A major social housing provider in Nottinghamshire is having to scale back the number of homes it is building due to "tough" economic conditions. The Nottingham Community Housing Association (NCHA) says rising inflation and a cap on rents are among the economic factors working against its ambition to help solve an affordable housing "crisis."
NCHA is celebrating 50 years in business this week, with the company having been launched thanks to a small grant from Shelter and a loan from Nottingham City Council in April 1973. The company now owns an estate of 10,000 homes and provides around a million hours of care and support services each year.
The company's social housing is available to those in need, including groups such as low-income families and the elderly. The National Housing Federation recently called for a national plan to increase the number of affordable and social homes in England, after publishing research showing that over 310,000 children were living in overcrowded homes.
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NCHA has been developing 420 new homes every year, but the company now says it will be reducing its building work to 370 new homes. Paul Moat, who has worked at NCHA since 1999 and served as its chief executive for five years, said: "We're working in a tough environment, so economic factors are maybe working against us to some degree.
"There's a cost of living crisis, it's a difficult environment within which to operate, but we haven't lost our ambition." Mr Moat said the key factor affecting the company is inflation.
Formulas would usually allow NCHA to increase the rent for its tenants by Consumer Price Index inflation plus one. That would have meant rents going up by 11.1%, but the Government then capped the rent increase to 7%.
Coupled with rising interest rates making it more expensive for NCHA to service debt, Mr Moat says it has been forced to make difficult choices. He said: "Our board have decided, just at the moment while things are financially and economically challenging, to reduce the number of homes we develop by 50 each year from 420 to 370.
"But they've said that with a very clear caveat that if financial circumstances start to turn back in our favour, they'd like to replace those 50 homes. They realise there is a housing crisis, a housing shortage, and it's people like us that are going to solve that crisis."
Mr Moat acknowledged that even if NCHA had been able to increase rent by 11.1%, it would have been a difficult decision for the company to take. He said: "We are running a business and our costs are increasing, but we are socially driven and helping people who need help, so this is a really difficult conversation that we have with our board.
"With my commercial hat on, of course I want to increase rents by 11% because it makes us far more financially strong. But on the other hand, I'd like to increase rents by nothing because when I talk to our customers, they're struggling."
Jake Bradley, Associate Professor in Economics at the University of Nottingham, said it was "little wonder" that NCHA was being forced to scale back development. Professor Bradley said: "In the discussion regarding inflation, it is often neglected that price rises affect institutions as well as individuals.
"Inflation has been stubbornly sitting above 10 per cent for some time and building material prices have been growing faster still." This problem was also noted by East Midlands Chamber chief executive Scott Knowles, who said: "The cost-of-doing-business crisis, which has been running in synchronisation with the more widely-known cost-of-living crisis over the past 18 months, has significantly narrowed financial margins for many organisations and caused them to reassess business plans.
“Research from the chamber via our Quarterly Economic Survey during this period has highlighted the cost pressures that have affected East Midlands businesses from all sides – whether it's energy, fuel, raw materials and people costs, or the rising interest rates that are designed to combat high inflation. As a result, their access to cashflow has declined into negative territory and investment intentions have been scaled back.
"The picture is at least improving, with our first survey of 2023 showing all these key economic indicators are heading in the right direction, and a higher degree of business confidence due to a more stable policy environment means we hope to see the situation continue to improve. But as the latest ONS figures show, there has been zero growth in national GDP and inflation remains in double digits, which shows we aren't out of the woods yet by any means."
Professor Bradley also said issues had been "compounded" for low-income renters by the freezing of local housing allowance, a benefit provided to tenants renting from private landlords. He said: "A recent report from the Institute of Fiscal Studies shows that since rents have increased at different rates across the country, this has widened already large regional disparities. For example, while rents in Nottingham and Kings Lynn are roughly equal, the amount of housing support that those who live in Nottingham can receive is £25 less than those living in Kings Lynn."
Of the 420 homes that NCHA was building, around 370 of them were affordable whilst the rest were made up of the homes it sells under its commercial subsidiary for profit, which is then gift aided back into the charity. Of the 370 homes, around 60% of them were rentals and the rest were shared ownership properties.
The third element of NCHA is its purely charitable arm that manages around 150 almshouses, the oldest form of social housing. But key to its operation is the social care and support it provides to customers, something which Mr Moat said it does not want to cut back on.
He said: "Care and support is an underfunded area, so social care should be funded more strongly. We continue to deliver social care, it's tough, but our board have an ambition for us to at least maintain the level of service that we provide and to grow where it makes sense.
"That is not the case across the whole of the housing sector, some have withdrawn from care and support. But we have seen that as a real part of our DNA and an important part of what makes NCHA special."
Despite the challenges, major projects for NCHA remain ongoing, including a second phase of homes at the Trent Basin site in Nottingham. Another major development is the building of 82 affordable houses at the former Virgin Media offices off Daleside Road, which got underway in October."
Scott Knowles added: "As we have outlined in our East Midlands Business Manifesto for Growth, the Government can support businesses by 'getting the basics right' – in other words, removing the day-to-day barriers that exist across numerous sectors. For industries like construction, Westminster can help them to tackle the deeply entrenched skills shortage by providing greater incentives for companies to invest in staff training, and bringing forward the introduction of the Lifelong Loan Entitlement to support retraining and the retainment of an older workforce."
A Department for Levelling Up, Housing and Communities spokesperson said: "We remain committed to delivering 300,000 new homes per year and we are investing £11.5 billion to build the affordable, quality homes this country needs. Our latest data shows overall annual housing supply was up 10% in 2021/2022 compared to the previous year – the third highest rate for the last 30 years."
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