Stalled housing market hits funds to affordable homes
THE slump is delaying thousands of desperately-needed new homes, MPs have been told.
Sunderland housing group Gentoo has told MPs it is being forced to slow its plans to build 3,600 homes in the next decade because of a collapse in the housing market.
Half the properties were earmarked for private buyers, with the cash raised used to help pay for the half allocated as affordable lets.
Government grants also subsidise the cost of social housing, but it is said the amounts may have to rise to fill the gap in a situation that is affecting housing organisations nationwide.
In evidence to MPs investigating the housing crisis, Gentoo said: “The sale elements of this programme are under threat, given the current market conditions.
“As a proportion of the whole programme relies on sale to cross-subsidise the rental element, there is therefore also a knock-on effect to the rental elements of the programme.
“In short, until the market stabilises and begins to pick up, the majority of schemes within the overall programme will have to be halted, thereby delaying the overall delivery profile.”
The organisation, which is also improving 36,000 former council homes in Sunderland, said its financial position remained healthy.
Concerns about commercial developments were assessed case by case and put on hold where necessary.
And it said it had continually met its financial covenants, having taken a pessimistic view of the potential to sell new homes.
“However, should the market deteriorate further, then as with most housing associations, we may look to renegotiate the loan covenants with lenders,” it told MPs – although Gentoo’s deputy chief executive John Craggs yesterday stressed it was not in this position at present, thanks to its cautious approach.
The group also said the Government’s targets to build hundreds of thousands of homes were unlikely to be met without a significant shift in political and financial will.
“Part of this is market based in that there is little current incentive to build in a declining market. Part of this is simply down to income and expenditure in that previous funding streams to enable new affordable housing provision are no longer viable or achievable,” it told the committee.
Gentoo deputy chief executive John Craggs told The Journal: “We are committed to maximising the renewal programme, but obviously the ability to sell houses to cross-subsidise the rented properties has fallen as a result of the credit crunch. So, the rate of renewal has slowed. It is a movable feast.”
But the group would be prepared to accelerate the programme – although it would require more public funding – if innovations such as the Government’s homebuy scheme, where buyers initially purchase a share in the property, stimulated the market.
Mr Craggs also said the group remained on target to improve 36,000 former council homes in Sunderland by 2010 to reach the Government’s decent homes standard.
