stronger links between councils and housing associations

What does it mean for Sovereign?

The Budget will have a dramatic impact on Sovereign and other housing associations, particularly in their ability to build more affordable homes and provide value added services.

The reduction in rent - while good news for our residents - will significantly reduce our income over the next four years. Fortunately, Sovereign starts in a strong financial position.

Meanwhile the proposed Right to Buy scheme could mean we lose a significant number of our affordable homes. However, any surplus we raise from these sales could be spent on providing more new homes.

The government is also proposing a ‘Pay to Stay’ policy, which would mean households in social housing earning more than £40,000 in London and over £30,000 elsewhere would no longer get sub-market rents. Rents would be expected to increase as residents’ incomes rise above these thresholds, although we do not have the detail yet. If the scheme goes ahead, it’s likely to start from April 2017.

When you look at these policies all together the implications for us and the housing sector are complex. For example, a reduction in the rents not only reduces our income but it also impacts on the value of our homes. This could then make the cost of money that we borrow more expensive. That in turn increases the cost of building a new home.

We regularly build around 1,000 homes a year. These changes will affect the scale of our development programme and the types of homes we are likely to build in the future.