Housing associations unable to take over hundreds of affordable homes in London

Housing associations unable to take over hundreds of affordable homes in London
Housing associations unable to take over hundreds of affordable homes in London

London Assembly Planning and Regeneration Committee. Image: London Assembly webcast.

Hundreds of affordable homes are being built in London but “no one wants to buy them” as housing associations become increasingly unable and unwilling to buy them, City Hall has been warned.

The London Assembly’s planning and redevelopment committee was told on Tuesday (9 July) by one of the capital’s largest housebuilders that the system private developers use to build affordable homes is “bursting at the seams”.

Syreeta Robinson-Gayle, head of affordable housing at Barratt London, told meeting members this was due to “a lack of capacity” among housing associations facing high costs and a difficult economic outlook.

When municipalities grant permission for the construction of new private homes, they usually do so only after entering into an agreement with the developer, known as a Section 106 agreement. This agreement usually requires that some of the homes be designated as ‘affordable’, including social housing.

The affordable homes that are built are then usually sold to and managed by a ‘registered provider’, usually a housing association.

But speaking at a meeting of the Assembly’s housing and redevelopment committee, Robinson-Gayle said: “At the moment the Section 106 system is really creaking at the seams.

“There is a lack of capacity among registered providers to realize the number of affordable homes that are currently planned.

“So we will find ourselves in an unusual position where developers are building affordable housing and there is no one who wants to buy it.”

She added that the issue is affecting multiple developers and that it “needs to be resolved urgently as it will act as a barrier to development.”

Asked for comment, Fiona Fletcher-Smith, chair of the G15 group of London housing associations, told the Local Democracy Reporting Service: “G15 members have significantly reduced our purchases of Section 106 homes due to rising costs, economic pressures and the critical focus we place on building safety and investment in existing homes and services.”

The focus on repairs to existing homes has intensified following the introduction of “Awaab’s Law” last year. The law is named after two-year-old Awaab Ishak, who died in Rochdale in 2020. The coroner found that the boy “died as a result of a severe respiratory illness caused by prolonged exposure to mould”.

The new law requires social housing landlords to investigate hazards within 14 calendar days and to commence remedial work within seven calendar days if the hazard could pose a significant risk to the health or safety of tenants.

Fletcher-Smith, who is also chief executive of housing association L&Q, added: “Quality, design and high service charges are also concerns, particularly when housing associations are involved late in the Section 106 design process.

“However, we remain steadfast in our commitment to delivering affordable housing and are proactively seeking solutions with developers and the new government to address this challenge head-on.”

Meanwhile, the capital’s authorities said they were also aware of the problem and were also keen to “work urgently with the new government to stabilise social housing finances”.

A London Councils spokesperson said: “This extremely frustrating situation is further evidence of the worsening funding crisis in London’s social housing sector.

“We are facing record levels of homelessness and there is a desperate need for more affordable housing in the capital. However, the pressure on social housing is so great that providers feel unable to afford newly built properties created by private developers under Section 106 agreements.”

At Tuesday’s meeting, Conservative Assembly member Lord Bailey told Robinson-Gayle it would be “terrible if those houses were built and no one took them over”, and asked what the solution might be.

Robinson-Gayle cited a recent example where Barratt built 100 affordable homes as part of a development in Southwark, including 58 homes for social rent, but had no registered provider willing to take them on.

She said it was only because of Barratt’s size that it could start building the houses without a housing association already in place. However, smaller housebuilders would not have been able to start building if they did not know there was a buyer for the houses, because of the costs involved.

“We’re big enough to keep building, and we were 60 percent done before we could find a (housing association) partner, but if you were any smaller you just couldn’t keep building those houses,” Robinson-Gayle said.

She added: “I understand the GLA (Greater London Authority) are looking at it (as a problem), but I suspect that if we’re not very careful it will happen to us, (and) we’ll have a lot of homes that are almost finished without registered providers to take them up.”

Jonathan Seager, director of policy at BusinessLDN, said: “The new government has rightly made a concerted effort to boost housebuilding, and there is nowhere in the UK where this is more needed than in London.

“The plans put in place so far are positive, but what will quickly get the shovel in the ground is finding ways to get around gridlocked systems, such as the delivery of affordable housing through Section 106 agreements.”

He said a “quick fix” could involve councils being allowed to “receive the monetary equivalent of the developer’s affordable housing”, which local authorities could then use to support their own affordable housing schemes.

London Assembly: Planning and Regeneration Committee – Tuesday 9 July 2024; agenda; webcast.

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