Written evidence submitted by Jigsaw Homes Group [FSS 003]

Jigsaw is a housing association owning and managing c. 36,000 homes across the northwest and east midlands.  It was formed in 2018 from the merger of New Charter HT and Adactus HG.

The current state of financial resilience of social housing providers:

High levels of inflation, especially of maintenance materials, plus increased energy costs have combined with a below inflation rent cap to reduce our financial capacity. Budget choices have had to be restricted to immediate priorities of property maintenance and building safety, so that significant areas of spend such as net zero works, environmental sustainability measures and neighbourhood investment have had to be delayed. 

At the same time, we have responded to the financial pressures on our tenants by increasing our expenditure on welfare funds, food banks and our money advice service.

Increasingly we are also called upon to support tenants with mental health problems – the cuts to local authority services have resulted in a growing number of residents with mental health issues not receiving the support they need.  This can lead to anti-social behaviour, to hoarding, to safeguarding issues and the inability to maintain a tenancy. We are funding wellbeing officers, hoarding specialists and mental health advisors who can signpost rather than prescribe.

For 2023/4 our current surplus level has allowed us to maintain our significant new housing development programme, however, the grant rates agreed have not covered all of the increased costs and consequently these are also funded by Jigsaw. If inflationary pressures and other additional costs continue into the near future then the development programme will come under pressure, together with other strategic spend on issues such as achieving net zero carbon and neighbourhood investment.

New challenges to the social housing sector:

Maintaining our existing stock is a key priority together with building safety.  Our resources are sufficient to cover expected spend in this area. However, if costs and government requirements continue to increase this will inevitably lead to reduced spend in other areas.

Our surplus allows us to invest in new homes, and this is a key corporate priority.  As a community benefit society, we try to balance our responsibilities to current tenants with those people in the wider community in housing need on waiting lists who would like to be our tenants.  From a business point of view new development is surplus/cash generating, as in early years there is limited spend required. This cash is then used to support existing budgetary priorities.   If our surplus reduces from budgetary pressures then the development programme will have to reduce, but this also results in a negative feedback loop and less cash generation.

On new development schemes, the housing types produced are dictated by both what sites will allow, and what local authority priorities are. We work closely with our local authority partners to ensure that the homes we build are meeting the areas of greatest housing demand/need.

Approximately 20% of the properties we develop are for shared ownership. Our board see our role as primarily focused on spending our limited resources on providing social rented housing, and shared ownership takes us away from this.  Government policy and planning requirements mean that a shared ownership programme is necessary.  In the northwest there are many areas where lower cost properties can still be purchased, although there are other higher value areas where shared ownership remains in demand.

A recent research project carried out by the National Housing Federation has identified an increased need for supported housing provision but found that a lack of capital resources, and the short-term nature of revenue support contracts, prevents much of the sector from providing supported housing.

We expect the infrastructure Levy will have a huge detrimental effect on affordable housing – currently c. 20% of our development programme comes from s106 (i.e. 800 homes over five years) – the Levy will mean that this is lost to affordable housing.  S106 also benefits efforts to create mixed communities, ensuring that new build provision is made for all income levels.

Building safety remains a key priority for our business; changes to legislation have required us in the last three years to spend over £5M on replacing fire doors which do not have certification. Similarly we plan to spend a further £5 million on the same over the next three years. Timber balconies are being replaced with metal at a cost of approximately £1 million over the last three years and again we plan to spend in the region of a further £1 million on similar requirements over the next three years.  We do not have any ACM panels; however, we are required to replace the cladding on four tower blocks at a total cost of £2.5 million per block or £10 million in total.  Additional requirements such as changing systems to more fully demonstrate the “golden thread”, building safety cases and Evac systems will also cost in the region of £0.5 million.  No additional funding has been provided, and this spend must come from existing budgets.

Improving the energy efficiency of our homes is extremely challenging. Our initial aim is to have all properties to EPC C or above by 2030 and our overall aim of being net zero by 2050 is being put under increasing pressure by other competing maintenance requirements. Over the next two years we have included c£6m in our forecast rising to c£9m per annum and then increasing to c£17m per annum over the course of our 30 year plan, nearly £400m in total. This is on top of any future grant available such as SHDF which we have successfully bid for in both SHDF Waves 1 and 2.

The consultation asks about struggling housing associations which require a stronger partner to rescue them. The success in finding a suitable rescue partner will depend upon the size and problems at the struggling housing association – it may become necessary to break up struggling larger associations.  In some cases, where a rescue is required, it may also be necessary to financially compensate the stronger partner who otherwise could risk weakening the financial performance of their own business in return for a poor strategic opportunity.  This is an area the government should look to prioritise for financial support in the same way as it did the banking sector.

There is no evidence that larger associations do a worse job of providing a customer focussed service than smaller sized organisations – both Rochdale Boroughwide Housing and Kensington & Chelsea Tenant Management Organisation were smaller organisations with a tenant focus - indeed with significant tenant representation built into their governance structures - who clearly failed in their service to tenants. 

What are the policy and regulatory challenges to the Department and the Regulator?

The current range of grant funding is insufficient to address the issues and challenges that social housing faces. Income is not meeting inflationary cost increases, and government expects that we pick up increases in development costs, building safety costs, which would result in lower energy costs for residents and zero carbon

In the northwest much housing stock needs remodelling or is reaching the end of its useful life, yet HE funding is not available for regeneration.

The end of European funding has also had a detrimental effect on some of our housing support schemes. For example, we have headed up the Motiv8 project across Greater Manchester, allowing 2,171 people into work or training over a 6 year period   When this funding came to an end in March 2023, replacement funding, UK Shared Prosperity Fund does not become available  until April 2024 – Jigsaw has therefore also funded this shortfall for our tenants for a year so that skill and momentum are not lost.

In our opinion decisions to merge or not should ultimately rest with the board of the merger parties.  The regulator has powers to replace board members on organisations and can pursue this option in the case of a failed organisation.

May 2023