Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 22
22
Acknowledged
Paragraph: 106
Financial pressures lead to deeply concerning decline in new social housing construction.
Conclusion
It is deeply concerning that as a result of financial pressures on social housing providers less new social housing will be built. This will further exacerbate the chronic shortage of social housing and will place further unacceptable pressure on those in need of social housing.
Government Response Summary
The government acknowledges the committee's concerns about financial pressures on social housing providers and explains how increased expenditure on existing stock, coupled with rising costs, is impacting their capacity to invest in new housing supply.
Paragraph Reference:
106
Government Response
Acknowledged
HM Government
Acknowledged
However, the sector also faces significant financial pressures, as the committee notes in its report. These include necessary expenditure on existing stock to ensure this meets safety, quality and energy efficiency expectations and the increasing cost of capital as a result of higher interest rates which impacts the sector’s ability to build new homes for future tenants. London and other urban areas, where large numbers of flats need building safety works, are seeing the strongest financial pressures. This pressure has resulted in a continued trend since 2018 of reducing financial performance in the sector. This has intensified recently resulting in the cost of servicing debt exceeding net earnings in 2023/24, for the first time since 2009. In aggregate terms, forecast sector interest cover over the next five years is just 111%. Higher than expected interest rates, building and fire safety remediation costs, the increased volume and cost of repairs, and the impact of the rent cap mean that previously projected recovery in interest cover in landlords’ business plans has consistently failed to materialise. The increased investment in existing stock is impacting on providers’ capacity to invest in new supply which is being reined in to meet the demand for spend on existing stock.