22 September 2015, One implication on the residential development land market of the Chancellors Budget speech in July is his announcement to reduce rents in the social rented sector for four years from April 2016. This has the potential to reduce Housing Associations ability to meet targets for affordable homes and adds risk to the land market.

In his July Budget speech, George Osborne confirmed that the social housing rent settlement announced in 2013 that allows Housing Associations to raise rents by one per cent above inflation per annum would be scrapped. Instead the Government will impose compulsory reductions in social rents of 1% per annum for a four year term, before reverting to CPI index linked increases once again.

More recently in a House of Lords economic affairs committee earlier this month, Mr Osborne questioned the performance of Housing Associations, the registered social landlords that are supported by the state. In defending plans to extend the Government’s Right to Buy scheme he questioned the sector’s efficiency.

This has placed uncertainty in the market with Housing Associations now having to rebuild business plans and reconsider their positions in the market when putting forward offers on the affordable element of consented land sales.

This is still a relatively fresh announcement and the implications are yet to be fully realised whilst the sector still establishes its position moving forward. The noticeable initial affect is the withdrawal of offers made by Registered Providers to house builders, to take up affordable housing under S106 agreements, stalling sales of consented development sites. In some cases, offers are being re-negotiated at reduced rates, ultimately impacting negatively on the land value. A number of RPs have withdrawn from this area of the market and there are longer term concerns around ongoing austerity measures beyond the initial four year term. This could be a hiatus in the market with activity resuming, albeit at reduced values, in the next couple of months however the immediate uncertainty is doing nothing to assist the delivery of much needed housing stock. We are monitoring this issue closely so that we can provide up to date advice to our land owning clients and work with house builders to understand and mitigate the effects of this policy through this period of uncertainty.