As the delivery of housing becomes more complex, the challenges are even greater for not-for-profit registered providers (RPs). The delivery of affordable housing by RPs can be a challenging area due to the squeeze on finance and management costs, rent caps and other development pressures such as the net zero agenda at a time when grant funding is ultimately being cut and there are increased regulatory requirements requiring urgent action following the new consumer standards. Many in the RP sector are also having to deal with aged stock and focus what budget it has on retro fitting the stock and addressing issues such as the Building Safety Regulations.
These struggles are leading to a further problem whereby not for profit RPs are no longer bidding for housing that is linked to S106s sites and this in turn affects not only the delivery of much needed affordable housing but also the delivery of private housing. Most planning permissions that deliver housing have to deliver a proportion of affordable housing and delivery of the affordable housing is typically secured by the restriction occupations in S106 agreements linked to the private homes. So, for example, a S106 restriction may say no occupation of more than 50% private homes until 50% of the affordable homes are constructed and transferred to a RP. If there are no RPs bidding for this type of scheme, then not only does it affect delivery of social housing but it also hampers private developers from delivering their private units. In this way delivery of social housing and delivery of private housing are two sides of the same delivery coin.
One of the solutions from the industry has been for developers themselves, and indeed some local authorities and not for profit RPs, to set up their own for profit registered provider (FPRP) in order to deliver affordable housing.
The driver for this move in the market is not necessarily linked to a profit-based delivery (although some are), indeed some of the FPRPs are being set up by not-for-profit organisations who then reinvest the surpluses back into delivery of affordable housing. And, for many developers, setting up a FPRP is a response to unlock the problems of housing delivery on major schemes. There are also other advantages of developers setting up their own FPRPs including the opportunity to diversify in a challenging economic market, more joined up placemaking on schemes and more opportunity to respond to changing market conditions by, for example, changing tenure of housing units.
As with most issues around housing delivery there is not a ‘one size fits all’ and there is huge opportunity across the market for FPRPs to work side by side with not-for-profit RPs, both applying their different skill sets to contribute towards increasing housing supply. The current situation whereby many not for profit RPs are opting to move away from development and towards managing affordable housing stock for FPRPs is a perfect example of how this can work.
FPRPs are not without their challenges as they still need to sit within a regulated market so it is important, in particular for funders, to understand that there is a process that is different to simply setting up a company to deliver housing. It is therefore critical for those seeking to do this to ensure they understand the heavily regulated market that they will have to operate in and essential for the successful operation of this model that the FPRP properly understands and complies with, the regulatory framework including careful consideration of long-term financial viability, good governance, how they will hold the stock, and also how the stock will be managed and maintained.
Whilst it is not anticipated that FPRPs will overtake the not for profit RPs in terms of the raw number of affordable housing units delivered, there is no doubt they can assist in housing delivery for example, unlocking sites and they can be part of a solution to speed up delivery of affordable homes.
Delivering affordable housing for profit is still an emerging market but one that is likely to continue and possibly be an area of growth in terms of delivery of affordable housing. The key will be for funders and the operators to understand the regulated sector in which they operate and to engage properly with stakeholders in relation to how they will manage and maintain the stock going forward.