I spoke at a housing conference in Edinburgh on Wednesday. ‘Lifting the lid on the affordable housing supply programme’ was organised by the Chartered Institute of Housing. My brief was the challenges facing the sector in delivering the Government’s output targets over the current Parliament. The meeting on reflection raised important dilemmas but before I get to them a short recap.
The SNP Government has an annual target to deliver 6000 social and affordable homes for each year of the five year Parliament. Two-thirds of the programme is to be social housing, at least 1000 units per annum from council house building (although the predominant player is assumed to remain developing housing associations). In the current three-year spending review period (final year 2014-15), the overall cut in public capital spending on affordable housing was of the approximate order of 45% (compared with an average cut in capital spending of a third). However, since then a combination of Barnett consequentials and in-year reallocations have boosted housing spending bringing it closer to the average reduction.
In the first year of the programme (2011-12), the target was comfortably exceeded (but did reflect earlier years’ approvals) and the Scottish Government expects the target also to be reached for 2012-13. Some 80% of housing programmes are organised around three year strategic programmes led by each council – the key issue at the moment is the ability of each local programme to deliver the requisite new supply overall for the next two years. The big worry for councils and their partners is the cliff face that follows in the form of the, as yet unknown, June 2013 Whitehall spending review and the future budget implications for the following three years. To reduce uncertainty the Scottish Government has already offered (albeit reduced) planning assumptions for these three years to provide some degree of continuity (even though these cannot yet be guaranteed completely).
The Scottish Government view expressed in the conference was one of confidence that the numbers would be delivered for the remaining years of the programme. So much so that it was suggested that the focus should shift now to the period thereafter and a further examination considered of alternative ways to deliver more social and affordable housing within plausible financial, public spending and housing need scenarios (continuing the innovation process started by the Scottish Government in 2010).
I am a bit more cautious for a number of reasons:
- There is quite a long gap from initial local plans, to approvals, starts and final measured completions. While we all welcomed the multi year planning model after decades of annuality – we clearly need to recognise that local providers circumstances may change over this period and it may not always be possible to generate shovel-ready alternatives if specific developers either withdraw or do not come forward in the first place.
- Two speakers representing the local council experience of running these programmes (Glasgow and Highland) painted a picture of declining output and in both cases big reductions in the number of developing housing associations. This is the view commonly expressed by parts of the sector and the question is how general is this trend across wider Scotland?
- Financial capacity remains a key issue. I stressed in my own paper that there are really two questions here. One is about the ‘true’ level of financial capacity, particularly in the housing association sector. This has been controversial since the 2010 study that set financial parameters thereafter. Regardless of the accuracy of the study in 2010, financial capacity, however, may have weakened thereafter. Second, however, is the ‘gap’ between financial capacity – it is after all, only potential or latent financing ability – as opposed to actual demand for finance. The point is that even if financial capacity has fallen, the real level of demand for finance may be considerably lower, and all the more so in troubled times. One reason for the apparent decline in willing developing associations is that their assessment of risk, costs, quality, etc. is increasingly to manage stock, perhaps diversify a bit, but not build to the same extent, if at all. We need a better understanding of both of these dimensions.
- And then there is the numbers game. Completions are the key metric, and while there are careful well-established standards and regulations, we lack comprehensive evaluation of the outcomes of the main social models in play – size, location, mix, greenfield or brownfield, efficiency dimensions. It is remarkable in this day and age that there seems to be so little interest in this – certainly until the end of the programme (when the value of such a study is considerably less).
The Government and the sector face need levels that exceed completions by around a third (if the need estimates of 2006 remain accurate). In many respects the Government has done an impressive job to sustain output levels and to widen the mix of affordable rented housing in creative ways. But looking forward, the business risks arising from welfare reforms, continuing credit market problems, the 2013 spending review and this gap between provider financial capacity and demand – all raise questions, if not red flags. While supply policy should not be simply output focused, it will nonetheless be difficult to get away from the numbers.