Affordable homeownership completions reach record high

The survey showed the impact of for-profits on the sector’s development.

 

The RSH said that five providers have each reported more than 1,000 pipeline units, accounting for 22 per cent of the overall total, and this includes two for-profit providers.

 

For the next 12 months, £16.8bn of investment has been forecast, up from £16.6bn of investment forecast in December.

 

Of this, £11.4bn is contractually committed, which is £400m more than in December. Forecast expenditure also includes around £600m of payments to other registered providers for stock transfers.

 

The regulator said the increase is driven by for-profit providers, which have collectively increased their forecast development payments by £500m since December.

 

The RSH said in its survey: “Without this, overall development forecasts would have reduced by £0.2bn; however, there is a roughly even split between providers that are increasing expenditure and those forecasting to reduce expenditure.”

 

At the start of May, a report from Savills showed that almost 90 per cent of housing associations would consider partnerships with for-profits, as sentiment has shifted and financial capacity is constrained.

 

In the year to 31 March, £13bn was invested in the acquisition and development of housing, a rise from £12.7bn in 2021-22 and £10.3bn in 2020-21.

 

In the fourth quarter, £3.4bn was invested in acquiring and developing new housing properties, six per cent below the forecast for contractually committed schemes.

 

This was a fall from £3.8bn spent in December, 12 per cent below the record amount invested in the previous quarter. But it was still above the £3bn average quarterly expenditure incurred over the past three years.

 

The RSH said development spend is relatively concentrated, with over half of the sector spend during the quarter being reported by 17 providers.

 

Development expenditure was 29 per cent below the £4.7bn forecast for the quarter, and six per cent below the £3.6bn forecast for contractually committed schemes.

 

The survey revealed that underspends against development forecasts are “common and widespread”.

 

A total of 84 per cent of providers reported expenditure below the amount forecast for both committed and uncommitted schemes, and 59 per cent said their expenditure was below the forecast for committed schemes.

The RSH said: “In addition to general scheme delays and timing differences, other issues reported by providers include planning and legal delays, adverse weather conditions and ongoing material and labour shortages.

 

“A small number of providers have also reported being affected by contractors entering administration, resulting in works on certain sites being paused.”

 

Several housing associations have spoken out about reducing their development.

 

At the Social Housing Finance Conference on 10 May, Emma Turner, director of treasury and corporate finance at Riverside, said the provider, which now holds 76,600 homes after bringing One Housing into the group in December 2021, has reduced its uncommitted development.

 

In March, Paradigm Housing revealed plans to cut its development by 20 per cent because of investment needed on other priorities.

 

Sales

 

Sales of affordable homeownership units in the fourth quarter were nine per cent lower than in the previous three months, and slightly below the average of 4,090 units per quarter over the past three years.

 

Nine providers each reported sales of more than 100 affordable homeownership units during the quarter, accounting for 40 per cent of the sector total.

 

A total of 16,582 affordable homeownership sales were recorded during the year, compared to 17,497 in 2021-22 and 15,006 in 2020-21.

 

The RSH said the record number of affordable homeownership completions, coupled with below-average sales, has resulted in a 19 per cent increase in the total number of unsold units over the quarter, up to 7,407 units.

 

Despite this, the number of units unsold for over six months has reduced by nine per cent to 2,374. This reduces the proportion of stock unsold for over six months down from 41 per cent in December to 32 per cent in March.  

 

The RSH said: “Where sales income has been delayed, the regulator will monitor the provider’s liquidity exposure and test business plans to ensure they are robust enough to cope with a range of adverse scenarios.”

 

Sales proceeds from first tranche affordable homeownership sales fell from £565m at the end to December to £497m at the end of March.

 

The overall surplus on affordable homeownership sales dropped from £122m to £91m, resulting in an average margin of 18.4 per cent, down from 21.6 per cent. This compares to an average margin of 19.3 per cent over the past three years.

 

Total asset sales, including staircasing, Right to Buy and voluntary sales, as well as affordable homeownership first tranche sales and market sales, amounted to £1.9bn in the quarter to March, up from £1.8bn in the previous quarter.

 

Non-social housing sales reached £670m, compared to a quarterly average of £581m over the past three years. Affordable homeownership first tranche sale proceeds of £497m were reported, slightly above the three-year average of £485m.

 

Total cash receipts in respect of current asset sales, including market sales and first tranche affordable homeownership sales, rose from £1bn in the third quarter to £1.1bn in the fourth.

 

The regulator said sales were three per cent above the total forecast, with two large providers each reporting “favourable variances” of £100m due to bulk transactions completing earlier than anticipated.

 

The RSH said: “Although total sales were above forecast for the period, a number of providers have reported delays to sales due to overrunning development handovers, and a general hardening of the property market as a result of rising interest rates and cost of living pressures.”