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Analysis: Half of Hammond homes boost is not new government cash

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Almost half of the £7.2bn for investment in housing announced in the autumn statement is either not new money or does not belong to the government, LGC analysis reveals.

The sector has given a positive welcome to the extra resource announced in Philip Hammond’s autumn statement last week but questions have been raised over how some of the funding will be accessed and allocated. 

One of the four key announcements relating to housing was the setting up of a £2.3bn housing infrastructure fund. The main autumn statement document said this money will be available to councils “in the areas where housing need is greatest” and will be targeted at providing infrastructure with a view to delivering up to 100,000 new homes.

In his speech last week, Mr Hammond said such areas experienced “high demand” for housing but the definition of this is not yet known, prompting speculation within the industry. The government is expected to provide clarity in a prospectus outlining the criteria for the bidding process.

In addition to the fund for infrastructure, the government has topped up its affordable homes programme, previously worth £4.7bn, by an additional £1.4bn of new money. The government believes the extra funds can result in construction being started on an additional 40,000 affordable homes by 2021.

It is unclear whether the money will be available only to housing associations, as was implied in the autumn statement’s costing document, or councils too. However, the existing affordable homes programme is open to bids from local authorities with sufficient housing revenue account borrowing headroom.

What is clear, however, is the fact there is now greater flexibility over the use of all of the funding in the affordable homes programme. While the focus before was primarily on home ownership through the construction of starter homes, the money can now be used to deliver homes for affordable rent, rent to buy, or shared ownership. It will not, however, be possible to use the funds for homes for social rent.

Melanie Rees, head of policy at the Charted Institute of Housing, told LGC she would “continue calling for investment in social homes for rent”.

She said the government’s persistence with the annual 1% rent reduction policy on social housing has had an impact on the ability of councils and housing associations to access this funding and build affordable homes. She said it had “potential” to become an even bigger barrier to housing invest if the policy was extended beyond 2020.

However, Ms Rees thought it was interesting there had been a “softening” of the government’s focus on home ownership and added it provided councils and housing associations with greater opportunities for investment.

The autumn statement announcements also contained a £2bn pot of cash for the “accelerated construction” of house building on primarily central government land – £1.7bn of which will be used in partnership with private developers on sites in England. The money, however, was actually announced by communities secretary Sajid Javid at the Conservative party conference at the beginning of October.

The government has also included £1.8bn of assumed extra borrowing by housing associations in its headline £7.2bn figure. A Department for Communities & Local Government spokesman told LGC the £1.8bn was what housing associations would “be able to borrow from providers as a result of our additional investment”.

There is a feeling within the sector that the measures overall are to be welcomed and provide councils and housing associations with greater confidence to invest in housing and infrastructure.

However, the Office for Budget Responsibility claimed in its immediate response to the autumn statement that the housing measures overall would result in housing associations building 13,000 fewer homes. 

But Ms Rees said “a big part” of the OBR’s projections were based on the government’s decision to abandon pay-to-stay even though implementation of the policy would have been voluntary for housing associations.

She said: “One or two big players had said they would be interested in working up a pay-to-stay approach but most housing associations were very relieved they wouldn’t have to do that. I’m not sure how real that potential income was going to be, especially when you add in the great burden of administration and bureaucracy. It was going to be quite prohibitive.”

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