As of this April, social housing will be financed differently, with local governments taking more control through a self-financing model and housing associations relying more on the market value of their homes to raise growth funding. Dave Lewis, head of sales at energy company npower, considers the new financing model’s potential to kickstart a critical new era of social housing growth and construction.
The Affordable Homes Programme (AHP) will allow housing associations to charge higher Affordable Rents, up to 80% of the local market rent value, beginning this spring. They can then use the proceeds to construct more new homes while maintaining the efficient delivery of high-quality housing.
Local governments will also be able to keep rental income and sales receipts beginning in April, which they can use to fund new construction and the upkeep of existing stock.
Initially, there may be a slight slowdown in new construction investment while socialhousing providers fully comprehend and accommodate the changes. This is where expert partners can come in handy. There is an opportunity to seek advice and assistance to ensure that the plans developed are geared toward creating an energy-efficient and high-value housing stock.
While new developments are critical to the social housing sector’s future, it is also critical that enough is done to ensure that existing stock is kept up to Decent Homes Standard. Tenants will benefit from energy-efficient housing, which will make them less expensive to heat and may help lift some people out of fuel poverty.
As a result of the AHP, many housing associations and local governments have submitted applications to develop new build social properties over the next four years. However, the number of new construction starts is at an all-time low. New developments are critical to the future of the social housing sector, so it is critical that they are built to the most efficient standards from the start and that ongoing maintenance is taken into account.
The stock condition is critical for maximising market value and potential rent yield. This, in turn, increases the registered provider’s borrowing capacity for the construction of new starts. As a result, the future of the social housing sector is also dependent on the condition of existing properties.
The Government’s Decent Homes funding has been extended until 2015, and it is now available to local governments and ALMOs to help improve the standards of their stock. It should also be noted that funding from the Community Energy Savings Programme (CESP) is only available until December 2012. CESP is advantageous because it enables registered providers and energy suppliers, such as npower, to take an all-encompassing approach to energy efficiency. New boiler installations, fuel switching, improving access to gas central heating, significantly reducing carbon emissions in affected properties, and introducing microgeneration projects are all examples of energy-saving measures. CESP funding is available from npower, and we are seeing a significant uptake as housing providers realise it will not be available indefinitely.
It is more cost-effective to implement these measures through a single supplier and across multiple homes at the same time. Not only will you save money in the short term because the supplier will do the work in bulk, but the measures will also naturally lead to more energy efficient homes and reduce the need for future ad hoc major repair work on individual properties.
Green energy solutions are becoming increasingly important for our future, and registered providers should take them seriously.
The advantages of microgeneration, such as ground source heat pumps or solar power, are not only beneficial to the tenant in terms of lower bills, but can also generate revenue for the provider via Feed-in-Tariffs. CESP can assist in the funding of such technologies. The government’s Feed-in-Tariffs are an additional incentive for solar PV (FITs). The current FIT levels are valid for installations completed and registered by March 2012. From April 2012, a 21p rate will apply to solar PV installations that become eligible for FITs on or after March 3, 2012.
The Green Deal, which goes into effect this year, is another funding initiative to consider.
However, preliminary indications suggest that the social housing sector may not benefit as much as initially anticipated. Social landlords are barred from receiving the ECO’s £323 million in affordable warmth funding, and they are also likely to receive only minimal benefits from the ECO’s £975 million in hard-to-treat funding. Several Green Deal measures are also unlikely to be subsidised when implemented in the social housing sector, as properties in the social housing sector are often more efficient than those in the private sector.
npower has seen significant interest in green energy solutions even in the absence of the Green Deal and ECO funding. We recently worked with a housing association in Greater Manchester to install solar PV on social housing stock, and we anticipate that similar projects will become more common. In fact, this is only one area of expertise we provide, and we collaborate with other social housing providers on a wide range of energy-efficient solutions, including loft and cavity wall insulation, plumbing, heating, and electrical installation. We also offer more general maintenance services like gas and electrical work.
There are clearly several Government initiatives to support social housing development, and April marks a watershed moment in financing opportunities for local governments. It is important to note, however, that direct funding for social housing has decreased. It is therefore critical for collaboration and careful planning to ensure that affordable housing targets are met and the UK’s social housing is better prepared for future generations.