ending 31 March 2020. However, with this being one week after the lockdown, it may be too soon to determine how the pandemic has entirely impacted on affordable housing numbers and this does not take into account the affordable housing provided under S.106 agreements.  

Registered providers of social housing can actually help the economy by giving a kick start to the construction sector by creating a source of work to the sector. This has been evidenced by more lenders looking to invest with registered providers of social housing, as they are seen as low-risk and long-term investments. This is encouraging and lenders including NatWest Group, who have not previously invested much in affordable housing, have now committed to investing in the sector over the next two years, as well as new overseas investors, including a subsidiary of the Housing Finance Corporation.  

Although there is still a lot of uncertainty, registered providers of social housing are in a robust position to help the economy and in our experience registered providers of social housing are always diversifying to find solutions for their community needs and will continue to do so regardless of the pandemic. We not only need to bounce back; we need to emerge from the pandemic with a more resistant house building sector. It might be some time before we get back to normal (or the ‘new’ normal) but registered providers of social housing can help us get there. 

Lyndsay Baxter, Solicitor, Forbes Solicitors (lyndsay.baxter@forbessolicitors.co.uk

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