The G15 group of housing associations has warned that their ability to finance affordable housing by renting or selling private accommodation is putting the sector under strain.
Many housing associations across the UK have implemented large open market sale programmes to fund the development of affordable housing.
However, the G15 is concerned that housing associations in London are being put under pressure by a cooling sales market in the area.
This, it said, could be exacerbated further by London mayor Sadiq Khan’s plan to increase grant rates for housing associations willing to boost the delivery of affordable homes.
Speaking to Inside Housing, chair of the G15 Paul Hackett, said the cross-subsidy model is “already at full stretch”.
This, he stated, means “the opportunity to increase overall volumes based on previous assumptions around cross-subsidy is not realistic”.
Mr Hackett said the G15 will therefore work with Mr Khan and the government to devise “ways to get more subsidy into rented housing”.
The G15’s concerns have been backed by Waqar Ahmed, finance director at L&Q, who said the cross-subsidy that is required is approximately 50 to 60 per cent of the capital costs of a scheme.
This, he said, means around two to two-and-a-half units would need to be sold for every new affordable home that is provided.
Mr Ahmed added that this “pushes the development programme significantly towards outright sale compared to the proportion that’s done for affordable housing”.
For further information on any of the points raised in this article please contact Andrew Murray in our Social Housing Team.