Budget 2014: More homes please

17^th March 2014

David Orr, Chief Executive of the National Housing Federation, argues that this year's Budget has the potential to turn the housing market around

The fact is, we’re still not building enough homes. People across the country are struggling to get on the property ladder, move out of their parents’ homes, or find a rental place they can afford. This year’s Budget is an opportunity to change that – and to be smart with the nation’s money into the bargain.

This Government, like successive ones before it, has recognised that action is needed on housing but has not responded with the urgency required for a crisis of this scale. Yes, it announced £3.3bn for affordable housing over the next three years and has confirmed future rent levels for social housing. While both measures are welcome, they are not enough when housing supply is so far from meeting demand. The shortage of new homes is pushing rental and house prices up, leaving many locked out of home-ownership, hard pushed to pay their rent, and even claiming housing benefit to keep the roof over their heads – despite being in work.

The Budget is a chance for the Government to make a real difference for this stuck generation. With just a year until the next election, we are not expecting sweeping policy changes or long-term announcements – but there has never been a better time to implement some simple, easy wins that would free up housing associations to do even more to tackle the crisis.

There are three barriers in particular that are holding housing associations back from delivering more of the affordable homes this country needs: lack of land on which to build, lack of access to finance, and restrictions on Government guarantees.

The first easy win, then, is land. The Government has agreed in principle to make more public land available, but identifying suitable land is only part of the solution. It also needs to be released more quickly once identified, so developers can get on site sooner and build homes faster for the communities that need them.

The land must also be priced fairly and affordably. The current ‘best consideration’ standard that public bodies have to achieve when selling land should be reconfigured so it takes into account the wider social and economic benefits of affordable housing, as well as simply the price. Public bodies could also be encouraged to use more innovative approaches to land release, such as discounted or deferred payments and shared equity arrangements to help boost competition.

The second easy win is access to finance. Housing associations’ capacity to borrow funding is currently limited by restrictions on how their properties are valued. Changing this would allow them to borrow more, maximise their resources and deliver more homes – a shot in the arm, not just for the housing market, but the economy as well.

Government guarantees are another piece of the financing puzzle. The current guarantee programme, announced last year, has given a much-needed boost, but is restricted to new finance. If the guarantees were extended further, they could be used to refinance existing debt and allow associations to borrow more to deliver even more new homes.

This is all very well, but why, you may ask, this focus on housing associations? Why not plug extra money into the private sector? There’s a one-word answer: communities.

Unlike private developers, housing associations invest their surpluses in the communities where they operate. Many deliver health services, employment programmes, support for older people, and neighbourhood regeneration on top of the bricks and mortar, reducing demand on thinly stretched local authority budgets. They build affordable housing for people stuck on waiting lists and the investment in building and maintaining homes creates new jobs – up to six jobs in the wider economy for every one home built. The private sector quite simply cannot match up.

This Government has stated time and again its determination to support aspiration and generate growth in our nascent economic recovery. Investing in homes – and investing in housing associations – will do both, and with no capital grant to stack up on the nation’s creaking balance sheet. George Osborne has a great opportunity this month to be smart with his money and to ease the crippling housing crisis. I urge him to take it.