Facing momentous change

Elaine Bailey from Hyde outlines how the housing sector is facing momentous change and will need to undergo structural change both as a sector and as individual associations if it is to continue to thrive. But, conversely, housing has never been so needed and we have a crucial part to play in meeting Government targets for one million new homes in the next 5 years.

Since the election, the sector has had its operating environment significantly altered. The present government came in on a wave of confidence, with no real opposition, and has followed bold policies – rent reduction, right to buy, pay to stay and welfare reform – and clearly stated objectives of more homes and increased home ownership. And we also suffer from a government that views us as inefficient, slow to embrace change, complainers rather than entrepreneurs, and not fully utilising our surpluses to deliver new homes.

Our income stream is no longer assured and associations have responded to the rent reduction, likely increase in arrears and loss of revenue from R2B in various ways – reducing service provision, reducing and/or changing their development mix, utilising their reserves and accepting reduced surpluses.

R2B will likely impact more significantly in low value areas where prices are affordable, but replacement on a 1:1 basis is unachievable. Income and loan security will be lost and some associations will struggle to replace it, potentially jeopardising loan agreements and development programmes.

And with capital grants shrivelling away, developing HAs are ever more reliant on generating surpluses from their underlying business, cross subsidy from open market sales and a mix of short and long term loans to fund development.

On the other hand, Housing Associations have never been so needed – we provide homes for those who are priced out of the open market, either buying or renting. Our social purpose is fulfilled through the supply of new homes and the provision of well managed good quality housing, let at subsidised rents to those who most need it, and providing extra services to a small proportion of our customers who are most in need, most vulnerable and most at risk of not sustaining their tenancies by themselves.

We provide a much wider variety of tenures than private sector landlords and developers, we provide customers with security of rents and tenure, confidence that their home will be properly maintained; and we invest in neighbourhoods to make them safe and enjoyable places to live.

Developer HAs  invest for the long term and are more able to take on the large strategic sites which require significant enabling infrastructure, and which private sector developers may shy away from. We can build out sites at a faster rate than private developers because we’re bringing a broad range of tenures to the market. And we can continue to build during downturn, switching tenures as required to ride out the cycle.

So what sort of changes might we see over the coming years?

  • A reinvention of the sector if we are to win back Government support – clarity about who we are, what we do, and how we do it
  • A new delivery model and management model based on ‘what’s needed’ rather than ‘what’s nice to have’. A focus on efficiency – reducing waste, bureaucracy and services that demonstrate marginal or no value.
  • HAs working their asset base harder, borrowing money on the strength of it and taking commercial risks in order to build homes. Many smaller HAs don’t currently have those skills and the sector as a whole needs to find a way to support them.
  • Some HAs may struggle over time to maintain viability. Options include sharing support services with others (eg back office, procurement deals) and, for developing HAs, partnerships with developers and LAs to stretch available funds to maximise the volume of homes built.
  • With the advent of the NHF voluntary merger code Boards around the country will be considering their long term futures. Some will be considering their ongoing viability, others will be considering the opportunities for additionality – what extra can be done together that can’t be done apart. Merger activity is very much on the increase, albeit it is the larger HAs currently involved in these deals – Affinity Sutton and Circle, Genesis and Thames Valley, Amicus Horizon and Veridian already announced.

We were very pleased to announce recently the proposed merger of L&Q, Hyde and East Thames to form the largest HA in the country and the largest landlord in London. But, importantly, the driver for the merger is that together we can build 100k homes over the next 10 years, 35k more than if we remain as 3 standalone organisations. Together, we can invest £250m into a foundation to support the communities in which are residents live; and together we’ll be setting up a Training Academy for staff and residents with an annual budget of £5m more than our current combined training and development budgets.

Our sector has undergone the biggest change for many years. We can choose to hold onto the old ways or we can step confidently into the new world, embrace change and emerge stronger, more relevant and more valued.

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