Anthony Riley

Developing New Homes
Navigating the risks and rewards

In addition to the existing 2016-21 Programme, Homes England (HE) have recently allocated a further £1.7bn for 23 strategic partners to start another 40,000 homes by March 2022, as well as providing much needed certainty over rent levels post-2020. The sector must now deliver!

Many organisations are looking to build new homes themselves for the first time in many years, with some strategic partners inviting small to medium sized associations and local authority partners to help them deliver this ambitious national target. They are being invited to join partnerships to help fund individual schemes or a series of schemes while benefiting from the available HE grant.

Even under the umbrella of ‘strategic partner’, each organization will need to know accurately their own capacity to fund ambitions. Crucially, members also need to understand and agree on their appetite towards the scale and risk of delivering chosen programmes on time and on budget.

Attractive opportunities will become available and caution is advised; board members and councilors will need to understand the specific rewards and the risks involved, especially if there are limited development skills within the organisation. The uncertainties in the general economy, labor and materials markets must also be considered.

There needs to be a thorough understanding of the limits of risk exposure via a Scheme Appraisal system regularly approved by the board. Further to ensuring Homes England standards are met in the finished home, there needs to be a system of managing the following risks:

• Contractor performance/exposure
• Payment certificates
• Sales income (particularly for both outright sale and shared ownership homes)
• Demand for the rented product in terms of its size and location
• Other provider activity in the area

Additionally, the use of Off-Site Manufacturing is increasing within the market. Members will need to be aware of the opportunities these systems can offer but also their relative immaturity. It is essential that the product is fully warranted by insurers and a review be undertaken of how the predicted life cycle costings of the system fits within the organisation’s existing Asset Management Programme.

All of these considerations reflect the good governance practice required by the regulator in order to avoid any ‘white elephants’ which will put the organization at financial and reputational risk. 

Please contact us If you would like to know more about how Central Consultancy can help your executive and board navigate these risks.