Development after the pandemic

Jonathan Layzell, executive director of development at 32,500-home Stonewater, has heard similar things. “Because they are adopting safer methods of working, some of them are saying it will slow the speed at which they can build,” he says.

But the impact is not all negative, he adds. Some developers and contractors have reported that having a rigid timetable where sub-contractors can be on site only for a set amount of time due to social distancing means jobs are done quicker. “They’re not giving the trades the flexibility to take a day-and-a-half when they think it should take one,” Mr Layzell says.

But, as housebuilding gets back to some sort of normality, concerns remain about the state of the housing market with the UK now officially in recession. Commentators have predicted a fall in values of anything up to 20 per cent.

And with many associations exposed to the open market, as noted in recent rating updates by credit agencies, this is worrying.

For the time being, however, the housing market appears to be holding up. Nigel Wilson, chief executive of Sunderland-based Gentoo and chair of Homes for the North, says the pent-up demand seen throughout lockdown and the boost from the stamp duty holiday means that reservations and sales are “sustaining reasonably well”.

But he remains cautious. “You don’t want to be too optimistic,” he says.

At L&Q, Waqar Ahmed, group finance director, says it has yet to see a drop in house prices. “If anything they’ve gone up slightly,” he says.

The positive comments chime with an update from house builder Persimmon in August which revealed that since the start of July it had seen a 49 per cent jump in average weekly private sales.

However, for housing associations exposed to commercial sales, would changing tenures on future developments be a possible solution? Many seem to be waiting to see what happens to the market first.

Mr Layzell says Stonewater has not changed its approach to tenure. But he adds: “We are looking at the impact [of switching] if there’s a lack of money in the mortgage market.”

With mortgage lenders tightening up their criteria for borrowers, it looks like this pressure could take hold. As Helen Collins, head of Savills Affordable Housing Consultancy, says: “We are already seeing a pulling-back
from [consumer] lenders.”

Aside from COVID-19, associations have plenty of other threats to their development pipelines – not least, the proposed scrapping of Section 106. In its place, as set out under the government’s proposed planning reforms, would be a new national flat rate charge in the form of an infrastructure levy. Ministers have claimed that the new system would deliver more affordable housing, but many are sceptical.

Shelter argues that social housing could face “extinction if the government removes the requirement for developers to build it”.

The National Housing Federation points out that Section 106 is the “single biggest contribution to building new affordable homes in the country” and last year helped to deliver around half of all affordable homes.

Mr Wilson stresses the importance of making sure there are safeguards. “We need to make sure ministers understand the consequences of their desire to change,” he adds.

While this particular reform will be some time off, another more immediate change is raising concern. The Planning White Paper proposes that the threshold for developers being required to deliver affordable housing on small sites is raised from 10-home schemes to 40 or 50-home sites.

Ms Collins says: “It’s a real worry, particularly in rural areas where a local authority might be very keen on providing more affordable housing. There is a lot of activity on sub-50-unit sites right across the country.”

Looking further ahead, another factor weighing on minds in the sector is the UK’s push towards net-zero carbon. While the need to achieve this is clear, some are uneasy about the costs involved.

Phil Elvy, executive director of finance at 19,000-home Great Places, which operates across the North West and Yorkshire, is concerned about the financial hit from retrofitting homes.

“A lot of our properties are terraced, where any carbon solution is going to be incredibly expensive,” he says. “If that costs a lot more than we’ve already factored in to our business plan, then something’s got to give.”

The government has so far announced £50m of funding for social housing as part of a wider £3bn green investment package. But Mr Elvy says this is a tiny proportion of the necessary long-term spend. “It’s a drop in the ocean compared to the cost of achieving zero carbon,” he says. “Fifty million will probably do a couple of thousand houses.

“Zero carbon will affect virtually every single one of our properties. We don’t yet know how much it’s going to cost, how easy it is to do, how practical it is to do, and what the options are.

“We’re talking about a massive scale here and it may be development that has to compensate for it.”

Mr Wilson agrees on the size of the challenge. “The numbers that have been crunched by various organisations will be eye-watering,” he says. “We will need to have a very grown-up conversation about how we manage that against all the other pressures and demands we have.”