Social housing construction pipeline falls as cash diverted to repairs

The pipeline of new-build social housing construction shrunk 4% last year as registered social landlords diverted money to repairs in the wake of the Grenfell fire according to exclusive new construction industry research from Glenigan.

The study covers detailed planning applications for new-build housing made by RSLs or housing associations during 2018 and shows plans submitted for 24,164 units in 2018. The drop of 4% ends a run of growth that began in 2015 and comes amid increasing expectation that RSLs will shift spending into repairs

Glenigan’s economics director Allan Wilén explains: “The tragic event of the Grenfell fire in June 2017 is disrupting the progress of planned developments.

“The immediate need to review and address any safety issues on the existing high-rise stock is likely to divert associations’ internal resources and estimates of the cost of installing sprinklers in high-rise blocks has been put at £1 billion.”

Slowdown turns negative

RSLs were already wrestling with changes to their funding model when the Grenfell tragedy occurred in June 2017.

The pipeline had surged 20% in 2016 but this rise slowed to just 8% in 2017. The reverse in 2018 was due to significant falls in the number of new flats proposed by RSLs. Glenigan’s construction industry research shows that in 2018 RSLs submitted planning applications to build 13,252 houses. This was a rise of 9% on the previous year, but the pipeline of flats and retirement housing shrank.

The number of flats proposed by RSLs in detailed planning applications shrank 21% to 9,742.

The retirement pipeline shrank by a quarter as plans for just 955 units were submitted by RSLs.

As a result, 54.8% of the overall planning pipeline for RSLs is now comprised of some form of house. A year ago, that ratio was 46.8%.

In contrast just 40.3% of the RSL pipeline is flats compared to 47.6% in 2017. Retirement homes comprise 3.9% of the pipeline – down from 4.9% a year earlier – with just under 1% of new homes proposed by RSLs now bungalows.

More applications, less homes

Despite the fall in planned new homes, the number of detailed planning applications of 10 or more units made by RSLs continues to increase.

In 2016, Glenigan’s construction market research showed that RSLs submitted 435 detailed planning applications of 10 or more units. That figure rose to 453 submissions in 2017 and then to 462 applications last year but on average RSLs are planning slightly smaller schemes.

In 2018, the average detailed planning application submitted by an RSL contained 52 units compared to 57 homes in 2017.

With RSLs working with new funding models and a need to assess previous work, Glenigan anticipates that the underlying value of new social housing work fell by 12% last year. This year will bring an improvement and a rise of 5% as repairs increase and student accommodation work booms, but new build homes from RSLs look unlikely to grow substantially.