No.

Question

Answer

Part 1: The current state of financial resilience of social housing providers:

1

How would you assess the financial resilience of the social housing sector currently? Are increasing pressures and requirements putting financial viability at risk?

Yes - Significant cost increases and less than inflation rent increases

Standardised Financial Appraisal models are increasingly falling short of the minimum payback periods due to increased costs and limited additional funding

2

What pressure has high inflation, increased energy costs and any other additional costs placed on the finances of social housing providers?

Increased energy is impacting, because we haven’t passed the full cost of energy increases on to tenants. 

Increased new build costs – We can sign off on an appraisal, then inevitably costs will increase.  This then leads to the question how do we fund the increase? 

• Additional borrowing
• use of 1-4-1 receipts and S106.

This all puts a stain on what we can deliver.

         Staff wages

         Subcontractor cost increases

         Repairs & Maintenance material costs

         Reduced supply of materials

         Construction contractor price increases

         Contractors falling into administration so fewer opportunities to achieve VFM and further delays to planned investment programmes

         Ageing Housing Stock

         Suitability of stock to meet changing demand and ever increasing housing register

         Ageing population

         Increased focus on customer satisfaction

         Making it easier for customers to report issues

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?

This is all dependant on the viability of financial appraisals, funding, and the availability of sites

4

What impact have changes in the housing market in recent years had on the strength of housing associations’ balance sheets?

Not sure if this is applicable to a Local Authority?

5

Does the cross-subsidy model, by which market housing helps pay for social and affordable housing, have any continuing viability?

We have 2 sites currently in development.  The continued viability would be dependant on large enough sites to develop, which would be the issue.

6

To what extent have private equity investors, and in particular international investors, been entering the sector? What challenges does this present?

Not sure if this is applicable to a Local Authority?

Part 2: New challenges to the social housing sector:

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?

Would need to assess the MRR and peaks and troughs in lifecycles. 

Main factors that will have a major impact are net carbon zero – what funding will be available for that, especially after the impact of rent decreases

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?

Our development programme is based on the Strategic Housing Market Assessment (SHMA) that we undertake with Gateshead as part of the evidence base for the Core Strategy and Urban Plan

9

What issues does the requirement on Housing Associations to carrying out building safety present?

Changes to legislation, particularly Fire safety more recently has obviously introduced further cost pressures

Increased inspection frequency

Increase in costs

Increase in standard required for materials used – higher costs

10

Has the lifting of the cap on the Housing Revenue Account made a difference to supply or improved housing from Local Authorities?

Allows us to build in the HRA! So, as long as the outputs are doing what we need – we’ve done a lot of extra care type properties recently

11

Have for-profit Housing Associations made the sector, as a whole, more financially robust?

• Shift of focus from social aspects to financial?
• Is the intention to add value to the sector or extract value???
• Potential for profits to plug the gap in increasing new build affordable housing?

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?

• Mergers can provide efficiencies in operating costs
• Consistency in approach to social housing customers in a similar geographical location
• Mergers (if covering multiple areas) can lose the connection with local communities as strategic priorities may conflict with local needs/issues
• Availability of funds for investment will have greater demands and priorities leading to perceptions of “favoured” areas

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

Newcastle uses a partnering framework with developers and developing RPs. To aid to collaborating on local development.

This allows us to move quickly in partnering when opportunities / funding becomes available to help deliver consistently and quickly.

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?

• The main advantage of shared ownership is that it can be easier to achieve than full ownership.
• Customers only need a smaller mortgage, the necessary deposit will also be smaller.
• Mortgage repayments plus rent may be as much as (or more than) the repayments on a full mortgage, the smaller deposit required makes it easier to achieve.
• Shared ownership is also preferable to renting, as the portion of the home owned will grow in value if the price of the property goes up.
• This could increase equity that will help progression on the property ladder.
• Building homes is costly and the period from appraisal to completion is drawn out – SO doesn’t solve the long term issue of diminishing social housing stock comped to increasing demand

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?

