Housebuilders win, housing associations lose

The first fully Conservative Government for a number of years and it is interesting to reflect on the construction industry particularly the winners and losers that come out of the election.

The main policy on housing revolved around extending the right to buy to housing association tenants, which would allow up to 1.3 million more homes to be bought by their current tenants. This does raise questions about creating a “rich” versus “poor” effect on the streets but will also, hopefully, raise vital funds to replace the housing association stocks. They have also committed to building 200,000 starter homes for first time buyers – again a good thing but what about those that aren’t first time buyers.

The first sign of a good decision comes from the stock market – clearly very happy with housebuilders and estate agents share price rising well. Two reasons would drive this, firstly we have a majority government which provides security over the next five years but also the continuation of the help to buy scheme and with no Labour mansion tax or imposed rental cap providing further assurances to overseas buyers.
The flip side to the argument though is that while housebuilders brief a sigh of relief housing associations don’t. The Conservatives’ plans to extend the right to buy have been opposed by housing associations and we can expect the issue to be one of the most contentious of the next parliament. They key argument being that forcing charities to sell off their stock will need laws to address and govern it and what happens to the underlying debt – this would need to head back to the Government balance sheet.


It is early days as the new government settle in and plan the next five years and undoubtedly there will always be winners and losers. I see both sides of the argument but think there are ways to address this. It needs to be clearer how Right to Buy will work and how the government can work with housing associations to ensure sufficient social housing is available to those that need it. The national housebuilders drive housebuilding so security for them will hopefully push them to take on more risk and really help meet the housing targets but promotion of smaller developers needs to occur.


Despite all this excitement, to me the most innovative and exciting news was that Liverpool University is forming its own construction company. Liverpool University is planning to build a major part of its £100m-a-year capital spending programme in-house after forming its own construction company.


The university is considering giving more work to its in-house special projects team, which was formed in 2013 when the university took on staff from failing contractor Ocon. The university is lining up the company to build its planned £90m Greenbank Halls project, which gained planning consent earlier this month, and a separate £25m teaching facility.


The basis is simple – private and public coming together for construction. The public sector has large elements of lands and development required with limited funding while partnering is a key focus for the construction sector to reduce overall risk. More public sectors should consider this approach – whether housing or development.


Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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