Development teams are reassessing ambitious plans to build more than 175,000 homes over the next five years, as Brexit threatens to unleash turmoil in the housing market.
Inside Housing’s development survey, published this week, reveals 40% of starts by the 50 largest builders are either for open market sale or shared ownership, up from 36% last year.
This leaves associations’ development plans vulnerable to changes in the sales market, as many experts predict a slowdown in the market owing to referendum uncertainty.
David Montague, chief executive of L&Q, said: “Our business plans may adapt as things become clearer.”
A spokesperson for Genesis, which was downgraded by Moody’s this week partly owing to its reliance on sales, said it will “look again” at its pipeline in the wake of Brexit.
Inside Housing understands other associations are formally reassessing risks for all major schemes.
Fiona MacGregor, executive director of regulation at the Homes and Communities Agency, said: “Organisations that are reliant on sales for surpluses which they are applying to support their development programmes, may say ‘we’ll pause to work through the impact of this before we enter new commitments’.”
Associations have increased building in for-sale tenures to generate surpluses, in many cases to cross-subsidise building sub-market rent homes as grant disappears.
“We have a much more pro-cyclical model of development than we have had before. In the last recession, we kept on building social rented housing through the downturn, but it is not clear that housing associations would be able to carry on in the same way this time around,” said Matthew Bailes, chief executive of Paradigm.
But others pointed out that demand for housing will remain, owing to the underlying shortage in the market. Places for People development director Colin Rae said: “We still have significant housing need and that will prevail regardless of what happens in the economy.”
At least one association policy strategist predicted any turmoil in the market could encourage the government to restart grant for sub-market rent. “If things start looking a bit hairy, government may use associations to support the market in some way,” he said.