Affordable housing development – what to expect in 2021?

Last January, I was asking if 2020 would be the year we would finally see some new housing legislation. For many reasons, we didn’t get the reform that was much anticipated. So will 2021 now bring change to affordable housing and what do housing associations need to look out for in the coming 12 months?

  • New Homes England funding programme 2021-2026. This is a key element of the Government’s ambition to build a million homes during the current Parliament. There is a highlighted £7.39 billion available for delivery of up to 130,000 affordable homes under the programme. The scheme broadly follows its 2016-2021 predecessor, but there is a new focus on modern methods of construction and sustainable design, and the addition of new model shared ownership and the right to shared ownership for homes delivered under the programme.
  • New model shared ownership. We now know that new model shared ownership (and the new right to shared ownership) will be linked to the 2021 Homes England funding programme and its use will be encouraged for new S106 schemes. We also know the initial share will be from 10%, 1% staircasing will be permitted to a maximum of 15% and the shared owner will have limited repair liability during the first 10 years of the term. We haven’t yet seen the new form of lease and the detail of how these changes will work remains sketchy, as does the finer detail of the right to shared ownership. The actual changes to shared ownership may be more limited than the Government first proclaimed, but HAs should not underestimate the administrative burden of running a two tier system. All HAs will need to understand new model shared ownership and review their systems, procedures and tenant guidance. There is a real danger here that smaller housing associations will turn away from shared ownership due to the uncertainty, viability issues and increased administration burden. This may be an opportunity for institutional investors to make further advances in the shared ownership market.
  • First Homes. It seems that the Government is keen to go ahead with First Homes (new homes with 30% discount secured in perpetuity for local people and key workers). The scheme is to be monitored by local authorities, so there is no apparent role for HAs. Legislation was introduced in 2020 to allow First Homes to benefit from CIL relief, so this may be a sign that we will see the first First Homes in 2021. The expectation is that First Homes will be delivered through S106 agreements, so HAs may see a reduction in affordable homes available to them through planning obligations.
  • Help to Buy. Details of the new scheme running from April 2021 to March 2023 have been published. It is strictly limited to first time buyers and this could lead to an increase in demand for shared ownership from “silver splitters” or others frozen out of the new Help to Buy scheme and could provide greater opportunities for HAs prepared to take on new model shared ownership.
  • Leasehold Reform. **STOP PRESS** Robert Jenrick has announced the Government will be bringing forward legislation for zero ground rents, and will then look at reform of leasehold enfranchisement (including a new 990 lease term on extension) as well as setting up a Commonhold Council to seek to reinvigorate this alternative tenure option. It remains to be seen what direct impact this will have on HAs, but all developers may want to be ahead of the curve and look at longer lease terms and zero ground rents as standard now.
  • Planning for the future. Although it is unlikely that any legislative changes will be made in 2021, the Government should be publishing the outcome of the 2020 consultation on essentially ripping up and starting again on local planning. This could potentially have an enormous impact on the provision of affordable housing with the proposed end of S106 planning obligations and it will be something which HAs will want to follow with interest.

There is undoubtedly change ahead for the affordable housing sector in 2021, but the past year has shown that with the right support and advice, the sector can adapt and find ways to continue to provide much needed new affordable housing in the toughest circumstances.

January 2021

Spire Solicitors LLP is a leading provider of legal advice to the affordable housing sector.  To find out how Spire can help your organisation, contact us on 01603 677077 and ask to speak to a member of the Social Housing Team.

 

This is not legal advice; it is intended to provide information of general interest about current legal issues.