Show image

Are Housing Associations Pulling Their Weight?

18th September 2014

Commentators argue that due to the historic levels of funding and wider government support received by housing associations, they could and should do more to deliver low cost homes (ie homes rented at a substantial discount to the market rate).

It is iniquitous that working families need to rely on housing benefit to meet their housing costs and that even people in professional jobs are priced out of shared ownership in parts of the country. The market in housing is dysfunctional serving current owners and providers over households seeking a home.

In this context the relatively low gearing (ratio of debt to assets), despite the cheapness of borrowing, and the surpluses made by housing associations, are taken to mean that each and every housing association could, and more importantly should, do more to boost the supply of low cost homes.

Housing associations are not homogeneous, in what used to be known as the voluntary housing movement there is great diversity.

Tony Hutchinson

Tony Hutchinson

Business Development Director, Housing


Housing associations can attract cheap finance because, through the regulatory regime, they are perceived to be low risk, being almost backed by government. When the credit rating agencies, such as Moody’s, perceived the regime to be too lax there was a move to reduce the Triple A status enjoyed by larger associations. And then there was Cosmopolitan.

Possibly the only thing that unites all housing associations is that they retain and recycle any profits which they make. Now, some of these profits need to be held to provide interest cover the debt incurred in building homes with private sector cash (an investor wants to be sure that their money is safe) which leaves major parts of the surplus still available for reuse.

However, one of the consequences of welfare reform is to generate uncertainties over the level of rent arrears which an organisation can anticipate, especially where affordable or market rents are being charged. Income uncertainty means that provisions for debt interest cover need to be made more robust and therefore erode how surpluses can be used.

As landlords, housing associations need to maintain their homes and provide for the planned costs of doing this, clearly the depreciation allowances made are a charge in the accounts before surpluses are recorded. Prudence dictates that there is a degree of cover required to ensure that an exception event in one location does not mean that other tenants are denied the investment their homes require.

Surpluses are being used to support new initiatives that it could argued are part of the overall ethos of voluntary housing.

The Peabody, Guinness and Sutton Trusts were, for example, set up to house respectable working households and to return 5% on the money put up by investors. One of the things that CHAS did when it was first formed and supporting family housing associations across the country is to collect a weekly sum from each tenant to be saved towards a house deposit. The co-ownership societies set up in the 60’s and 70’s allowed occupiers to accumulate a sum based on the increased income generated as flats were re-let at higher rents.

Unlocking the creativity, flair and enterprise of housing associations, using their asset base and revenue stream imaginatively could enable a new blossoming of the spirit which created the current spread of over 1,000 developing organisations. Experience suggests that these new ventures (or re-imagining old ones) requires a great deal of self awareness, what are the strengths at board and senior management to understand and manage the risks, what mitigation measures can be put in place to protect the core business, what can be done to increase business resilience, reduce costs or generate new income streams?

Tony Hutchinson is business development director - housing at Capita

Richard Blakeway, Deputy Mayor of London, will be guest speaker at Capita’s roundtable fringe debate at this year’s National Housing Federation Annual Conference.

The Deputy Mayor - whose portfolio covers housing, land and property - will tackle the same question: ‘Are housing associations pulling their weight on delivering new homes and implementing energy efficiency?’

The debate, which takes place on Thursday 18 September, will also be attended by housing association chief executives and development directors from across the UK.

  • Share