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Gavin Barwell

The surprise of Gavin Barwell’s final Housing White Paper Roadshow in Surrey today, didn’t come from the Minister himself, but instead one of the questioners.

The unusual suspect, a Conservative Councillor from (the not so socialist heartland of) Guildford was extremely concerned about stretched Social Housing within his constituency. In particular his concerns centred around the compulsory sale of high value Council housing assets and the Right to Buy as a whole.

The latter of which he requested to be reformed as “completions of Right to Buy sales had happened too quickly and gone too cheap”.

Whilst I have heard whisperings of Conservative disquiet in the heartlands, this is the first time that I have ever witnessed it in person and it does bring hope for the future.

Although Social Housing during the event by no means dominated the conversation the terminology used by Gavin Barwell was telling and he continued to refer to “affordable rent”. There was no mention of social rent.

The Minister confirmed that there will be no rethink on the sale for high value assets and his “hands were tied as this was a manifesto commitment to fund Housing Association Right to Buy” however he did stress that DCLG projections predict this will be a lot less painful than envisaged by Councils.

In justifying the Housing Association voluntary Right to Buy Mr Barwell explained it was difficult to justify to constituents why they could not buy a Housing Association house funded by government, whilst others could buy a council house.

This however is a rather simplistic argument as the key distinction here, is of course that this justification assumes that all Housing Association units have been grant funded, which is not of course always the case.

Although Gavin Barwell does support Right to Buy, he stressed this did come with the genuine caveat of like for like replacements. This in itself is a positive sign, but one that only history and statistics will ultimately judge. For example is an affordable rent unit a genuine like for like replacement for a previous social rent one.

Overall the Minister does rather impress with the grasp of the brief he has held in little over 9 months. His detailed knowledge is admirable and it is clear he is well briefed, at one point between questions quickly scanning the National Planning Policy Framework for an exact provision.

His message to all Sectors is extremely clear, “I am listening” and “I’m a man very much in need of allies to create a broad coalition and win support”.

He has certainly listened to Developer’s omissions that they are unable to build to required levels and publicly mentioned Housing Associations as being part of that solution to fill that void.

However most of all today, following one question from a Conservative Counsellor I am optimistic that we are closer to an all parties housing consensus than we may well think.

divided setor

The ripples of the Genesis Affair continued last week, with the Aster Group becoming the latest Registered Provider to confirm that they are “considering” the abandonment of Social Rent.

What is even more significant is that Aster’s proposals would appear to involve the potential blueprints of the Groups conversion to a “mainstream housebuilder” and ultimate deregulation from the Homes and Communities Agency. Although it is important to stress that this is merely one option being considered by Aster, that it is even being publicly mooted drastically highlights how far Registered Providers have been pushed since the grant boom years in the noughties.

Now contrast this with David Montague’s (who just so happens to be the CEO of one of the UK’s largest Registered Providers, London and Quadrant (L&Q)) blog published the very day before the Aster reports. By way of background in March L&Q had announced an ambitious plan to build 50,0000 homes. As a result of the Budget these will likely have to be reappraised.

Montague begins with the immediate omission that he came very close to reaching the same conclusion as Genesis methodically summing up the evidence in favour, ultimately stressing that commitment to affordable rents could lead to the Registered Providers own demise, before departing from this approach.

Montague sums it up best in his own words:

But at L&Q we feared that, if we turned our backs on affordable rent now, we would never return. My successor, my team’s successors, my board’s successors, would be recruited to an organisation which didn’t do affordable rent. Would they be as committed as we are today? And besides, people need somewhere to live now, not tomorrow.

So we concluded that, as difficult as it might be, we must retain our commitment to affordable rent. The slices of the cake may change; we will boost affordable home ownership activity and maintain our private rent ambitions; but we will guarantee a minimum percentage of affordable rent. After all, with no commitment to affordable rent, what is our surplus for?”

L&Q however are in a strong position,”they do not have all their eggs in one basket” and their assets base is worth 16 Billion pounds”.

Many Registered Providers will not have the same luxury. One recently told me it is estimated that the Budget reforms were predicted to result in a loss of annual revenue between 13-15%.

It is of course easy to be blinded by the polarized views of Genesis and L&Q, however in reality what I am hearing from many of my own clients is the most popular model by far is a third middling option.

In an act of survival of their historic values many Registered Providers are shelving developments, looking to convert affordable rental plots to market rents, affordable or open market sale disposals. The majority of Registered Providers were already aggressively charging housing stock and disposing of void units prior to the Budget announcement. Now those projects take on an even greater significance. However both options have their short term limitations, which is why open market sales and rents will reign supreme for some.

