Special report: Foundations shift for social housing

Introducing the first in a series of features exploring the changes to the social housing policy landscape and consequences for the North West, published in association with KPMG and Hill Dickinson.

It's been a pantomime of changes for the affordable housing sector lately. As if the recession didn't ravage it enough, the sector now finds itself shifting again to accommodate the Lib-Con coalition government's policy changes. New housing minister Grant Shapps has been at the vanguard of these moves despite his role as housing minister being downgraded from the cabinet.

In opposition, he had always made his dislike for the Tenant Services Authority clear – a quango only set up in April 2010 to regulate affordable housing for tenants and residents. But in June, Shapps signaled his intention to scrap the TSA through the 2010 decentralisation and localism bill.

On taking office, the minister also claimed a £780m 'black hole' in the housing budget left by Labour and is now on a mission to make cuts throughout the sector.

The housing and regeneration body, the Homes & Communities Agency has had its capital budget reduced by around 10% to £4.11bn for 2010/11, losing at least £450m by July 2010. This has meant the National Affordable Housing programme, Kickstart Round 2 to support construction at stalled sites and the Gypsy and Traveller programme all suffered large cuts.

England's housing market renewal pathfinders – created to boost housing in the North and Midlands – not only had their budgets slashed but have seen the ring-fence from their capital grant removed. Ministers have said this will allow more flexibility for savings to be made.

Bill Enevoldson, head of public sector for KPMG in the North, says: "The Government has certainly done a lot in a very short space of time. The cuts in public investment were inevitable given the current climate. The challenge is to try and find ways of replacing the funding through the HCA, Councils, RSLs and the private sector house-builders all working closely together.

"Some of the less robust organisations will be particularly susceptible to cuts. There is also a danger that if the cuts fall in the wrong places geographically, then this could impact upon labour market mobility."

Keeping track of the legislative and regulatory implications is an ongoing strain landlords and house-builders could do without, believes Peter Barlow, head of Hill Dickinson's social housing team. He adds: "It is now usual for a new Government to seek to make its legislative mark as soon as Parliamentary conditions allow, and on this occasion the housing sector is in the spotlight. However the ever changing regulatory framework makes it more difficult, and costly, for the sector to keep up to date with the relevant legislation."

The Conservatives have also made the localism agenda paramount through their idea of the Big Society. Communities Secretary, Eric Pickles, in effect abolished regional strategies in July, using the Coalition Agreement. The last government established regional targets to build three million homes nationally by 2020. The aim, in line with the new government's localism agenda, is to eventually allow local people to have greater control over what is built in their communities through local housing trusts. This move has raised fears of nimby-ism and has worried some developers, although the government intends to introduce incentives to replace building targets.

Derek Long, head of North at the National Housing Federation, is concerned that the abolition of the regional spatial strategies with no alternative model has created "all manner of chaos in terms of planning permissions and the pipeline for builders". He continues: "Lots of planning permissions will get disrupted and builders will also not know the basis on which they will get planning permission."

A spokesman for the Home Builders Federation agrees that the changes will create uncertainty for builders: "The new government operates very differently and is committed to localism.

"They have already scrapped the regional spatial strategies and all the local plans. We've now got a situation where local authorities can do what they please in terms of development – for developers, clearly this poses concerns because while some local authorities are pro-development, the majority probably aren't."

The new planning regime, continues the spokesman, puts the onus now on developers to convince local people and councils – most of whom will not want large developments on their doorsteps – of the value of their developments. "Developers are just looking for some clarity and guidance in terms of how the new system will work," Long says.

Ken Perry, chief executive of Liverpool-based housing association, Plus Dane Group, said: "It is disappointing that, at a time when regional and sub-regional working is at its strongest, most of the architecture supporting it is being dismantled. However, Plus Dane strongly believes in neighbourhood-led regeneration and we are confident that local working will remain strong.

"The biggest challenge we are facing is not the loss of targets or regional structures but the loss of public investment due to the current economic climate. We're working hard with our partners to ensure that we maximise the impact of the resources available in the neighbourhoods we serve."

George Osborne's budget in June announced measures to limit housing benefit including capping private sector allowances and restricting housing benefit for working age claimants in under-occupied social rented properties.

Abigail Davies, head of policy at the Chartered Institute of Housing, thinks this might be problematic. She says that while the impact of changes is still unclear, "at the moment we can see that the impact of housing benefit changes are going to be really significant, restricting where people can live in the private rented sector, causing people to struggle to pay their rent, putting pressure on waiting lists and possibly meaning more people will live in overcrowded and poor quality accommodation."

Davies adds that giving more power to local communities could lead to better decision-making regarding the type, location and design of new homes, "but there is still real concern that some people, often those who most need new homes, have little voice in their community and may not get their interests represented unless their capacity to speak out is increased."

Michelle Reid, chief executive of the Tenant Participation Advisory Service, echoes this fear that some tenants may fail to have their views represented in the absence of a strong regulator. Reid says: "The TSA have attempted to change the way that social housing operates, and for that they should be congratulated. We would strongly urge that whatever the future holds for the TSA, the new regulatory framework must survive.

"Losing the new regulatory framework would be a huge blow for tenants who are already going to bear the brunt of cuts in housing, health, education and other services. It's crucial that the momentum of change towards tenant empowerment is not lost or weakened regardless of spending cuts."

As with so many areas of property and regeneration right now, the only certainty is change. The comprehensive spending review and decisions over successors to regional planning strategies cannot come soon enough.