How has the COVID-19 pandemic affected building and sales in the affordable housing sector?
Here at EMW we are privileged to work with a number of Housing Associations, who have been battling against many new challenges that recent months have brought. We have been speaking with several of our clients and contacts to find out just what those challenges have been, and how they have been fighting back…
At the start of 2020 there were reports of a recovery in the housing market following the result of the general election after a period of stagnancy due to Brexit and political uncertainty, but unfortunately this proved to be short-lived when the COVID-19 pandemic hit.
The immediate impact was a new wave of uncertainty and a short term ‘freeze’ in the housing market as we went into lockdown in March. There was initial confusion about construction workers being on site and the majority of housebuilders temporarily shut down their sites (with the exception of some smaller developers where it was easier for them to social distance on site) which resulted in the building of thousands of much needed homes being halted up and down the country.
Not only did this impact on Housing Associations’ ability to take handover of completed units, but it also presented challenges in terms of their shared ownership sales. Practical difficulties were faced in both carrying out viewings and actually physically moving home. There were difficulties in obtaining mortgages given the preventing of physical surveys and valuations, not helped by a general nervousness amongst buyers and their lenders about possible impacts on the job market and the economy.
This brought fears of a potential pinch point in the cross-subsidy model, as Housing Associations rely on their shared ownership sales to generate income to spend on their other services and tenures including social rent.
The fight back
However, in the background the Housing Associations were adapting. After a few weeks they were using technology to conduct virtual viewings using videos and 3-D imagery, installing key lockboxes to enable limited viewings and contact-free handovers, attending virtual scheme progress meetings, receiving information in electronic format only and setting up powers of attorney with their solicitors for the easier execution of deeds – to list but a few examples.
We have been delighted to hear that our Housing Association clients have been able to continue to let and sell on an adapted basis, with the numbers ending up far better than initially feared. For our team who have been working from home during lockdown, hearing real life success stories of single young people, couples and families being grateful and relieved to able to move into their new shared ownership homes has really given us a boost.
We are now seeing a relaxation in lockdown, with a return to building and more lenders returning to the shared ownership market with valuations being conducted by limited physical inspections and desktops and Employer’s Agents have been able to obtain photographic evidence for signing of build staged payments.
Programme delivery is still a challenge, however, given lack of labour and materials and slower pace on site, but we are yet to see the true reality of what this means as developers push out their timescales and are reluctant to commit to dates.
It is good to hear reports that Homes England are being flexible with schemes moving around and delivery between years, but decisions are awaited on converting tenures on some sites from sales products to rented products with grant assistance.
There is potentially an increase in development opportunities for Housing Associations, as the strength and resilience of the sector has been highlighted. The sector is sometimes even thought of as counter-cyclical as demonstrated in other downturns, with value and experience having huge potential to help both the economy and society as a whole including with direct and indirect job creation.
Even during the crisis some Housing Associations have been able to secure borrowing through the bonds market, and the need for housing remains, despite the uncertainty in supply. We have seen an increase in developers looking to partner with Housing Associations and also to sell some market stock to convert into affordable products, similarly to the 2008 recession.
Housing Secretary Robert Jenrick announced last week an extension to the current Affordable Homes Programme until March 2023, and Chancellor of the Exchequer Rishi Sunak announced a new Social Housing Decarbonisation Fund in his Summer 2020 Economic Update, to help social landlords improve the least energy-efficient social rented homes.
Our social housing team feels privileged to be able to put our residential development knowledge and experience into practice in a sector so full of talent and opportunity. The sector is ripe for investment, funding and partnership, and we look forward to seeing what this means in reality.
"We act for a number of Housing Associations in carrying out their property work, including acquisitions, development and construction contracts, and shared ownership sales. Our thanks in particular go to Susan Bland and Sue Dance at Grand Union Housing Association for their time spent discussing these topics."
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All information in this update is accurate at the time of writing. It is meant for general information only and is not legal advice.