If a recent Communities and Local Government source quoted in Private Eye is correct, Registered Providers are seen in Whitehall as: “the orange that hasn’t been squeezed hard enough”.

Ironically some of the hardest hit will be those who have been at the forefront of large regeneration projects, which satisfy political aims by providing safer communities.

Therefore suddenly from having been proactively at the forefront of the housing crisis, potentially many Registered Providers are going to be forced to take a defensive position.

So where does this leave us?

Just like every other crisis the sector has faced it will evolve and this time is no different, as hard as that may be subjectively to see at present.

There is no right or wrong answer and clearly some of the more development focused Registered Providers may look towards; ‘doing a Genesis’. After all as David Montague himself stresses there is a clear business case for doing so.

However Registered Providers are no different from any other sector and specialisms which are already forming will be further increased.

You only have to look at the Legal Profession by way of example. 20 years ago there were several Solicitors Firms on every High Street providing every legal need. Now they have evolved to concentrate their business plans to their individual legal strengths, merged and relocated to industrial estates.

Each Registered Provider will be different and take their own approach to centre on, just like one Registered Provider I can think of whose business model is increasingly centralising around Extra Care. However it is key that Registered Provider’s consult one another before undertaking such moves to attempt to ensure a full service provision, albeit from different Providers.

In a move to further reduce expenditure savings beyond joint ventures, further mergers will be a natural consequence.

Additionally every challenge creates opportunity, and it is here where I foresee Local Authority Housing Companies potentially taking a greater role, and perhaps this is the Government’s ultimate plan. Additionally the natural partnership between the NHS and Registered Providers will ever strengthen as the Government looks towards Community focused care and new funding streams may result as a natural consequence.

Registered Providers may be down but they are certainly not out, and the housing crisis is not going anywhere anytime soon.

As supply fails to meet demand market values will continue to soar and in time the British obsession with home ownership will have to finally be readdressed. Ultimately (and contrary to current policy) a re-balance will be needed to be made towards a European model. Who else but Registered Providers will be best placed to achieve this?

There were two stories that caught my attention in the media last week. The first being the demise of the charity Kids Company and the second being that the Homes and Communities Agency were proactively aiming to create a ‘taxi rank’ of Housing Associations able to rescue others hit the hardest by the recent Budget reforms.

The former because stretched Local Authorities, previously relying upon the charity would need to fill the void, and the latter because it made me wonder what a dystopian society without Housing Associations would be like.

The coverage that Kids Company has received has been widespread, partly due to approximately 20% of its funding coming directly from the Exchequer.

However arguably not only is this a much larger proportion of funding than recieved by Housing Associations, (many of which have proactively decided to free themselves of the bondage of Central Government Grants), but Kids Company’s entire annual Budget of £20 million is modest compared to that of even some of the smallest Associations.

Contrast this with the objects that Housing Associations perform in providing the basic human rights of housing those in need, the elderly, the vulnerable and those that are unable to pay the costs of soaring market rents. It is Housing Associations that are the vessel of ‘aspiration’ a term so often heard during the General Election. It is Housing Associations that enable an aspirational young family to jump on the Housing Ladder and buy as little as a 25% share in their dream home. Add to this the various Social Enterprises and community engagement projets that Housing Associations undertake and you start to understand the incredible value for money they provide.

Now consider the ever increasing housing shortage. In England alone consensus is that we need to build in excess of 220,000 dwellings per annum. Last year according to official Department of Communities and Local Government figures we managed a poultry 125,110. Of these approximately 25% were completed by Housing Associations with Local Authorities not even managing to build 1%.

The role of the Housing Association has never been so integral to the nation yet with reductions in their rental incomes proposed in the Budget many are already revising their build programmes, with the likely impact of less social and affordable housing.

As tragic as the social impact of the loss of Kids Company is, it arguably pails in comparison to a loss that would be felt by the disappearance of Housing Associations. This makes the further pain anticipated in the forthcoming Comprehensive Spending Review even harder to take.

So ask yourself this, if Housing Associations disappear:

Where will you be able to afford to rent?

Who will you be able to afford to buy a home from?; and

How on earth would we be able to build those 220,000.00 new homes a year?

As a Country we are very lucky indeed to have Housing Associations as our friends, so think of that the next time you see one of their vans on the street, and give them a wave.

Hard to believe 20 years ago Tesco was just another supermarket. Its core and actually only business was as a grocer and it was behind J Sainsbury’s as the UK’s leading provider.

