Reprieve for housing association cost sharing groups?
After years of uncertainty, the announcement that the…Read More › ›
Housing associations can survive and thrive if they engage with the realities of the new political agenda, tackle the challenges they face head on, and adopt a joined-up approach to streamline operations and maximise income. That was the key message delivered at Croftons’ latest housing and regeneration seminar.
Our 100 Days in 100 Minutes Seminar (Thursday 10 September) focused on the key budgetary and policy changes announced since the general election, and the resultant implications and opportunities for registered providers.
Key speakers, Julie Loggenberg and Jo Savage from Croftons, and Lee Sugden, Chief Executive at Salix Homes, acknowledged that recent announcements, such as the extension of Right to Buy, the 1% rent reduction and ongoing changes to welfare, have combined to create a period of “profound change that’s a significant milestone” for the sector.
Lee Sugden offered an insider’s view, giving Salix Homes’ perspective on the challenges RPs face. “To make the road ahead as smooth as possible we need to understand and accept the drivers for these policy changes, and in my view they boil down to three areas,” Lee said.
“Firstly, meeting the needs of aspiring homeowners is clearly central to the Government’s housing agenda. Secondly, they’re focusing on promoting employment, particularly through changes to benefits that aim to ensure people are better off in work. And thirdly, asking the question of ‘what is fair?’ is driving Tory policymaking. With Pay to Stay, for example, the Government clearly doesn’t see it as fair that a household with an income over £30k should have subsidised rent.
Small changes, big implications
“But beyond the big headlines, what concerns me most is how well thought through some of these policies are, because even small changes in policy can have a profound impact in our communities. Take removing housing benefit for under 21s. An increase in youth homelessness in an area like ours in Salford, which is already a tinderbox because of years of deprivation, could be the tipping point that leads to social unrest.”
“The key question is how we respond as a sector,” Lee continued. “It needs to be balanced. We need to work with the new Government, because it’s not going anywhere; but we need to challenge where appropriate with a combined voice and consistent message, because the sector’s future shouldn’t be determined by Whitehall, but by the sector itself.”
While the impacts of these changes are profound and plentiful – torn-up business plans, loss of good stock, increased development costs, staff reductions and cuts to tenant services to name but a few – it’s not all doom and gloom! Jo and Julie from Croftons outlined the many opportunities for housing associations to respond positively, minimise costs and future-proof their businesses.
Clearly, more organisations will be looking at mergers to consolidate and make cost savings. But while the overall objective may be efficiencies, the primary consideration should be about cultural fit. Don’t be afraid to get so far down the road and pull out, rather than press ahead when it’s not the right match.
Now more than ever, developing requires a dynamic approach. It means looking at what you have, identifying opportunities, and anticipating issues so budgets can be fixed and informed decisions made before a spade hits the ground. And delivering growth is not always about building your way out of the problem. Consider exploring stock swaps, stock rationalisation, partnership arrangements, JVs, converting properties from social rent to affordable rent, and alternative funding and development models. And in the current climate asset registers will be more important than ever.
Governance, regulation and risk
Compliance with the regulatory framework has changed and the HCA has new expectations in respect of reviewing risk, monitoring risk frameworks, board capabilities and diversification. Ensuring the correctgovernance framework and an effective Board are in place will ensure the smooth running of your organisation and provide comfort to the regulator and your funders.
Housing management savings
Core housing management and tenancy enforcement services are areas ripe for making savings and driving value for money. Reviewing policies, procedures, tenancy agreements and facilities agreements with contractors can all help reduce costs.
Maximising commercial assets
Are you making the most of your commercial assets or lease arrangements? From exploring break clauses and renegotiating office leases, to minimising void units and selling off units to raise capital, RPs – either as the landlord or as the tenant – may have many opportunities to save money or generate income. And never has it been more important to explore commercial or ‘profit for purpose’ activities to create additional revenue streams that will support your core activities.
Deregistration – a realistic consideration?
The discussion then moved to deregistration as a potential way forward. Croftons’ view is that while there are obvious benefits, such as increased flexibility of rent setting and who you house, and removing the debate about exactly what services you should or shouldn’t be providing, the financial implications of essentially becoming a private landlord would likely dissuade RPs from pursuing this option.
Besides having to meet the HCA’s strict deregistration criteria, such as ensuring you are suitably regulated by another body, the transition would lead to much less favourable lending rates, breach of existing loan covenants, increased taxation, and repayment of affordable homes grants – something most RPs would struggle to stomach financially.
‘We’ll weather the storm’
In rounding up the seminar Jo Savage said: “The housing sector is an optimistic one. We’ve weathered many storms in the past, and I’m confident that this one will be weathered too. But more than ever it requires pragmatic advice and joined-up thinking across the board – from policies, tenancy agreements, rationalising stock, streamlining costs, understanding your assets, new partnerships, commercial and non-housing activity, and everything in-between.”
Croftons is the trading name of Croftons Solicitors LLP, a limited liability partnership registered in England and Wales with number OC343375. The term ‘partner’, if used, denotes a member of Croftons Solicitors LLP or a senior solicitor of Croftons Solicitors LLP with equivalent standing and qualifications. A full list of members is open to inspection at the office. Croftons is authorised and regulated by The Solicitors Regulation Authority (SRA) number 508041. Croftons has its principal place of business at The Lexicon, Mount Street, Manchester, M2 5FA.