Funding and development

The sector’s relationship with the banks continues to remain positive, with just eight per cent of respondents in our 2016 survey reporting any difficulties with their bankers. Whilst this figure is marginally higher than in 2015 (six per cent), more than a third of the sector were having problems with their bankers in 2013 so we have seen a dramatic improvement since then. 

The banks have certainly had a more positive attitude over the last few years which has almost undoubtedly been influenced by the on-going improvement in the UK economy. The sector also remains less reliant on the banks for funding and continues to seek alternative sources to fund their work. Of those RPs seeking alternative funding, corporate bonds remain the most popular choice, with 95 per cent of RPs having taken or considering taking this route to generate funds (78 per cent in 2015). Pension and investment funds also remain fairly popular within the sector, with 35 per cent and 37 percent of respondents respectively having used them or considering using them to raise finance (38 per cent and 32 per cent in 2015). 

In previous years the sector has actively pursued commercial opportunities to help fund social housing projects. In our 2015 survey 43 per cent of respondents were engaged with active commercial projects and another 28 per cent were planning on following suit. 12 months later and we’re still seeing more than 60 per cent (42 per cent with active projects and 20 per cent planning) of the sector looking to commercial opportunities to raise funds, but an increasing number are choosing not to go down this route (38 per cent compared with 29 per cent in 2015). Given the changes going on within the sector at the moment it’s clear more RPs are choosing to concentrate on their core activity.

Of those respondents with active projects, 79 per cent have been focusing their attention on low cost home ownership sales, 69 per cent market property sales and 66 per cent market and mid-market property rentals. It’s clear those providers choosing to actively pursue commercial opportunities are concentrating on what they know best and focusing their attention on property transactions. 

Development 

We’ve seen funding to build affordable housing decrease over recent years. In the early nineties grants met 75 per cent of the cost of each new home. By 2010 this had fallen to 40 per cent and it is now only 14 per cent. In our 2015 survey the sector was, unsurprisingly, pessimistic about the grant regime; with only 30 per cent of respondents feeling future grant would be worthwhile. 12 months on, and with grant funding likely to continue to decrease, the scepticism within the sector has remained. Only 26 per cent of respondents in our latest survey see future grant as worthwhile. 

Budget cuts have clearly had an effect on providers’ development plans, with 33 per cent of respondents expecting to reduce development after 2016, compared with 20 per cent in 2015. Whilst the sector is disillusioned with the grant regime, there is still a sizeable majority who are expecting their development plans to be unaffected, and a third of RPs seeking to increase development after 2016. Almost half (49 per cent) of RPs are expecting to fund their development plans using internal resources. And of those, two thirds will be re-investing surpluses from their diversified activities as well as their housing surpluses.

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