Cause and Effect

It’s pretty hard to escape the fact that the current incumbents at Westminster don’t particularly like social housing.  It is even harder to avoid needless introspective bouts of Balotelli-esk ‘why always me’.  Sadly this week has rather kicked home the point that, like a wronged (and incredibly persistent/vindictive) ex, we are persona non grata with the boys in blue.

A while back I was moved to write to my local MP, it was a moment of weakness/dizzying optimism and one that is likely not to be repeated.  The response was reasonably well thought-out, albeit strewn with the toeing the line malark you would expect.  It was an insightful experience as it showed just how deliberately singular government thinking has become on social housing.  The ‘S’ word wasn’t used (no Social Housing here please, we’re British), everything was affordable housing, definitely not social.  As John Bibby notes in his blog for Shelter (an excellent, if depressing read) this is a rather broad term.  More to the point it gives the boys in blue a lot of room for manoeuvre when talking figures.

So far, so already known, but the key thing to note is just how effective the Coalition Government has been at reining back the building of of truly social housing.  It really is quite shocking, when housing need is at its highest for decades.  When low pay is becoming a real issue for millions in the UK, the very housing that can help ease some of the crisis is at its lowest level for years.  The last time new social housing building was this low we were still mopping up after a short, angry Austrian decided to go smashy-smashy across Europe.  However, it is not just the low level of Social Housing being built, but the type of housing being built in its place that is of interest here.  Affordable is not so much the new black, but the new social.  When the Coalition is talking about Affordable Housing it means Affordable, not Social.  It also means stuff like help to buy, sneaky sods!

Borrowed Graph 1 – Breakdown of Affordable/Social Housing builds

Shelter Graph2 When you look at graph numero dos from Shelter it is even more depressing and for all the sector’s guff around developing and building (borrowing a lot of money in the process) we are still building nowhere near enough homes as we should be/need to be.  Yes there are a plethora of mitigating factors, reduced grant, an economy that would embarrass even Soviet era Russia in terms of performance, the culling of badgers Section106 agreements, Right to Buy’s re-birth, the desolation of Smaug Council house building.  Regardless, we need to do more in order to ensure that we can build more.

Borrowed Graph 2 – Social Housing Built Since WW2

Shelter Graph

Whilst I have previously stressed the need for financial prudence we must still develop as a sector.  Remember JC and his parable of the talents?  That story stands as true here as it does in Sunday School rooms up and down our increasingly secular land, even for an atheist like myself.  Use what you have got to the best of your ability.  No-one likes a landlord who buries his/her kitty in the middle of a middle-eastern desert and leaves it there.  It is for the large part why I question the long term viability of smaller organisations.  If you are small and grant is scarce you can only borrow so much against the value of your assets in order to grow.  Otherwise you will be trying to squeeze more and more from the same resource.  Ever tried squeezing an orange?  Only so much will come from it…

So what can we do?  As a sector we often talk about the need for innovation and creativity but very rarely act on it.  Now more than ever is the time to think outside of the box because, as both the graphs show, the funding game is changing and we need to change with it.  That being said some green shoots are appearing.  Pre-fab houses are back en-vogue, albeit in a more sophisticated form.  Borrowing a feck-tonne of private finance in order to fill the grant void is also being trialled.  Rent to buy, deposit free mortgages, wage linked tenancies/rents are all in place or being mooted.  So despite the doom and gloom there is a healthy air of ‘fuck it, what’s the worst that can happen’ in the sector.  More of this is needed otherwise the graphs above will continue to look as grim as the Labour Party’s PR team when they heard Ed beat his brother to become leader.

As always if you want to follow me on Twitter simply click here or find me using the handle @ngoodrich87, you can view the rest of my blogs here.

The Goldilocks Conundrum

If you ask any Chief Executive what they would like their organisation to be in the next few years the chances are they will answer with one of the following.  1) To be bigger 2) To be more efficient 3) to have a more diverse portfolio in order to spread risk and maximise income.  The last week or so has shown that such ambitions are not easy to fulfil in the current operating climate.

Our first example is a small organisation (if you have under 5,000 properties you are small) in the North West, Venture Housing, an organisation now with the dubious honour of joining Cosmopolitan by getting both a G4 and V4 from the HCA.  It also appears that both the board and executive have failed in their responsibilities to control the finances of the social landlord despite warnings from the regulator.  Having worked for an organisation twice the size, but still small in general terms, I can appreciate budgets are relatively tight.  However, just as we advise customers when things get tough for them, spend within your means, if you can’t afford to borrow it, don’t.  And whilst welfare reforms, budget cuts and the continued economic squeeze have made things tricky, as a sector we still get 50% + of our income direct to us.  So to mess up this badly means something has seriously gone wrong.  For the sake of the customers, staff and the sector in general I hope the issues involving Venture can be resolved soon.

