By Jonathan Layzell, Chief Officer for Development and Growth at Stonewater

Housing associations face some difficult decisions in the current unprecedented economic climate, as costs rise, energy prices spiral and inflation soars.

Our customers of course face the same challenges, with the cost-of-living crisis meaning that many are struggling to make ends meet and keep up with their rent payments, resulting in a further knock-on effect for landlords.

Recognising that times are indeed tough for all our customers, the 7% rent cap has been broadly welcomed by the sector. But, in an environment where inflation has been running at over 10% and the rent settlement is usually CPI plus 1%, this still represents a 4% income cut in real terms.

So where does that leave us in terms of our commitment to plugging the gap in quality affordable housing in the UK?

Balancing priorities

Many housing providers will feel the need to mothball or severely curtail their development aspirations in the short to medium-term, as business plans are reviewed in light of fresh budgetary constraints.

At Stonewater we remain committed to maximising our delivery of new affordable homes, although we must carefully work through the way this will be achieved, taking into account the financial environment we are now operating within.

We will have to balance our commitment to growth with ongoing investment in our existing stock (including the retrofit challenge on the net-zero carbon journey), along with the need to deliver an excellent service to our customers.

But our aspiration is still to deliver at least 1,000 homes per year. We are on track to achieve or exceed that this year, having completed 836 homes last year, and currently have around 3,000 homes in contract.

With our costs increasing significantly, we will have to be laser-like in our focus on efficiency and delivering value for money in order to maximise the number of homes we can build.

We will need to maintain the organisational resilience to realise our housebuilding ambitions, despite the economic turbulence around us, but our development achievements so far are testament to the underlying strength of our business.

Our development journey 

Having formed from a merger in 2015, with two development teams brought together from our legacy organisations, Stonewater managed to deliver 350 new homes within that first transitional year.

The team then rapidly developed a strategy to pursue increasingly larger opportunities. A few years ago, we committed to our first scheme of over 100 properties and now we have around half a dozen of that size in progress at any one time. While the average size of our schemes used to be 15-20 homes, it is now more like 40-60 properties.

After becoming part of the largest Homes England strategic partnership alongside Guinness Partnership in 2018, we won further funding in 2021 to help us deliver over 8,500 homes by 2029.

Crucially, by closing the viability gap between the cost of development and the revenue it generates, this government funding allows us to develop truly affordable homes of a range of tenures – a mix of affordable and social rent, along with shared ownership properties.

This assurance of long-term funding gives certainty to support our housebuilding plans, enabling us to commit to buying additional land and target areas of greatest housing need. By ensuring our organisation is well run, efficiently and effectively, we are also able to raise further funds by borrowing from the private sector through the bond market.

We recently celebrated the milestone of delivering our 5,000^th new home, bringing our total stock up to 35,000 properties. The 145-home Safford Park development has been built on the site of the former Parker Pen factory in Newhaven.

As well as an EPC B energy rating, the homes benefit from electric vehicle charging points, a community garden and allotment space, along with attractive public artwork reflecting the history of the site – a feature we incorporate in all our new schemes.

Future pipeline

Operating as we do across much of England, we are keen to develop more homes in areas where we already have a presence, so currently we have a number of schemes ongoing in Yorkshire, Surrey, Northamptonshire, Sussex, Somerset and Worcestershire.

Our focus remains on building much-needed family homes in market towns and rural areas. We have a mix of brownfield and greenfield sites, and around half our new properties are built under Section 106 agreements.

Two-thirds of our new homes are affordable or social rent, with a third for shared ownership. Although we are exploring open market schemes as joint ventures with the private sector, this is not our priority and we remain focused on deploying our resources to deliver as many affordable homes as we can.

In line with our 1,000 homes per year target, we are currently aiming to hand over at least 20 homes each week. But we recognise it is important that we are not just driven by numbers – we must remember we are creating homes, rather than units. We should not lose sight of the fact that we need quality, not just quantity, of homes.

As such, we take great care with the built environment and public space around our schemes. We have a longstanding commitment to investing in public art installations and plant at least six trees for every home we build under a partnership with the Community Forest Trust.

Sustainability is also a key factor in our new developments, and we are keen to harness the latest technology to maximise this.

We made an early decision to phase out fossil fuel heating in our land-led schemes and we are working to do the same with our Section 106 providers. We are committed to installing electric vehicle charging points for all our new homes and are exploring smart technology to actively manage the heating of buildings in order to maximise energy efficiency.

Long-term affordability is, as always, our prime concern. For example, where we fit solar panels, we are exploring a model which will better benefit our customers – so excess electricity generated can be sold at low cost to fellow customers, rather than being exported back to the grid.

Rising to the challenge

To continue to deliver on our development plans, we need to take steps to tackle the huge challenges facing the construction sector – whether that be rising costs or the shortages of materials, labour and skills.

These can be mitigated to some degree by varying our approach, such as incorporating the use of modular housing, and we are already working with a number of Modern Methods of Construction (MMC) manufacturers on various new-build schemes across the country.

The industry is in its infancy in this country and our sector is still at the beginning of its journey with MMC, but we need to explore its potential in order to realise the benefits.

It offers huge scope to better control the quality, price and speed of delivery of new housing. As such, it is surely part of the solution to the UK’s housing crisis by helping us to hit the government’s target of building 300,000 homes a year.

In the midst of the climate crisis, the long-term challenge for all of us is the need to limit our damage to the environment. While we recognise the pressing need for affordable homes, we must also recognise the massive environmental impact of building and running homes.

At Stonewater, we are not blind to the plight of our planet. We take such considerations very seriously and are working to drive down the environmental impact of our new and existing homes throughout their lifetime, whether through improved energy efficiency or a more sensitive approach to the construction process.

Weathering the storm

Building resilience is key to achieving our housebuilding goals. We have strong foundations, with a highly committed team firmly focused on bringing our development strategy to fruition and delivering the new homes that are so desperately needed.

We also take the long-term view, with our investment decisions based on the fact that we want to build and then own these properties for many decades to come. Money we generate is ploughed into maintaining or improving our existing stock or developing new homes, enhancing our assets and leaving the organisation in a better financial position.

As a relatively large business, we are used to navigating storms – whether that be Brexit, Covid, recession or the climate emergency – so we are confident in our ability to make the right decisions to steer our future course. The resilience necessary to tackle new challenges is built into our psyche.

At a time when the need for somewhere warm and affordable to live has never been so clear, our team remains dedicated to realising Stonewater’s vision – for everyone to have the opportunity to have a place that they can call home.