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NHF Report

27th October 2014

Richard Blakeway, Deputy Mayor of London, was 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 - tackled the same question: ‘Are housing associations pulling their weight on delivering new homes and implementing energy efficiency?’

The debate also featured housing association chief executives and development directors from across the UK.

Jules Bickers of Capita reports...

The Deputy Mayor for London, Richard Blakeway, presented a series of observations about the sector, in particular the ambition shown by housing associations to maximise development activity. From the 2011-2014 funding round he said one major housing association had delivered a programme of over 2000 units while another, of comparable size, had delivered nine units per year. The challenge is to understand why such discrepancies exist and are the reasons behind them sound?

Resources or ambition?
The organisations taking part in the discussion did not lack for ambition but the desire to maximise the number of homes built is often held in check by concerns over providing properties that are affordable to those on the lowest incomes. The boards of some housing organisations and local authority members are wrestling with this dilemma. Unresolved, this has the effect of reducing the total amount of housing that gets built.

In other instances the brake on development is not ambition or reserves but the availability of land according to one housing association chief executive in London whose organisation has grown considerably in recent years and diversified their housing products. At the same time, however, there is development activity right across London and the South East and housing associations are still competing successfully against commercial developers to secure sites in prime locations. How organisations are finding land opportunities and the extent to which they are working to identify sites before they are marketed seems to be key to long term land supply success.

Housing colleagues from organisations in the Midlands highlighted the re-emergence of local authorities as developers in their own right. This major shift in housing provision, although still relatively small scale, signals an existential threat to developing associations whose former partners might now start to act as competitors.

The retrofit challenge
Research from Gentoo and Affinity Sutton has estimated that to retrofit all of the UK’s social housing to a reasonable level would require an investment of around £27bn. This represents the investment requirement to get the housing stock to an average SAP of 70 and to start to tackle fuel poverty, excess winter deaths and basic thermal comfort. Beyond this there are further improvements that the stock will require to make homes truly energy efficient. There is broad agreement that this matters because rising energy prices show that many homes start to become unaffordable in a few years time. We heard that many housing organisations are taking a wider view of affordability which goes beyond the rent to look at the cost of occupation. Indeed, rent costs are in some ways the lesser issue as there is relief provided in the form of housing benefit.

Clearly the sector cannot afford to ignore this requirement, but are the resources available? Something close to £4bn is spent each year by housing associations and local authorities through their asset programmes. Very little of this is direct investment in retrofit measures but the question remains can more of it be devoted to energy measures and can the absolute amount of asset investment be greater. HRA and housing association reserves suggest that the sector could dig deeper and do more but doing so reduces the investment available for development. In London, the Mayor has made it a requirement of the development funding support for organisations to formally set out their approach to retrofit.

Organisations seem prepared to make a greater investment but also want to see how rents can be used to help fund stock improvements. Many of our participants could remember the previous rent setting regime which allowed for rent increases based on upgrades to the property. This is a debate to which organisations would like to see back on the table.

Crucially we heard that securing organisational commitment to change can be difficult. Local authority members and housing association boards are wrestling with the impact of welfare reforms on their future viability. Often there are contradictory demands of the regulator and ratings agencies in relation to reserves and surpluses and with managing increasingly complex and diverse businesses including local housing companies and commercial entities. This is a crowded agenda requiring constant attention. Getting the bandwidth in the boardroom for a serious consideration of asset investment in relation to energy efficiency is no easy task. It’s not helped by the boom and bust of the policy and funding landscape in relation to ECO, RHI, FIT and their predecessors. What we have seen is that organisations that have relied on their own resources have gone further and faster than those who have built programmes supported by external grant funding. The development of a compelling strategic business case for investment in energy measures is a massive help to leaders within housing organisations to find the space at the top table to get organisational commitment underway at scale.

Capita will be running a series of further sessions exploring each of these topics in more depth over the coming months, using examples from within housing and from other sectors, to identify the concrete steps that organisations can take individually and collectively to resolve some of these policy tensions. If you would like to participate in this, or have approaches you would like to share, we would be delighted to hear from you.

Jules Bickers  is a director at Capita

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