Fast forward to the present where we are all too familiar that Tesco provides a one stop shop where you can buy anything ranging from a can of baked beans to obtaining a Bank Loan. Indeed Tesco is now the second largest global retailer by profit with stores in such unexpected places as Malaysia and Japan.

How did Tesco do this in such a short space of time? The answer is surprisingly simple; ‘branding’. Tesco soon realised in the 90s that its own brand enabled it to expand into new areas not traditionally associated with supermarkets. Unlike a start up they were already a trusted name and so automatically a consumer would be more inclined to buy a TV from Tesco than a new electrical shop that had opened on the High Street. The consumer had trust that if that TV became defective they would have a means of recourse that they wouldn’t from a shop that they had no prior experience of.

So how does this all relate to Housing Associations? It’s all about perception. Like Tesco in the 90s Housing Associations have a limited core business and are under extreme financial pressure. Housing Associations have suffered more than most during the Government cuts, with grant allocations being reduced to a fraction of previous years. Like Tesco, Housing Associations need to pause and objectively ask themselves two questions:

1. ‘What do we do best?’ and

2. ‘What are we trusted for?’

I am not advocating that Housing Associations start selling televisions but one obvious area of expansion would be to expand internal home repairs units to the wider public. Similar innovative thinking has already been reached by the board at Spectrum Housing Group linking up with Argos and B & Q.

Sceptical? It all comes back to branding. Now think how many of us are constantly asking friends and colleagues if they have any recommendations for plumbers, electricians or gas engineers etc and even then we are constantly paranoid that we are getting ripped off whilst at the same time being unwilling to pay known brands such as British Gas whom knowing our predicament charge us a premium for this comfort.

This is not alien territory for Housing Associations, they do it day in and day out for Tenants. Housing Associations offer a geniune alternative in the home repairs market, able to provide the consumer with the reliance of their brand coupled with competitive prices.

Now consider how much additional revenue Housing Associations could generate from annual gas check services, let alone more ambitious Housing Associations providing boiler care plans on direct debit.

More importantly any profits generated from these alternative business structures can be ploughed back into the provision of Social Housing. As this revenue will also not be restricted by grant funding it more importantly provides a geniune alternative to Affordable Rent ensuring that Social Rented properties can still be built.

Unlike Tesco however Housing Associations do have additional regulatory constraints to consider. To avoid these it is likely they may need to set up a Subsidiary Company to specifically provide these services, and revise their Group Structure. There are many well known precedents in this respect.

However even bearing this in mind, it is time to realise that the situation we find ourselves in is a real opportunity for innovation. We are not a Housing Association, we are a brand and expansion and opportunities are limitless.

As widely reported in the media, the Housing Minister Grant Shapps announced this month he is considering the removal of Security of Tenure for existing social tenants earning over £100,000.00 per annum.

It has been proposed that such tenants may be permitted to remain in the property provided that they pay “market rent”.

However during times of increased funding constraints for Social Landlords, this headline may also highlight a potential opportunity for Social Landlords to increase their revenue stream through additional promotion of the Right to Acquire beyond existing Statutory duties.

Despite many Social Landlords now increasingly engaging Shared Owners promoting staircasing, it does appear that the Right to Acquire option for Assured tenants has been largely forgotten.

Although Government findings show that 6,000 current social tenants earn over £100,000.00 p.a, this is merely the tip of the iceberg and does not take into consideration those tenants on above average incomes and able to obtain an “Affordable Mortgage”.

Social Landlords may also be able to reach a further class of social tenants, by offering them Shared Ownership Leases of between 25 -90% shares under the HCA’s Social HomeBuy Scheme.

Naturally these options are not available to all tenants and are subject to tenants meeting the 5 year qualifying period and other set criteria. However it is a potential string to Social Landlord’s ever decreasing funding bow.

During a recent Staircasing event for a leading Social Landlord it became clear from tenant feedback that many would have liked to staircase earlier but were unaware of the process, preventing them from doing so.  I suspect the same very much applies to the Right to Acquire. Accordingly Social Landlords identification of, and engagement with, suitable tenants is critical to increase revenue.

In addition although a qualifying tenant will qualify for a discount (the level being set by geographical location and time spent in the property) it is important to remember that the Social Landlord can obtain a re-imbursement for this from the HCA within 6 months of the date of sale (Paragraph 4.1.1 HCA Capital Funding Guide).

With post 2007 House Prices, now has arguably never been a better time in recent years for a qualifying tenant to utilise their discount and benefit from the negative property market to enter home ownership.

For further information please contact @The _SH_Lawyer.