The Week in Housing: new year, new underspend

Good afternoon.

“We are confident that we will provide all £4.2bn of the Housing Infrastructure Fund [HIF] to local authorities across all regions of England.”

These were the words of a Department for Levelling Up, Housing and Communities (DLUHC) spokesperson this week after it was revealed that more than two-thirds of the HIF remains unspent six years after its launch.

The fund was meant to unlock hundreds of thousands of new homes. However, DLUHC confirmed that work had begun on fewer than one in 10 of the promised homes and that it had downgraded the fund’s delivery target from 340,000 to 270,000 homes.

This will all sound very familiar. In July, DLUHC revealed a £1.9bn underspend, including hundreds of millions that was earmarked for the Affordable Homes Programme.

The government rightly asks a lot of housing associations and local authorities in the sector, but it could really do with giving them a bit more of a chance.

While the government fails to distribute the money it said it will, housing associations’ operating margins have fallen 30% in the past five years and will remain tight until the mid to late 2020s.

Data company Housemark analysed public data from 181 English landlords that have more than 1,000 homes to calculate the squeeze on cash flow experienced by social housing providers.

Researchers said median operating margins stood at 18.5% in 2022-23, down from 26.8% in 2018-19. They attributed the cash flow challenge to rising interest rates, price inflation and investment in existing stock.

The need to invest in existing stock had forced landlords to allocate record amounts last year due to numerous shocking examples of disrepair.

The trade-off between building more homes and maintaining existing ones saw a whole host of associations take the decision to cut back on their development pipelines in 2023. Not ideal during a housing crisis.

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