Almost half of the additional financial capacity to deliver more housing rests with large scale voluntary transfer (LSVT) associations, particularly larger ones, managing 785,000 homes most of which are ex-local authority stock.

However, our analysis shows two thirds of LSVTs have limited existing development for market sale programmes despite having £2.4bn of additional financial capacity (see Figure 1).

There are a number of reasons for this including funding and contract restrictions, a reluctance to invest outside their local areas, attitude to risk and size.

We also found £4.2bn of additional capacity among HAs that are already developing, particularly among the larger players of all types with more than 20,000 homes.

Whilst there is less capacity among the smaller players to bring forward substantially more development, existing output makes a valuable contribution to local housing provision.

Geographically, we found significant capacity in the HAs operating in London and the South East where the housing shortage is most acute and property values are highest. There is also substantial capacity in those based in the north of England.

However, HAs operating in the East Midlands and to a lesser extent, the South West have less additional financial capacity to support development. Therefore, to ensure that financial capacity is matched with housing need, a greater partnership approach between HAs and across regions is needed.

^{Source: Savills Research}

HAs as SMEs

The declining number of SME housebuilders is often cited as a key reason for housing delivery in England remaining stubbornly low. HAs are already contributing around a fifth of total housing output but their competitive advantages allows them to deliver more, particularly in areas of limited developer diversity (see Figure 2).

The latest figures from the Department for Communities and Local Government (DCLG) show that almost 190,000 additional homes were delivered in England in 2015–16. Separate data from the National Housing Federation (NHF) highlight that HAs contributed 40,000 new homes, with over 40% of those homes delivered outside the Affordable Homes Programme. This brings the Government closer to reaching its target of delivering 1 million new homes by 2020.

^{Source: Local Authority Strategic Housing Market Assessments (SHMAs), Glenigan Savills Development Database, DCLG}

Competitive advantage and market cycles

The structure of HAs also allows for continuing housing delivery through housing market cycles. Their existing stock ownership provides an ideal asset to borrow against during periods of tighter development funding.

This feature is especially relevant as we face uncertainty following the vote to leave the European Union, prompting a more risk-averse position from lenders and making it harder for smaller developers reliant on finance on a scheme by scheme basis to raise debt.

HA expertise in owning and managing large rented housing portfolios also sets them apart from commercial developers. The cash flow from their existing business can help smooth out the business cycle, avoiding the boom and bust that has hurt private sector small and medium house builders in recent decades.

Flexibility to deliver a range of tenures means that HAs can react strategically to market cycles. The sector could increase the delivery of tenures that carry greater market risk, such as homes for market sale and shared ownership, during a strong market and switch to private and affordable rented housing during leaner times.

Planning flexibility and subsidy

Such an approach would require a more flexible approach from Local Planning Authorities on the timings of delivery of affordable housing by HAs to reach the goal of higher overall housing delivery over the longer term.

HAs will generally seek to limit exposure to sales products and thereby avoid the risks these tenures bring to the core business of rented housing. A development programme does need to generate sufficient sales proceeds and gearing capacity to be sustainable over the long term.

Subsidy is critical to enabling HAs to develop a mix of tenures, minimising the risk of delivering a high proportion of homes for sale.

WHERE TO BUILD?

Opportunities across the country

Housing need differs across England. In many midlands and northern markets, housing quality and the need for replacement housing are equal or stronger drivers than a requirement for additional new homes than affordability pressures. Meanwhile, in many markets of the South East and London, the main issue is undersupply and unaffordability.

Government intervention in the form of Housing Zones, infrastructure spending and Devolution, with a focus on removing barriers to unlock larger sites, is creating opportunities across the country.

Increasing housing delivery relies on encouraging a range of different developers to bring forward a more diverse range of sites. Our map above highlights the areas that represent the greatest opportunities for the sector. Dark red marks out the counties which suffer the lowest level of housing supply and also have the least diversity of developer types.

Many of these markets would benefit from a greater diversity of supply and HAs are well placed to be part of the solution. Their contribution could come in various forms and may require working in partnership with other HAs or developers in markets where they do not usually operate.

Some HAs, especially those with development experience, could boost supply directly through increased promotion of smaller sites through the planning system. Larger associations, including those which currently do not develop, could act in partnership with a master developer to finance and bring forward large strategic sites, including funding of infrastructure. Regardless of site size, HA’s ability to deliver across a range of tenures increases absorption rates, ensuring more rapid delivery of housing.