What will 'evolution towards devolution'mean for Housing Assoications facing continuous operating pressures to their house building

April 8, 2025

Background

The current operating environment for Housing Associations is characterised by continuous change. This environment challenges the quality of services provided to customers, increases in operating costs, and necessitates the creation of viable solutions for new housing developments. With the need for de-risk funding for development land, when the sector faces substantial pressure on financial stability and the capacity to invest.

In boardrooms, strategic decisions have become complex, where trade-offs can significantly impact operational models, affecting short- to medium-term financial strength, regulatory status, and organisational reputation.

However, the landscape for building new homes is entering a significant period of evolution as devolution progresses across government. This evolution will extend regionally and involve various associated agencies within the housing sector. The housing association sector faces significant changes that will redefine how it procures and engages in housebuilding.

This article examines the influencing factors that will prompt the Housing Association sector to transition into a state of evolution, stemming from the consequences of devolution.

Devolution and Mayoral Evolving Powers

In December 2024, the government published its “Devolution White Paper," representing a significant move by central government aimed at fostering economic growth on a regional basis. This white paper facilitates the transformation of Mayoral Combined Authorities into key regional entities responsible for delivering economic and place-based regeneration, including housing delivery and spatial planning. As a result, their role is shifting from merely enabling Councils to assuming statutory authority, thereby placing housing at the core of the devolution evolution.

These regional Mayors will gain new powers in several areas, including housing, strategic spatial planning, economic development, regeneration, energy, environment and climate change.  These government reforms to policies and statutory functions empowering Mayoral Combined Authorities will involve a rebranding as Strategic Authorities. Strategically, this indicates that affordable housing will become a statutory function of

regional mayoral authorities, marking a fundamental shift in the relationship between Housing Associations, land, and funding as they pursue viable new build projects and secure grant funding for housing supply. The focus will evolve toward delivering outcomes of scale and demonstrable deliverability within this new landscape of housebuilding influenced by devolution.

In the short term, Homes England’s accountability will increase towards the established Mayoral Combined Authorities. We are already witnessing a wave of strategic partnerships being formed among well-established combined authorities. This will equip those authorities with the ability to guide and monitor Homes England’s progress and escalate issues to ministers as needed. This incorporation will also facilitate the establishment of Mayoral Development Corporations in the centralisation of new build housing targets set by the regional district council’s spatial planning, directing large-scale regeneration and new town development delivery.

The expansion of mayoral powers compels Housing Associations to evolve into place makers as advanced master developers, recognised through collaborative partnerships and engagement with multiple agencies if they are to adapt to this new mode of operation, resulting from devolution.

Planning Policy

The increased powers granted to regional Mayors will be further strengthened by shifts in government planning policy aimed at accelerating economic growth and housing development. The planning reforms announced in March 2025 include measures for the government to undertake certain planning decisions to reduce the workload of planning committees, enhance accountability for development corporations, and empower regional Mayors to control spatial development strategies.

For the Housing Association sector, this shift should be viewed positively, as it may expedite planning decisions. This will be particularly advantageous for those developing within designated mayoral housing spatial strategy areas, offering greater certainty in the planning process and approvals. This improved certainty should lead development teams to face lower risks and reduced abortive costs.

March 2025: A Month of Significant Events

Since the publication of the “Devolution White Paper” in December 2024, a wave of sector journal reporting and thought leadership has emerged regarding its impact across various sectors. Key discussions among housing leaders and politicians have centred on the goal of delivering 1.5 million new homes, all while addressing challenges related to land viability, technical capacity, and funding. These conversations have also touched upon the expansion of mayoral powers and the announcement of the new Interim Chief Executive of Homes England, who brings a background both in the agency and as a Chief Executive of a major Combined Authority, marking a significant signal of ‘evolution towards devolution’.

Historians will identify March 2025 as a landmark month that initiated the transformative journey of the ‘Devolution White Paper’. This period unveiled strategic thinking and planning in delivery. It signalled to the Housing Association sector, as MIPIM 2025 was staged in Cannes, France, alongside uncertainty of the operating environment, is being joined by a landmark evolution event directed by devolution. An evolution that will fundamentally reshape the procurement of land and grant support to the Housing Association sector. The Housing Association sector is moving beyond mere operational adjustments; it is entering a phase of transformation characterised by a significant wave of “evolution towards devolution”.

The launch of MIPIM 2025 was particularly significant, as it brought together major Councils, Combined Authorities, and Mayors at this renowned international property conference, alongside Homes England and the Greater London Authority. These key stakeholders presented to investors and partners their visions for shaping the evolution to deliver UK regeneration and economic growth under devolution. It saw major players in regeneration and housing growth outline what evolution would entail in driving “evolution towards devolution”. Under highly organised events, strategies and delivery plans were formulated in response to devolution, with Chief Executives and Mayors reaffirming their commitment to delivering 1.5 million new homes.

At MIPIM, Homes England was prevalent, with its new leader emphasising the need to evolve in alignment with devolution. The agency is expected to enhance its role as a master developer, tackling land assembly and de-risking sites for development. As mayoral powers increase, Homes England will work more closely with Combined Authority Mayors, to facilitate regional housebuilding. This evolution will see the emergence of Mayoral Development Corporations and other new development vehicles. This while fostering partnerships with the private sector, to access innovative funding streams and boost housing supply.

These developments mark key aspects of the shift towards devolution for the Housing Association sector, influencing its relationships and procurement processes for grant support in new housing projects.

