"While recent affordable housing supply figures are strong, they are a lagging indicator – those projects kicked off several years ago, and their completion masks a dramatic drop in housing association funding forecasts for the next decade"
- John Tattersall - Centrus
Corporate finance advisor, Centrus has analysed the global accounts of 29 Housing Associations, making up a representative 14% of providers and homes in the country. 204 Housing Associations in England own and/or manage almost 3 million social homes (including affordable housing and shared ownership), and Centrus’ analysis covers almost 400,000 of those.
In 2024, from Centrus’ data set, it has seen a drop from 2022 forecasts to 2023 forecasts of £216,931,000 in planned payments to acquire and develop housing. Expanding this across the 204 providers would give an overall reduction in absolute spending in 2024 of c.£1.5bn versus what was anticipated in 2022, a 9% reduction on last year’s forecasted spend.
Looking at the decade to follow, 2024-2033, Centrus reports an absolute reduction in forecast payments to acquire and develop housing of £2.8bn from what was forecast in 2022 to what is now forecast in 2023. Across the 204 providers, extrapolating this, we arrive at a reduction of c.£20bn; a 15% fall.
John Tattersall, Managing Director at corporate finance advisor Centrus, says: “While recent affordable housing supply figures are strong, they are a lagging indicator – those projects kicked off several years ago, and their completion masks a dramatic drop in housing association funding forecasts for the next decade.
“The substantial decrease in spending on new home delivery is driven by three core challenges; increased costs of building, increased costs of debt, and competing priorities. Inflation has increased the costs of every aspect of house building, from the price of materials to labour, whilst simultaneously placing contractors under strain with many sadly driven to bankruptcy.
"High-interest rates have skyrocketed the cost of new capital, which is how housing associations fund the vast majority of their projects – very little is backed by grants and while equity options are available, they are more complex to execute and less easy to access for a charitable sector, plus they’re inherently cash-flow driven. There is also immense pressure on housing providers to focus on housing quality and safety, such as damp, mould, and energy efficiency, which eats up already tight budgets for future development spending.
“Assuming the election later this year results in a change of party, we are likely to see affordable housing shoot up the political agenda – and rightly so. Housing associations are unsung heroes in the UK. Social housing is held to extremely high standards of tenancy conditions relative to the private sector.
"While charging lower rents, providers are working tirelessly to deliver high-quality homes for people in need while navigating an economic landscape which is especially tricky given their business models. This fall in funding forecasts is a crisis waiting to happen, and as houses take time to build this will be a slow ship to turn around. But it can be turned; the sector is resilient, and mission-focused, with strong and enduring investor appetite.
"It’s critical we see radical support from policy-makers to help turn the tide on plummeting supply and to ensure the UK remains a world leader in providing shelter to its people.”
