PRESS RELEASE: 7 January 2025
2025 promises to be a busy year for the social housing sector as the Government aims to catalyse development to meet its target to build 1.5 million new homes by 2029. Greater resources and deep pockets will be needed to meet those targets and to comply with a raft of new legislation and regulations expected throughout the new year.
Winckworth Sherwood’s market-leading Social Housing team points to the five things social housing providers will need to consider in the year ahead.
Spending review will put budgets under the spotlight
“The first milestone will be the Spring Spending Review where a new Affordable Homes Programme is expected to be announced,” says Matt Cowen, Senior Associate in the Housing Regulation team at Winckworth Sherwood. “Its outcome will have a major impact on development.”
“The Government has indicated it will release a long-term housing strategy in the first few months of this year, with calls from across the sector for this to be ambitious and provide a joined-up outcome-based approach which tackles affordability alongside the urgent delivery of new homes.
“2025 will also see the Government implement the results of several consultations that took place throughout 2024. In particular, the sector awaits the enactment of a new rent settlement and Awaab’s law, both of which will have a big impact on social housing providers’ budgets and activities in the years ahead. There will also be a consultation launched early this year on the new Decent Homes Standard which will need attention from RPs and other stakeholders.”
A standardised tenancy system
Introduced to Parliament on 11 September 2024, the Renters’ Rights Bill is set to bring about the biggest reform to housing law in almost 40 years, says Partner Liam Hale and Legal Director Victoria Gray. The bill promises to provide “more security for tenants and empowering them to challenge poor practice and unfair rent increases without fear of eviction”.
“The bill is set to be transformative, creating a simpler tenancy structure and a more standardised system. It will remove all assured shorthold and fixed term tenancies replacing them with periodic assured tenancies. This means that landlords will no longer be able to use the mandatory ground under s21 of the Housing Act 1988 to gain possession and will instead have to use one of the expanded grounds set out in the bill.
“This change will be a ‘one stage implementation’ for the private rented sector whereby all existing tenancies will convert to the new system and any new tenancies signed on or after the implementation date will be governed by the new rules. The date for this is to be set by regulations but could be as early as Spring 2025 given that the bill is set for its third reading on 14 January 2025.
“The government has confirmed its intention to extend the abolition of section 21 into the social rented sector as well, though this requires statutory consultation and will therefore be applied at a later date. Registered providers should expect this change at some point in 2025 as its clear that the government wants parity between the social and private rented sectors and has set out the structure for this in bill.”
RAPid remediation?
“The Spring Spending review should provide more detail as to how the Remediation Acceleration Plan will achieve the identification and remediation of unsafe cladding on buildings above 11 meters” says Charis Beverton, Partner, Winckworth Sherwood Construction team.
“At present development and asset management teams are stretched both in terms of money and resources, making it difficult to achieve resolution of these long-running projects in the time frames all would desire.
“The effect of the Building Safety Levy (expected to take effect from autumn 2025) on these stretched development teams is also something to watch.
“Finally, further decisions of the meaning and effect of new legislation by the courts and tribunals will guide parties on resolution of extant liabilities and in drafting future contracts. A working group within the courts should assist in providing consistency of approach but, as every lawyer will tell you, each case turns on its facts.”
New government, new funding challenges
“Whilst further grant funding has been promised, developing social housing providers will struggle to find the funding needed through the public purse,” says Housing Finance Partner Ruby Giblin.
“The inevitable outcome will be a push towards public and private partnerships, with Homes England, local councils, developers, and traditional and for-profit social housing providers partnering to share land and expertise, particularly as the S106 route has become unaffordable. There is even talk of a return to the better parts of the PFI model.”
“We also wait for resolution on a several wider issues that will also impact social housing providers’ valuations, lending and balance sheets. These include the Renters Rights Bill, no-fault evictions, commonhold tenures and tougher energy performance standards, as well as long-running retrofitting and building safety obligations.”
The return of the debt capital markets
The slow stabilisation of interest rates will see the social housing sector return to seeking funding from the debt capital markets via more private placements and bond issuances in 2025, says Rebecca Jason, Partner and Head of Housing Finance at Winckworth Sherwood.
“Social housing providers, particularly those with a significant portfolio of care and supported housing, will face challenges with the largely unexpected increase in National Insurance contributions, and we can expect to see budgets and business plans revised for the new financial year. This comes on top of providers continuing to grapple with ongoing building safety obligations and remediation work.”
“However, strategic partnerships and joint ventures involving lenders, private developers and public sector bodies, coupled with the launch of new funding products, such as the recently launched National Wealth Fund and other government-guaranteed retrofit schemes, may offer additional avenues for providers seeking funding to help them deal with the challenges they face.
“We might also see providers looking to see if they can realise any additional value from assets that they already have. There will likely be more merger activity, as providers seek to find efficiencies and economies of scale in service provision and delivery in an ongoing challenging operating market.”
A return of local authority housebuilding
Local authorities have been promised a ‘revolution’ with £1 billion to fund tens of thousands of new local authority-owned homes. But do local authorities have the development expertise they once had, asks Social Housing Partner Charlotte Cook.
“Local authorities have lost much of the expertise they had when they built, owned, and managed large property portfolios. That will need to be rediscovered. Many local authorities do have development companies, and they will be at the forefront of council housing in 2025 and beyond.
“We can expect to see local authorities accelerate plans to buy back good quality homes that were sold under the right to buy. There will be significant opportunities too for experienced residential developers and consultants to help local authorities achieve their and the government’s development aspirations.
“Additionally, alms houses, co-living schemes, and charity-funded homes continue to play an important part in the social housing mix, albeit in a still modest way. Whilst often below the radar of large social housing and developers, demand for specialist housing continues to grow.
“Whilst specialist and alternative housing providers can struggle to secure grant funding, they are often innovative, tapping into grants and funding streams that enable them to deliver small, targeted schemes to meet local need. They will be in much demand in 2025.”
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