At the other end of the spectrum some interesting news has come out of one of the big hitters in social housing.  Sanctuary, the 95,000 property behemoth has published its financial statement for 2013/14.  Apart from the usual utterly tedious and dry figures is the admission that the housing association’s debt to asset ratio, I believe the technical term is ‘gearing’, stands at 95%*.  To someone who has very little knowledge around all things finance that is sodding huge.  Though I do concede that it is ability to service debt that is the key issue here, something that does not seem to be in any doubt.  Of greater interest to me is the reason for the increase.  Inside Housing have cited the landlord going to the private sector to fund its development programme as the prime cause for the high gearing.  This is unsurprising due to the massive drop off in capital grant available for building new homes.  If central government ain’t good for it, and you want to build it, you gotta go private.  That means borrowing against what you own.  In the future it is plausible that a number of the bigger organisations follow suit.  Particularly as they largely shunned the last round of funding, much to Brandon Lewis’s delight.

It will be interesting to see how the sector will realign its financing.  For me mortgaging yourself up to the hilt is only manageable for the short term  You may manage to create some self-fulfilling growth but it is a potentially risky, almost reckless approach.  Fundamentally you can be creative as you like but to have truly affordable (i.e. social) housing you need central government grant or at least access to cheap credit somewhere in the mix.  You can make grant funding go further with additional private finance, something we have done as a sector since the 1980s.  You can be more efficient at what you do and the way in which you provide your services, something we don’t always manage.  But you need some of that good old home brewed capital grant to make the figures stack in the long run.

Ultimately one must find that Goldilocks moment (don’t worry I was always going to fit it in), where the risks are not too great/hot, or the rewards too cold (sorry), and the means to achieve your ambitions all fit (just right).  Yes we should never accept the mediocre, and certainly mustn’t throw the towel in over fighting against the reduce level of funding.  But we also need to balance what we can achieve with the means at our disposal.  Otherwise you might just find the HCA knocking on your door.

As always if you want to follow me on Twitter simply click here or find me using the handle @ngoodrich87, you can view the rest of my blogs here.

*Correction 15/10/14 Reliable sources have stated this figure could be nearer 85%.

The unspeakable in pursuit of the uneatable

After the relative damp squib that was the Labour Party conference the ‘All in it together (but not quite) brigade’ have laid out their version of what post 2015 election landscape will look like.  David Cameron and Gideon ‘Call me George’ Osborne have given the housing sector not even a whiff of comfort.  Sadly ladies and gentleman a shit-storm is coming our way.  Better get the bleach.

I have blogged previously about worrying noises coming from both Conservative HQ and their Think Tank (because politicians have very little capacity for thinking these days) The Policy Exchange.  The first is a lowering of the already draconian Benefit Cap.  The £26,000 threshold was already too low, especially in London and the South East.  It now looks likely to fall further to around £23,000.  Obviously those households who insist on being poor and out of work need more punishment to inspire them into employment.  The second is restricting access to housing benefit for those under the age of 21. This move is particularly disturbing as you don’t develop housing needs only over the age of 21.  You need housing support when you need it, not when the clock hits midnight on your 20th birthday.  To say I’m livid about this move is an understatement.

These arbitrary, callous and utterly short-sighted moves are vote winning at its finest.  Unlike the much maligned bedroom tax, a restriction on the cash people can receive in benefits has proved consistently popular with the electorate.  Acknowledging it is behind Labour on the cost of living crisis this is a smart political gambit, a refresher for the public that ‘tough’, ‘hard’ decisions i.e. one’s that fuck over the poor, the vulnerable (and those unlikely to vote) will be made by the Tories for ‘the greater good’.  Alongside tax cuts (that only really help those at the top of the ladder) it is a solid vote winner.

Alongside the two aforementioned policies a freeze on working age benefits post April 2016, on top of a restricted 1% from 2012 (again not biting the hand that feeds) has been announced.  It would be laughable how blatantly unfair these policy announcements are, if their affects weren’t so potentially horrific.  These changes would be bad enough on their own however more than 50% of Gideon Osborne et al’s cuts to local and central governments budgets are yet to take effect.  This will be catastrophic, not just for those at the bottom of the pile but the services, benefits and organisations that they rely on.  This my friends at the Million Homes, Million Lives Think Tank is why we in the social housing sector are stocking surpluses like a squirrel in late Summer/Autumn.  We know, as Martin Lawrence so eloquently put it in Bad Boys 2 [that] “Sh@# just got real”.

Universal Credit looks set to be rolled out further and more extensively than previously seen.  Iain Duncan Smith taking Queen’s statement that the show must go on to very extreme lengths.  Yet another senior figure in the project team has decided enough is enough.  The Universal Credit Project delivery team is the only part of the civil service going through more staff than the Housing Minister position.  For all of IDS’s bluster I smell bullshit in his claims of progress.

It has been a very grim week for housing, enough to dampen even my normally chirpy spirits.  The thing that has struck home more than anything is how woeful an opposition the lot in Labour have been.  The Tories have honed, vote winning policies set out.  Ed ‘sorry my face is forgettable’ Miliband can’t even remember his own speech.  The counter-points to the Tory proposals have been weaker than a comeback from your average high school kid.  It’s all a bit pathetic.  These policies are scary, detrimental in the long run and grossly unfair.  But they will probably win the Tories the next election.  Heaven help us all.

As always if you want to follow me on Twitter simply click here or find me using the handle @ngoodrich87, you can view the rest of my blogs here.