Written evidence submitted by Johnnie Johnson Housing Trust [FSS 021]

1. How would you assess the financial resilience of the social housing sector currently? Are increasing pressures and requirements putting financial viability at risk? As an organisation we are, and will remain, financially viable. However, what we have had to do is make difficult decisions in order to remain viable in the long term e.g. a £32m development programme over 5 years / reduce annual overhead costs by £300k / reduction in annual salary costs £400k are just some examples.
2. What pressure has high inflation, increased energy costs and any other additional costs placed on the finances of social housing providers? The cost of inflation and the increase in interest rates along with the cap on income from rents has resulted in a £169m development new build programme reduction to £13.1m. Our strategy, for now, has meant we have had to stop building new homes. Alongside impact on building new, the costs of keeping homes decent and investment in the future is now less value for money - we are not getting the number of e.g. bathrooms / kitchens / roofs for the investment plans given price increases of approx. 35%
3. To what extent can social housing providers maintain output levels in housing development to provide a counter cyclical balance in otherwise tightening market conditions? Our organisation cannot, for the time being, as answered above.
4. What impact have changes in the housing market in recent years had on the strength of housing associations’ balance sheets? Sales - positive impact as increased profit from outright sale of new build (costs were lower previously when being built). Value of asset in balance sheet - held at Net Book Value - have risen, so positive, strengthening balance sheet. Reserves lower because profit is likely to be lower, as it took a hit from the rent reduction. Issues on impairment if disposing of old stock as valuation is lower now than before.
5. Does the cross-subsidy model, by which market housing helps pay for social and affordable housing, have any continuing viability? * N/A for us. Most likely this is appropriate for larger housing providers who can afford to do this.
6. To what extent have private equity investors, and in particular international investors, been entering the sector? What challenges does this present? Money is being offered to housing providers to build new homes from private investors - this gives options for housing provider delivery models and financial decisions. Also, we understand that e.g. Middle Eastern money is wanting to be invested in green build - this may well become a morale issue for boards.
7. The Secretary of State has specified that more resources need to be directed towards maintaining and improving the existing stock. How feasible is this for social housing providers? We have done as much of this as we can do, given halting our development programme. However, this is a short-term strategy to fix an issue now. It does positively impact the housing market where we know that there is a shortage of social housing versus demand. We anticipate an increase in homelessness. A lower rent settlement for future - given the high inflation – will just add to these issues.  We provide homes for older persons. There are not enough homes being built, or also, being improved and making sure they are fit for the next 30-40 years.
8. How do social housing providers choose whether to undertake new development or to focus on maintenance and upkeep of existing stock? Is it currently possible to achieve both objectives? Where social housing providers are undertaking new developments, what consideration has been given to the types of homes they are building? For example, houses versus flats? We have had to pull away from homes suitable for older persons because these are more expensive, not just to build, but to run and yet there is a great demand. Homes England Grant Funding is inadequate for anything other than a standard general let build. Repairing existing stock has to come first for direction of funds. Options Appraisal for older, tired, no longer fit for purpose homes, is becoming an increasing challenge on funding. The ability to retrofit, as well as build new homes, with green features is also a huge challenge. We should also flag the digital switch over - analogue to digital - means we also need to re-direct funding. Changes to legislation e.g. development regulations, decent homes 2, building regulations also require additional investment. 
9. What issues does the requirement on Housing Associations to carrying out building safety present? Re-direction of funding into e.g. Fire Doors, compartmentation, as well as paying for additional expert staff, and training existing staff. Also we have invested in related H&S systems. Keeping our residents safe is our No.1 priority and fully supported by our Boards
10. Has the lifting of the cap on the Housing Revenue Account made a difference to supply or improved housing from Local Authorities? N/A
11. Have for-profit Housing Associations made the sector, as a whole, more financially robust? N/A
12. Traditionally, struggling Housing Associations have merged with stronger, sometimes complementary, Housing Associations. Will this continue to be possible? To what extent can mergers result in the creation of an umbrella group too large to discharge its duties and responsibilities to its tenants? I think that mergers will be a growing trend again in the sector. This can been seen as a positive because organisations can be proactive in planning spend for the long term future. Having a culture that focuses on residents and the right governance and structure and the robust financial planning, and good strategies, strong leadership can make sure this happens in either large or small organisations.
