The S106 (England) and S75 (Scotland) agreements play a vital role in delivering affordable housing as part of new residential developments. These agreements ensure that housebuilders contribute to the creation of good-quality, affordable homes, which are often sold to housing associations or other registered providers. However, the current market is facing challenges, particularly a noticeable lack of appetite among housing associations to acquire affordable housing units, especially smaller allocations of fewer than 20 homes.
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Understanding the Current Market Landscape
Over recent months, there has been a marked decline in housing associations’ interest in acquiring affordable housing delivered through S106 and S75 agreements. This trend has raised concerns for housebuilders who rely on these agreements to meet their planning obligations and ensure the financial viability of developments.
Possible Reasons for the Decline
1. Economic Pressures
Rising inflation and borrowing costs have placed significant financial strain on housing associations, reducing their capacity to invest in smaller developments. These economic challenges often push them to prioritise larger-scale opportunities that offer better economies of scale.
2. Resource Constraints
Managing multiple small developments can be administratively burdensome for housing associations. The time, effort, and costs required to oversee smaller schemes often outweigh the perceived benefits, making these projects less attractive.
3. Shifting Strategic Priorities
Many housing associations are increasingly focused on their existing stock. Compliance with new building safety regulations, improving energy efficiency to meet net-zero targets, and addressing tenant concerns are taking precedence over acquiring new developments.
4. Lower Demand for Smaller Allocations
Affordable housing units in smaller schemes often face challenges in demand. Issues like less community cohesion, limited amenities, or rural locations can deter potential tenants or buyers.
5. Market Uncertainty
Uncertainty in housing markets, coupled with concerns about long-term affordability for tenants amid rising living costs, has made housing associations more cautious about new investments.
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Potential Solutions
1. Innovative Partnerships
Highlight Housing can act as a bridge between housebuilders and housing associations, offering tailored consultancy to create win-win scenarios. By identifying suitable housing associations with aligned priorities, we can help facilitate smoother transactions.
2. Aggregating Smaller Schemes
A solution could involve aggregating smaller allocations across multiple developments into larger packages that are more attractive to housing associations. Highlight Housing can help housebuilders bundle schemes strategically.
3. Emphasising Market Demand
Developers can work with experts like Highlight Housing to conduct market research and demonstrate the demand for smaller affordable housing schemes. This can reassure potential buyers or investors of the viability of these projects.
4. Exploring New Delivery Models
Shared ownership, community-led housing, or custom-build options may provide alternative routes for delivering smaller affordable schemes. Highlight Housing can guide housebuilders in diversifying their offerings.
5. Flexible Approaches to S106/S75 Delivery
Working with local authorities to renegotiate planning agreements could help align expectations with current market realities, such as converting small-unit allocations to other tenures like discounted market rent or shared equity.
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How Highlight Housing Can Help
At Highlight Housing, we specialise in providing innovative, standout solutions for the affordable housing sector. Here’s how we can support housebuilders:
• Strategic Consultancy: We guide housebuilders through the complexities of the S106 and S75 processes, ensuring compliance while maximising opportunities.
• Marketing Expertise: We help position affordable homes effectively to attract housing associations, investors, or direct customers.
• Alternative Delivery Models: From shared ownership to custom builds, we offer insights into diversifying affordable housing delivery to meet evolving market needs.
• Network Access: With extensive connections across housing associations and other stakeholders, we can match housebuilders with the right partners for their developments.
• End-to-End Support: From initial planning to the final handover, Highlight Housing provides tailored solutions that help housebuilders navigate the challenges of delivering affordable homes.
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The challenges in the S106 and S75 affordable housing market require innovative thinking and collaboration. Highlight Housing is committed to supporting housebuilders in overcoming these hurdles, ensuring that the delivery of affordable homes remains viable and impactful. Together, we can address these challenges and continue to provide much-needed affordable housing across the UK.