The SAHP will help restore financial capacity, but more could be done to align new S106 product with housing requirements.
In recent years, financial capacity has proved the most fundamental challenge in the sector, impacting both appetite and capacity to develop new affordable homes. Pressure on finances has continued as providers anticipate the additional spend on existing homes needed to meet stricter regulatory requirements such as the Decent Homes Standard and Awaab's Law.
This year, when asked which measures would have the greatest effect on improving financial capacity, both Housing Associations and For Profit Registered Providers (FPRPs) cited the new Social and Affordable Homes Programme as having the most significant impact. While not solving the specific financial problems that stop providers from buying Section 106 (S106), the programme is beneficial for improving their total development capacity.
This is alongside the 10 year rent settlement at CPI + 1%, providing the sector with longer term certainty on future rental income. Confirmation of rent convergence at £3 per week is also a key priority, underlining the importance of policy tools in helping to restore financial and development capacity in the sector.
Both Housing Associations and FPRPs suggested that being able to use grant funding to purchase S106 homes would increase their appetite for S106. This could help improve the absorption of S106 homes in the short term. But there are potential issues with adopting this approach on a more permanent basis, including the risk of inflating the price of S106 homes.
What else needs to be tackled?
When asked about the barriers to unlocking appetite for S106, underlying concerns about the build standards of S106 homes have remained a prominent issue for both Housing Associations and FPRPs. Design of space, sustainability and energy efficiency standards are all sources of worry, as highlighted in last year’s paper. There is a clear role for developers in addressing these challenges in order to encourage more demand for the S106 homes they are providing. Greater collaboration and engagement between developers and registered providers at earlier stages in the planning and development process is key.
A significant reduction in the cost of debt was also reported as a high priority for both Housing Associations and FPRPs to encourage them to return to buying S106 homes, highlighting the ongoing impact of constrained financial capacity.
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