As of this April, social housing will be financed differently with local authorities taking more control via a self-financing model and housing associations depending more on the market value of their homes to raise funding for growth. Dave Lewis, head of sales at energy company npower, looks at the potential of the new financing model to stimulate a vital new era of social housing growth and construction.
From this spring, the Affordable Homes Programme (AHP) will enable housing associations to charge more in Affordable Rents; up to 80 per cent of the local market rent value. They can then use the revenues raised to build more new houses and ensure the efficient delivery of good quality housing is maintained.
April also marks a turning point for local authorities, as they will be allowed to keep rental income and receipts from sales, which they can feed into new build development and the maintenance of existing stock.
Initially, there may be a slight slowdown of investment in new builds while socialhousing providers thoroughly comprehend and accommodate the changes. This is where expert partners can help. There is an opportunity to seek advice and assistance to ensure the plans developed are focussed on creating an energy efficient and high value housing stock.
While new developments are vital to the future of the social housing sector, at the same time it is crucial that enough is being done to ensure that existing stock is kept up to Decent Homes Standard. Tenants will benefit from energy efficient houses, making them more affordable to heat and could help lift some out of fuel poverty.
The AHP has resulted in many housing associations and local authorities submitting applications to develop new build social properties over the next four years. However, the number of new build starts is at a record low. New developments are vital to the future of the social housing sector, so it is essential they are built to the most efficient standards to start with and ongoing maintenance is considered.
The stock condition is crucial to enable the highest possible market value and potential rent yield. This, in turn, increases the borrowing potential of the registered provider for the building of new starts. The future of the social housing sector, therefore, is also dependent on the state of existing properties.
The Government’s Decent Homes funding has been extended until 2015 and is available for local authorities and ALMOs to help improve the standards of their stock. Also, the fact that funding from the Community Energy Savings Programme (CESP) is only available until December 2012 should not be forgotten. CESP is beneficial because it enables registered providers and energy suppliers, such as npower, to take a whole house approach to energy efficiency. Energysaving measures can range from new boiler installations to fuel switching, improving access to gas central heating, significantly reducing carbon emissions in affected properties and introducing microgeneration projects. CESP funding is available from npower and we are seeing a significant uptake of this as housing providers realise it will not always be available.
Implementing these measures through one supplier and across a number of homes at once is cost-efficient. Not only does it mean you reduce costs in the short term because the supplier can undertake the work in bulk, but also the measures will 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 more important to our future and should be seriously considered by registered providers.
The benefits of microgeneration such as ground source heat pumps or solar power are not only of interest for the tenant in terms of lower bills, but can also generate income for the provider through Feed-in-Tariffs. CESP can help fund such technologies. An added incentive of solar PV is the Government’s Feed-in-Tariffs (FITs). The current levels of FITs are applicable for installations that are completed and registered by March 2012. A 21p rate will come into effect from April 2012 for solar PV installations that become eligible for FITs on or after 3 March 2012.
Another funding initiative to consider is the Green Deal, coming into effect this year.
However, initial indications are that the social housing sector may not benefit as much as first expected. Social landlords are excluded from accessing the £323m affordable warmth funding, provided through the ECO, and are also likely to receive only minimal benefits via the £975m ECO hard-to-treat funding. Several measures under the Green Deal scheme are also unlikely to be subsidised when implemented in the social housing sector, as properties are often more efficient than those in the private sector.
Yet, even without the Green Deal and ECO funding, npower has seen significant interest in green energy solutions. Recently we worked with a housing association in Greater Manchester to install solar PV on social housing stock and expect similar projects to increase in frequency. In fact, this is just one area of expertise we offer and we work with other social housing providers across a broad spectrum of energy efficient solutions from loft and cavity wall insulation to plumbing, heating and electrical installation. We also provide more general maintenance services such as gas and electrical work.
It is clear there are several Government initiatives to support social housing development and April marks a turning point in financing opportunities for local authorities. However, it is important to note that direct funding for social housing has actually decreased. It is therefore crucial for partnership working and careful planning to ensure that targets for affordable housing are met and that the UK’s social housing is better prepared for future generations.