Expert says decrease in spending is driven by three challenges
Housing associations in England are scaling back their planned expenditure on new affordable homes for 2024, leading to a forecasted 9% reduction, recent analysis by corporate finance advisor Centrus has revealed.
Centrus examined the global accounts of 29 housing associations, which collectively represent 14% of the housing providers and homes in the country. A total of 204 housing associations in England manage nearly three million social homes, including affordable housing and shared ownership. Centrus’ analysis focuses on approximately 400,000 homes within this extensive network.
According to Centrus’ dataset for 2024, there has been a notable decrease in planned payments for housing acquisition and development, amounting to £216.93 million when compared to the forecasts from 2022 to 2023.
If this trend is extended across all 204 housing providers, it indicates an overall reduction in absolute spending for 2024 of approximately £1.5 billion, marking a 9% decline from the previous year’s projected expenditure.
Spending on affordable housing in England to be slashed in 2024 https://t.co/5o0NMHomXP
— Financial Times (@FT) January 4, 2024
Looking ahead to the decade spanning 2024 to 2033, Centrus reports a substantial absolute reduction in forecasted payments for housing acquisition and development. The figures show a £2.8 billion decrease from the forecasts made in 2022 to the revised forecasts in 2023.
Extrapolating this data across all 204 housing providers, the cumulative reduction is estimated at around £20 billion, indicating a significant 15% decline in anticipated expenditure during this period.
“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 (pictured), managing director at Centrus, pointed out.
“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, while simultaneously placing contractors under strain with many, sadly, driven to bankruptcy.
“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 policymakers to help turn the tide on plummeting supply, and to ensure the UK remains a world leader in providing shelter to its people.”
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