Planned spending on new affordable homes in 2024 slashed by 9%

Housing associations in England have cut their planned spending on new affordable homes in 2024 by 9%, according to Centrus, the corporate finance advisor.

In 2024, from Centrus’ data set, it has seen a drop from 2022 forecasts to 2023 forecasts of £217m in planned payments to acquire and develop housing.

Expanding this across the 204 providers would give an overall reduction in absolute spend in 2024 of c.£1.5bn, versus what was anticipated in 2022, a 9% reduction on last year’s forecasted spend.

Looking at the decade to follow, Centrus reports an absolute reduction in forecast payments to acquire and develop housing of £2.8bn from what was forecast in 2022 to what is now forecast in 2023.

Across the 204 providers, extrapolating this, we arrive at a reduction of c.£20bn — a 15% fall.

John Tattersall, managing director at Centrus, commented: “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.

“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, whilst simultaneously placing contractors under strain with many sadly driven to bankruptcy. 

“High interest rates have skyrocketed the cost of new capital, which is how housing associations fund most of their projects — very little is backed by grants and while equity options are available, they are more complex to execute and less easy to access for a charitable sector, plus they’re inherently cash-flow driven.

“There is also immense pressure on housing providers to focus on housing quality and safety, such as damp, mould, and energy efficiency, which eats up already-tight budgets for future development spending.

“Assuming the election later this year results in a change of party, we are likely to see affordable housing shoot up the political agenda – and rightly so.”

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