         Investment Programme with dedicated focus on new-build

         HRA funding as well as other funding available

         Identifying priorities with relevant services (NCC/YHN/LH)

16

Will the introduction of the Infrastructure Levy and changes to section 106 significantly affect the capacity to develop affordable housing?

•                  Payment of the levy is expected to come at the end of development, making it unlikely that affordable housing and community infrastructure will be delivered alongside market-rate homes – thus possibly alienating and stigmatising the affordable homes element.
•                  Final gross development value can be estimated, but is only evidenced after completion, when all the units have been sold or valued, so the final payment to the local authority is expected at the end of development. In contrast, CIL is calculated and paid upfront when planning permission is granted, and Section 106 is also negotiated upfront as a condition of planning permission – which gives local authorities and developers more certainty.

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

17

Is the current Departmental policy on social housing and affordable homes appropriately focused?

•                  The range of affordable housing tenures and the emerging renewal of interest in social housing is welcome. However arbitrary percentage targets for certain products or uniform application of policy should be tailored to adapt to local housing and economic need and affordability, providing that the evidence base is there to qualify.
•                  There is a discord between the drive for new housing supply and policy to support and new restriction in the planning environment that are exceptionally onerous and restricting supply.
•                  Increased attention is required to accelerating the delivery of new models of housing for older age groups, moving away from one off pilot funds such as cash to sustained policy to support and investment that matches aspirations.

18

Is Homes England being directed appropriately by the Department, and is it achieving its objectives?

Their whole focus is on delivering new properties – we need a focus on regeneration as well. They’ll probably say it should be provisioned for within existing HRA resources but with all the current pressures, it makes it difficult. Could end up in a situation where the HRA is getting hit on void charges for long-term properties because we’re spending all our money maintaining tenanted ones that we don’t have the cash to invest in these. Funding to demolish and rebuild a demand product would be a way forward, eg. demolishing the ‘moribund’ flats that nobody wants and building bungalows to serve that demand

19

Has any evaluation been undertaken of the impact of the additionality guidance on the supply of social housing?

Not as yet.

20

Is the current range of grant funding available appropriate to address the issues and challenges that the social housing sector faces?

No. Even at 40% 1-4-1, we’re struggling to make appraisals stack over 30 years with the current costs and rent we can charge. Need to either increase the payback period or provide more funding.

Net zero carbon – SHDF is helping but it’s still costing us more than the ‘like-for-like’ replacement

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?

We recommend that all supported housing, irrespective of the number of people living in a particular scheme, should be subject to HMO licensing. This includes properties where the landlord is / or is not a registered provider.

22

Does the Regulator of Social Housing have sufficient power to ensure that mergers result in a financially viable new organisation?

Approach to intervention and enforcement - GOV.UK (www.gov.uk)

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?

Guidance on the regulator's approach to intervention, enforcement and use of powers - GOV.UK (www.gov.uk)

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?

This is something that should be looked at as part of this inquiry. There is no doubt the sector is facing increasingly complex” financial and corporate structures proliferating within the sector – coupled with an ever increasing demand in the sector and more stringent regulation.  This will become more evident as inspections are rolled out

25

How appropriate is the existing regime in respect of regulating for-profit housing associations?

•                 The RSH expects all registered providers to meet the same standards, regardless of whether they have a for-profit or not-for-profit business model. All private registered providers are expected to be well governed, financially viable, and provide safe and good quality homes for their tenants
•                 It is recognised, however, differences between for-profit and not-for-profit providers which the regulator needs to take into account when assessing governance and financial viability. In particular, for-profit providers have different capital structures and cash flow dynamics and are often part of wider groups of connected companies rather than standalone organisations.

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?

Other factors will include building cost inflation; a shortage of materials and labour; planning authorities' lack of resources; net zero obligations; delays with local utilities and highways; and the risk that housing providers may have to focus on retrospective work to ensure the safety of existing homes – e.g. damp and mould and falling decency standards