13. Has the emergence of partnership working between councils and housing associations in local areas made the sector more resilient? What encouragement has the Department given to such partnerships? To what extent do local authorities and Housing Associations collaborate when considering development plans for housing locally? Good and bad examples of Planning Departments from LA's hindering or being supportive.
14. The Affordable Homes Programme includes a high proportion of shared ownership properties. To what extent is this form of tenure desirable for potential purchasers and for social housing providers? Shared Ownership helps make building homes stack up, but this is a very difficult tenure for communal living. It can help people get on the housing ladder. We have had positive experience with Shared Ownership. We must be careful of service charge levels for the running costs for residents. Grant levels from Homes England are not keeping up with actual changes in cost increases.  We must address this to help us through these challenging times in order to keep existing pipelines going; keeping building contractors liquid; making new builds happen.
15. What contribution have council owned housing companies made to increasing social housing supply? Is the collapse of Brick by Brick – wholly owned by the London Borough of Croydon – a one off or the tip of the iceberg? N/A
16. Will the introduction of the Infrastructure Levy and changes to section 106 significantly affect the capacity to develop affordable housing? N/A
17. Is the current Departmental policy on social housing and affordable homes appropriately focused? There is too much focus on Right To Buy / Right to Acquire which takes out social and affordable homes from the system. There should be a greater emphasis on social rented homes for those in need. We need to work together as a sector and a Department, with Homes England, with Planners/Local Authorities on building more social housing as there is demand.
18. Is Homes England being directed appropriately by the Department, and is it achieving its objectives? No. Need a greater focus on older persons and specialist supported accommodation - need an Older Persons Strategy. Need a grant level that reflects current building prices
19. Has any evaluation been undertaken of the impact of the additionality guidance on the supply of social housing? This area needs more work because given greater space standards, and increase in building safety etc specifications it is unrealistic to expect to demolish and rebuild more homes in the same site.
20. Is the current range of grant funding available appropriate to address the issues and challenges that the social housing sector faces? No - not for building new older persons homes / specialist homes with greater need for communal space/facilities.
21. On our inquiry into Exempt Accommodation we found that issues have arisen when providers are not registered with the Regulator. How does the Regulator of Social Housing engage with Housing Associations whose registration is voluntary? N/A
22. Does the Regulator of Social Housing have sufficient power to ensure that mergers result in a financially viable new organisation? The RSH and merging organisations work together in a co-regulatory way and provide information for transparency. Organisations submit their regulatory returns - with and without a merged organisation. An IDA is completed after 12 months of merger. Boards will take decisions based on financial viability in the main, and the due diligence focuses on a range of aspects of viability, good governance, and culture.
23. Does the Regulator of Social Housing have adequate powers to ensure: value for money; and low risk from new sources of finance such as private equity? As much as you can expect a Regulator to have. VFM and Robust Risk Management are high on their agendas - their IDA's include these issues in their G and V ratings. I am sure they, as we all are, learning about how they impact on our sector.
24. Does the Regulator of Social Housing have the resources and skills necessary to regulate the increasingly complex financial and corporate structures proliferating in the social housing sector? N/A
25. How appropriate is the existing regime in respect of regulating for-profit housing associations? N/A
26. It is already accepted that the numbers of dwellings likely to be produced under the 2021 Affordable Homes Programme will be less than initially forecast. Will the financial challenges that the sector faces reduce these numbers even further? AHP cannot be delivered it would seem. A joint effort between Covid and the impact of last year's Autumn Budget has had a huge impact on numbers of new homes. We will see more housing providers announce scaling back their development programmes

May 2023