Supply and Demand- Sector Experts Predict 2017 Housing Spending Activity

Inside Housing takes a look at the year ahead and Osborne’s Carol Bailey shares her predictions for the year.
“Inside Housing’s Pete Apps looks ahead at the big stories and key players for 2017, and sector experts share their predictions for the year.
The big stories
LHA cap
The battle over plans to cap housing benefit at Local Housing Allowance (LHA) rates took up the whole of 2016, and is far from finished. We know what the deal for supported housing looks like, but with the social care crisis becoming a bigger and bigger political issue, the government may find it has to go back to the drawing board to give providers the certainty to build new schemes. Meanwhile, no one has yet calculated the impact of plans to apply the cap to existing tenants on Universal Credit. A battle over the detail looms.

At one point it looked like 2016 was going to be the year when mergers were announced and then fell through. But right at the end, three big deals got over the line and that might just clear the way for the floodgates to open in 2017. All the drivers for merger still apply, and talks going on behind the scenes last year are coming to fruition. Peabody and Family Mosaic seem fairly well progressed in their talks, and are on course to hit the July deadline they have set. Expect medium-sized associations to join forces regularly throughout the year, with at least one mega-merger.

Mayoral elections
Greater Manchester, Merseyside Metro and the West Midlands all elect mayors on 4 May. Labour’s Andy Burnham is expected to stroll home in Manchester, while Corbynite Steve Rotheram should be given control of the Mersey. Both have identified housing as a key issue, and will want the same freedom to dictate policy Sadiq Khan is enjoying in London. In the West Midlands, the Conservative candidate Andy Street – the former John Lewis boss – is expected to make the race with Labour close. He has also identified housing as a key policy area.

Housing delivery and the White Paper
The government granted the sector a lot of wishes in the Autumn Statement at the end of last year, and this year it will want results. Housing associations will need to get bids ready for the newly flexible grant programme. Ongoing labour shortages and some genuine momentum in the modern methods of construction space mean factory-built homes should really take off this year. The Housing White Paper is expected to shake up planning, and water down the Starter Homes pledge.
What the sector expects
“The regulator will be given a beefed-up role as regulator of price, quality and effective governance covering all social housing. Devolution will see the Homes and Communities Agency (in its investment role) being a partner to some, rather than all, local authorities. There will be winners and losers.”
Steve Douglas, partner, Altair

“Merger activity will continue as associations seek to build capacity, resilience and stay relevant. Deregulation, when it is implemented in April, is unlikely to result in a significant change in strategic asset management. Out-of-sector sales of tenanted homes will be a minority sport.”
Helen Collins, head, Savills Housing Consultancy

“The increase in new build housing activity will fuel wage and material inflation as demand will outstrip supply. Regions that co-ordinate spending will avoid additional price inflation – but not all will manage this.”
Carol Bailey, Managing Director, Osborne Property Services

“Supported housing providers will take a stronger position around provision, unless funding levels and security of funding are resolved. We could see more withdrawing from the provision of services, and a slowdown in building.”
Yvonne Arrowsmith, chief executive, East Thames (part of L&Q Group)

“I hope the government will make a tactical withdrawal on Starter Homes, by deciding local authorities are best placed to decide what sort of affordable housing is needed in their areas – helping developers and associations
to get on with building new homes.”
Matthew Bailes, chief executive, Paradigm

“The cold winter months – and the impact they will have on the social care crisis, NHS services and homelessness – will put supported housing centre stage, so government will face a battle over the Local Housing Allowance.”
Emma Maier, editor, Inside Housing

“The enactment of the deregulatory measures will not only take housing associations off the public books, but will also provide the flexibility to develop innovative solutions to the housing challenges the country faces. Key to this will be how we build and maintain our homes differently, as well as demonstrating our credentials as housing businesses with a social conscience.”
Nick Atkin, chief executive, Halton Housing Trust

The key players

Sajid Javid
The communities secretary is an experienced and ambitious politician and his current role will be judged largely on housing delivery. After leaving junior minister Gavin Barwell to do much of the talking in the first few months, he has made a number of key interventions on housing recently. Housing associations should note terse comments about perceived landbanking in the private sector. This is a minister willing to use sticks as well as carrots to get his way.

Brendan Sarsfield
A planned merger will see the chief executive of Family Mosaic take over the reins at Peabody in July. This gives Mr Sarsfield control of the only housing association with a brand that transcends the sector. It also puts him in partnership with current Peabody chair Lord Bob Kerslake, a potentially formidable lobbying force. Mr Sarsfield is a passionate advocate of low-cost rent and supported housing – putting him at the heart of two of 2017’s big debates.

Mark Henderson
Home Group chief executive and motorbike enthusiast Mr Henderson was hard at work in 2016: the organisation’s Graduated Ownership product caught the eye of ministers, and he led the work on new efficiency metrics, generating unusual unity from the sector and buy-in from government. Chair of umbrella group Homes for the North, he will also have an in with the new mayors.

John Godfrey
Former Policy Exchange wonk Alex Morton had a bigger influence on housing policy over the past five years than any housing minister in his role as David Cameron’s special advisor. As Theresa May’s government unravels his legacy, it is said to be Mr Godfrey, who spent 10 years at Legal & General before taking over as head of her policy unit, currently setting the direction on housing.

Joanne Roney
The current Wakefield District Council chief executive takes over the reins at Manchester City Council in 2017, replacing the influential Sir Howard Bernstein and joining just as the region gets its new mayor. Greater Manchester is seen as the forerunner in the devolution process, and Ms Roney will be keen to put her stamp on the quickly developing process. Her local authority background includes several senior housing-related roles.

James Murray
Former Islington Council firebrand Mr Murray is steadily reshaping housing policy in London in his role as Sadiq Khan’s right hand man. The new grant programme is a radical departure from the status quo of the past six years and the 35% quota for affordable housing has had central government sitting up and taking notice. Mr Murray put in the hard yards in 2016 to get the capital’s housebuilding sector onside last year. A fan of the phrase “it’s a marathon not a sprint”, he looks to be working up a good pace as he passes the five-mile marker.”