Sudden rise in inflation presents a ‘major risk’ to multibillion-pound Affordable Homes Programme 

The AHP is the primary channel for funds to be distributed to housing associations to build new homes and has more than £11.5bn earmarked to be spent on affordable homes.

Since the programme was first launched in the early 2010s, it has dished out billions of pounds to providers, enabling them to build hundreds of thousands of affordable homes.

The last five-year settlement, covering the period between 2016 and 2021, was the biggest yet, with the government committing £9bn across the country.

The report also warned that any increase in rent for tenants might affect associations’ cash flows and the financial viability of developments, which could result in grant funding being returned towards the end of the AHP 2021-2026.

Since 2020, social landlords in England have been able to increase rents by the rate of Consumer Price Index (CPI) – which measures inflation (the rising cost of living) – plus 1% each year.  

But CPI rose by 9.4% in the 12 months to June 2022, up from 9.1% in May. The Bank of England has warned that inflation could hit 13% by the end of the year. 

If the upward trend continues, it means councils and housing associations could raise rents by more than 10% from April 2023. Or if they decide against a raise, they would have to look at things to cut to deal with the shortfall. 

Comparatively, when the rent for 2022-23 was set last September, CPI was 3.1%. Last year, all major English housing associations raised rents by the maximum allowed.

The report follows a similar warning made by ratings agency S&P last week, in which it said a host of associations’ credit ratings could “suffer” as they tackle the thorny issues of rent levels and rising inflation.

As a result of rising inflation and the cost of living crisis, the Social Housing Action Campaign has called on the government to freeze rent and service charges for housing association tenants.

Last month, Inside Housing reported that Homes England had missed its affordable homes completion target by 21.5%. It aimed to support the completion of 34,349 affordable homes in 2021-22, but only helped deliver 26,953.

In addition, the agency missed its targets for overall completions. It aimed to support the completion of 44,275 homes, but 37,632 properties were delivered – 15% below the target. 

Meanwhile, the total number of starts Homes England supported was 38,562 in 2021-22, down more than 10,000 from the target of 48,810. 

The number of homes unlocked through infrastructure and land finished 38% below the intended target of 94,863 homes at 58,993. 

Update: at 14.21pm, 12.08.22

This article was updated as the report was originally attributed to Homes England by mistake.