Homes England chair: fiscal rules ‘most important thing in Budget’ as agency takes long-term view

Infrastructure ambitions

 

Also speaking at the Homes England event on Monday, Peter Denton, the agency’s chief executive, referred to the creation of the ‘National Infrastructure and Service Transformation Authority (NISTA)’ through the combination of two pre-existing infrastructure bodies, as announced last month.

 

This, he said, would become the “brain of infrastructure provision for the country” and create cross-government support for infrastructure ambition.

 

Social Housing asked what these developments would mean in practice for Homes England and its interaction with the new body – as well as the extent to which housing is being now being treated as ‘infrastructure’ within the government.

 

“Am I aware that anyone’s formally come out and ministers have said, ‘housing is infrastructure’? I’m not sure,” Mr Denton said. “But it is: it is infrastructure. And I think that that will manifest itself in a bunch of ways.”

 

As an example, he cites local growth plans.

 

According to Labour’s manifesto, a requirement will be placed on local leaders to produce long-term plans for their areas that identify growth sectors and infrastructure requirements. They would also need to demonstrate how these plans contribute to national industrial strategy – on which the Department for Trade and Business is currently consulting. The consultation, launched in October and entitled Invest 2035: the UK’s modern industrial strategy, is running until 24 November.

 

Mr Denton said: “If done correctly, these local growth plans are really fundamental building blocks here. You have national things – the reservoirs, the nuclear power stations – but a lot of ambition will be expressed in the locality. Those plans will be presented to Treasury, and if approved, become the blueprint for the next 10 years as to what local areas want invested and spent in their areas – and that includes housing.”

 

He added: “If you’re looking for growth and productivity, the quickest way to get growth is through construction of housing.”

 

National Wealth Fund

 

Social Housing also enquired about the National Wealth Fund (NWF) – renamed in October from the National Infrastructure Bank – which is already working within the sector on a new £1bn loan programme for retrofitting social homes, backed in part by its guarantee.

 

The announcement by the NWF and partners Lloyds and Barclays came six months after Homes England’s own programme, the Affordable Homes Guarantee Scheme (AHGS), gained a £3bn top up. The AHGS also opened up its loans to investment in existing homes – provided some new supply is also delivered – at the same time.

 

Social Housing asked if there is already a direct relationship between the two government-backed organisations, or if there is space for one. 

 

The NWF guarantees programme is “additive” to Homes England’s own scheme, Mr Denton said. “I think going forward we’ll probably want to be more harmonious overall,” he added – but said he was “excited” about the potential.

 

As an example (although no conversations with the NWF have yet been had in relation to it), Mr Denton referred to a site in York where there are early signs that geothermal water may be accessible.

 

“If we did find hot water at York, why would we not bring the wealth fund in immediately to look at funding mechanisms to be able to deliver a heat network?”

 

He added: “I do think that on large-site delivery, whether it’s new sites or whether it’s regeneration sites, that integration of the sustainability/net zero ambition alongside the traditional Homes England approach – we’ve got to get that right. And I’m really excited by [it]; I think that is something that can really work.”

 

Asked whether Homes England itself would focus more directly on funding retrofit for net zero or decent homes, Mr Denton said that the details of how the next Affordable Homes Programme will be structured would need to await future announcements.

 

But he added: “If you look at what this fund’s been allowed to do recently, it’s that blend across regeneration, which I think is often driven by net zero considerations where you look at [a site] and often it’s end of life because it can’t be justified to put the retrofit spend in. So therefore you regenerate it instead. So there is a proxy, there is a blurring between the two already.

 

“I can’t see that change. The principle – that the programme is encouraging regeneration and change as much as additionality – I think that will continue, because these are thematics that I think everyone agrees with.”

Mr Denton also drew attention to other forms of funding offered by Homes England, beyond the AHP.

 

“We have viability grant funding, we have loans, we have equity, we have guarantees, and I think that you’ll find that we will want to see those used for a whole range of things: additionality, retrofit, net zero, building safety, decency to a degree – although in my personal view, decency should be funded by housing association itself.”

 

Mr Denton said there was space to think about how all agencies, including Homes England, could collaborate more. “How does the [National] Wealth Fund, Department of Net Zero, MHCLG – how we all come together to offer a more coherent front door for [housing associations] who have various disparate needs? I think that’s the challenge of the next few months – to be able to be as good as we possibly can on that.”

 

Office for Value for Money

 

Last week’s Budget also formally established the creation of a new Office for Value for Money (OVfM), with the direct ministerial appointment of David Goldstone as chair. Social Housing asked what conversations between the agency and this new function might look like, and whether Mr Denton intends to continue his past advocacy for measuring social value as part of this.

 

With the caveat that his knowledge around the just-announced OVfM is currently limited, Mr Denton expressed his expectation that the Green Book (Treasury’s guidance on options appraisal and valuation) and the Red Book (the government’s financial statement and Budget report) will play a role in the evaluation. In this respect, Homes England is in a “really good place”, he said.

 

He referred to the government’s ‘benefit cost ratio’, the principle that in monetary terms the benefits of a proposed policy outweigh the costs.

 

“When Peter [Freeman] and I first started [at the agency], the Green Book evaluated projects based on land value uplift, which favoured the South East. You could get anything to work in the South East, but it was very, very, very detrimental to the North, in particular.”

 

Since then, a number of “wins” have been driven by the economics team of the department (led by Andy Wallis as chief economist). This has included analysis to demonstrate the potential scale of wider benefits of a regeneration or development site, particularly for those living within its circumference.

 

“That’s in the Green Book now. And I would go as far as to say the only reason Blackpool worked as an announcement last year is because of that. Without that, we’d be lost,” Mr Denton said.

 

Details of the agency’s £90m regeneration of Blackpool town centre, including investment from the Brownfield Infrastructure Land Fund, were set out in March.  

 

Another piece of work by Homes England’s economists looked at the measurement of the well-being and health impacts (as well as fiscal savings) of the provision of homes specifically designed for older people. 

 

The team’s efforts now are centred on Mr Denton’s “pet subject, which is the social value particularly related to affordable housing”, he said. “And this is a direction of travel that’s fully embedded with Treasury, and it’s really, really successful. I’m not suggesting they’re just going to sign off on this piece [of analysis], but there’s a really good relationship.”

 

Transfer of capital

 

Homes England’s chair also emphasised the importance of this approach in encouraging the direction of government subsidy to the most effective investments for the longer term.

 

“It’s critical to sorting social housing and housing benefit,” Mr Freeman said. “Housing benefit goes up and up, just as social housing delivery goes down and down.

 

“And the more you can prove the value in the social housing, the more you can transfer capital and stop the housing benefit going up.”

 

On this, Mr Denton again cited the potential advantage of the new fiscal rules towards winning the argument. “It becomes easier when you’re saying ‘this is investment spending that looks to rectify the issue’, and ‘this is the revenue spending that we have to fund until this is ready to go’. No question.”

 

The Homes England Investment Symposium took place in London yesterday in partnership with Ocean Media Group.

 

Hear more from the government’s housing and regeneration agency and other stakeholders in national and local government at the Social Housing Annual Conference, on 20 November in London.

 

Speakers include Shahi Islam, director of affordable housing at Homes England; Florence Eshalomi MP, chair of the Housing, Communities and Local Government Committee; Bernadette Conroy, chair of the Regulator of Social Housing; and Paul Johnson, director of the Institute for Fiscal Studies. For more information, and to book while spaces remain, click here.