March 2025 remains a significant month

The Chancellor’s spring budget statement reinforced the ambition for housing growth and its vital role in economic progress, supported by the Office for Budget Responsibility (OBR). This statement highlighted the importance of changes to planning policy and devolution, with a £2.5 billion top-up for social housebuilding. For the Housing Association sector, March 2025 continues to symbolise a critical moment where Mayoral Combined Authorities outline their commitments to housing growth, Homes England articulates its needs to evolve towards devolution, and a substantial £2.5 billion Government funding boost announced.

‘If Housing Associations want to continue building new homes to strengthen their revenue and ensure financial stability, they must embrace the evolution towards devolution.’

This represents a pivotal time for the Housing Association sector, demanding new strategic thinking and discussions in boardrooms to determine how they can engage in this evolution. Housing Associations need to actively participate in this evolution to maintain their ability to construct new homes, thereby reinforcing their revenue streams and addressing the challenges within the operating environment. Failing to do so may risk relegating them to mere housing management roles, lacking new revenue sources to sustain housing standards.

Evolve or Just be a Housing Manager

The Regulator “Sector Risk Profiles”, published in 2024, further emphasises the increasing operating challenges facing housing organisations. These challenges present significant strategic questions for boards, particularly regarding development viability, funding capacity, retrofitting investments and the financial capabilities of organisations grappling with reduced headroom and narrower margins, within loan covenant ratios. As Housing Associations begin to address these critical issues, there needs to be consideration of the strategic impact on organisations and the type of leadership required to evolve their new build programmes.

This is set against a backdrop of rising complexity in development and fundamental shifts in relationships with Councils, Combined Authorities, and Homes England, as traditional routes to new builds undergo substantial changes. With Homes England increasingly working closer with Mayoral Combined Authorities, as their powers are set to expand.

To navigate these changes, organisations will need to reposition themselves and forge new relationships with Combined Authorities, Homes England, and District Councils to secure grants and land. This includes engaging in partnerships to work alongside mayoral development vehicles that emerge from devolution-driven collaborations, inclusive of new master developer entrants.

‘This “evolution to devolution” necessitates that organisations redesign their capabilities in placemaking and create innovative funding streams, or risk simply becoming housing managers’

Given the challenging operating environment, boards must understand how devolution will influence their key priorities for new build and the skills required to thrive. Strategic decisions need to be informed by a nuanced understanding of devolution dynamics and ongoing evolutionary developments. By triangulating strategic and operational considerations, boards must assess how their capacity and reputation as developers should evolve to mitigate the risk of becoming merely housing managers. This adds further complexity to their operating environment as they aim to serve residents while fulfilling commercial and financial obligations amid increasing operational risks.

The “evolution to devolution” will require organisations to refine their placemaking capabilities while fostering innovative funding structures, which may involve delaying early debt payments during construction as a shared-risk approach, from lenders benefiting from long-term lending interest payments. This shift will change how Housing Associations procure land and secure Homes England funding to ensure viable projects.

Organisations must innovate in funding partnerships and excel in collaborative leadership across multiple agencies. This includes the capability of the master developer who can lead placemaking efforts effectively through collaboration across multiple agencies.

Evolution to Devolution

Housing Associations cannot underestimate the scale of the evolutionary changes accompanying devolution. By the end of this government term, we will witness a dramatically altered landscape compared to pre-March 2025. Those who offer viable solutions and can deliver rapidly, supported by expertise and skills to operate across agencies, will be well-positioned.

‘It will require this leadership of the place maker and collaborative partnerships in the arena of the Master Developer, skilled in collaborative multiple agency leadership, with the vision, and clarity on viability and funding solutions, in pursuit of access to land and grant, to deliver newbuild housing’. 

The capacity to develop and establish robust funding structures will be crucial, especially as Mayors seek to fulfil election promises to deliver housing at scale. Effective leadership will combine the roles of place maker and collaborative partner within the context of the Master Developer. This leader must possess the vision and clarity necessary to navigate viability and funding solutions in pursuit of land and grants for new housing developments.

The development sector for Housing Associations will necessitate the formation of new relationships or the reinforcement of existing ones with local District Councils. A new relational landscape must be built with Combined Authorities and Homes England. This must be guided by demonstrating the deliverability of collaborative master developer practices and mixed tenure commercial acumen. Next to funding structures that enable agreements in stretching funding and developer returns later in the development process to enhance viability. The leadership required will include expertise in placemaking across multiple agencies and collaboration skills that provide a clear vision for delivery. This entails working with stakeholders from the Government, Councils, Combined Authorities, and their emerging development vehicles, coordinating efforts among developers and institutions.

The risk of not investing in development means that Housing Associations may end up merely managing existing housing stock. The Regulator has highlighted concerns about lower operating margins and loan covenant ratios, which will restrict their capacity to reinvest. This is a challenge currently faced by the ALMO sector, as Housing Revenue Account (HRA) revenue reports show increasing pressures on reinvestment capacity, primarily due to reliance on rent receipts, with limited revenue growth. New build housing increases income on the balance sheet thereby enabling increased borrowing and investment capacity.

Building new homes goes beyond just providing affordable housing; it is essential for effective cyclical strategic property management. From a commercial perspective, renewing assets is necessary to adapt to changing lifestyles, needs and standards. This approach not only establishes new revenue streams but also allows for disinvestment to reduce financial risks while investing in assets that ensure residents remain safe and warn. If organisations fail to adopt this strategy, they may struggle to maintain decent home standards and risk breaching regulatory requirements.

Paul Patterson: Business Leader of RP’s, ALMO’s, LA’s and set up CA’s in transforming organisations, enabling transition at pace to meet the changing operating environment of tomorrow. Expert in housing & regeneration, strategic partnerships, enabling customers and stakeholders thrive.