Housing associations could play an important part in meeting demand for homes at market rents - especially among young, mobile professionals. But the Housing Corporation's regulation framework is acting as a deterrent and needs to change, according to research for the Joseph Rowntree Foundation (JRF).

The study by Prof. Barry Goodchild and Prof. Paul Syms of Sheffield Hallam University suggests there are currently fewer than 5,000 housing association homes in England let at full market rents. Most, like the JRF's own CASPAR (City-centre Apartments for Single People at Affordable Rents) initiatives in Birmingham and Leeds, have been developed in the past five years.

The two CASPAR schemes are demonstration projects intended to convince developers that affordable accommodation for single people and childless couples on middle incomes is a sound investment that can contribute to urban renewal. But the researchers found a range of different of reasons why housing associations had become involved in market rent schemes. These included a desire to diversify and create cross-subsidies for their social housing activities, as well as area regeneration or filling a gap in the local housing market.

The core client group for market renting was young people with incomes between £15,000 and £30,000 a year. These levels of income made it unlikely they would qualify for social housing, but their mobility meant they were not yet ready or willing to start buying their own home. Although the CASPARs and some other market renting schemes were sited in city centres, associations had invested in the inner suburbs and medium‑sized towns. There were also a few developments of semi‑detached and terraced suburban properties.

Most of the housing associations contacted by the researchers said their rent levels were no higher, and probably lower, than those of private landlords in their area. Their typical marketing strategy was to emphasise a combination of location, value for money, good design and efficient management.

Most schemes had proved easy to let, with the level of empty properties ('voids') ranging between 2 and 7 per cent. The financial returns on market rent schemes, appeared to compare favourably with the 6.5 per cent a year average on the Investment Property Databank's investment index for residential property.

Housing association managers emphasised that successful schemes required a clear understanding of the ways that market rent tenants differed in their needs from those on the social housing side of their operations. In general, they were less concerned about having a say in the way their housing was managed, but more demanding about the level of service, especially speedy repairs.

Interviews with housing association senior managers, meanwhile, showed that – although the Housing Corporation feels its regulation system is flexible – the regulatory regime was a recurring source of complaints, and seen as a deterrent to expanding the market rent sector. Associations, as Registered Social Landlords, are expected to devote at least 50 per cent of their activities to social housing. However, the Corporation’s regulatory framework also indicates that increased regulation may be justified if market renting accounts for more than 5 per cent of the activities of a housing association.

Prof. Goodchild said: “Housing associations feel strongly that the existing regulation regime fails to acknowledge their positive role meeting the demand for homes at market rents. They also want the Housing Corporation to recognise the potential contribution that market renting could make to their finances and viability in areas where demand for social housing is declining. We recommend that the regulatory framework should be changed to embrace the legitimate role of associations in providing homes at affordable, market rents – particularly where this contributes to area regeneration. ”

Note to Editors
Between social housing and the market: developing and managing market renting schemes by housing associations by Barry Goodchild and Paul Syms is published by The Royal Institution of Chartered Surveyors Books, Surveyor Court, Westwood Way, Coventry CV4 8JE (020-7222 7000) price £10.50 inc. p&p.

A summary of findings is available free of charge here.

For further information contact:

Prof. Barry Goodchild (author) 0114-225 3531
Prof. Paul Syms (author) 0114-225 4287

Issued by David Utting, Associate Director (Public Affairs) 020-7278 9665 / david.utting@jrf.org.uk