Procurement update: a guide to housing joint ventures

Clapham Park CGI

A slowdown in the for-sale housing market has resulted in a surge of interest in partnership models aimed at delivering affordable housing

Clapham Park CGI

01 / Introduction

The year 2023 is likely to be an annus horribilis for the UK housing market. In the private sector, a triple whammy of rocketing borrowing costs, the end of Help to Buy and the introduction of the Future Homes Standard is expected to result in a 20% reduction in activity this year. Apartment developments have also been affected by further uncertainty associated with second-staircase requirements. Affordable housing developers, including registered providers (RPs), face similar viability challenges while simultaneously grappling with backlog maintenance issues, building safety repairs and long-term decarbonisation obligations. It is little wonder that new-build housing development is taking a backseat until for-sale markets find a new equilibrium.

A slowdown in the new-build market has serious implications for the delivery of low-cost housing. With grant levels covering only 20% of development cost, cross-subsidy based on revenue from private market sales has propped up affordable and social housing delivery for many years. With the for-sale market in trouble, new ways of improving viability and accessing capital are needed to maintain affordable housing supply.

Furthermore, for-sale homes subsidised under the government First Homes scheme are due to absorb 25% of homes delivered by the section 106 route. This means that even when the housing market recovers, RPs will need to find new ways to maintain delivery volumes for shared ownership and affordable rental homes. 

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