Government needs to double private investment in social housing sector to hit 1.5m target, says Regulator of Social Housing deputy CEO

The government and housing associations will need to double the £100bn of private finance leveraged into the sector if it is to meet its growth targets, according to the deputy chief executive of the Regulator of Social Housing 

Speaking on a panel at the Housing Community Summit, Jonathan Walters was asked whether regulation was a blocker to growth.

He answered: “The sector has leveraged in £100bn of private finance on the back of this no-loss on default regulation. 

“If the government is going to meet its ambitions, it probably needs to double that. It probably needs to leverage in another £100bn of finance. 

“Investors want to invest in a regulated, safe sector. It’s a low return sector, but it’s also low risk and if you lose that, you lose lots of capacity to build new homes that we really want.”

Walters said the regulator was “really clear” about where there was financial strength in the sector, describing a “really strong arc”, running from the southwest through the South Midlands and into East Anglia, where there is “a great deal of capacity to deliver new homes”.

Speaking on the same panel, Nick Walkley, UK president of Avison Young and former chief executive of Homes England, gave his own opinion on the government’s 1.5 million homes target.

“I think it’s helpful for giving leverage inside government to extract more resources from Treasury,” he said. 

“But as a device in the market, it could actually become quite disruptive, because it gives funders a bit of a stick to beat people with - ‘if you don’t do this on these terms, you ain’t going to get to the number’”.

He said that the long-term problem for development was that “the market doesn’t work”.

“We’ve fallen into [a situation in which] you can have any partner you like, as long as it’s probably Vistry, Lovell or one other, [and] you can have any housing typologies, as long as long as it looks a bit like something from the Edwardian era shrunk,” he complained.

Looking ahead to the Autumn budget, Walkley said he was “nervous that broader moves” could “destabilize” the development environment.

He said policies like upwards only rent reviews, while “not unjustifiable”, could spook investors without consultation.

“Further surprise or untrailed announcements that are seen as unattractive to private capital do create real problems, because every investment decision is purely an investment decision against a capital allocation, against a bunch of other proposals held over time,” he said.

He said the government needed to be careful about spooking investors because development in London and other parts of the country was “pretty close to rock bottom” and that getting momentum back would be “really challenging”.