Category Archives: Finance

We’re still not taking safety seriously: So here’s what to do

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By Alistair McIntosh, CEO HQN

It’s getting on for two years since Grenfell. So, what have we done about it?

To cut to the chase, this is what Judith Hackitt said about us at the time: first of all, we didn’t know enough about our homes. But we certainly didn’t let that get in the way of cutting costs to the bone at every turn. It’s a pity we’re not so hot at listening to folk or keeping them safe.

Have we sorted this all out? No chance.

The RSH is still having to step in when landlords are lax on fire safety, gas and lifts. And associations are taking homes from builders that are not up to scratch. You’ve got to meet those targets after all. While we are on with that numbers game, Kit Malthouse says that he is fed up of being the complaints department for his local associations. What is the root problem here?

I don’t think the desire is there to fix safety. Why do I say that? Private finance came along. What did we do? We went out and got top notch finance directors. You’ve got to hand it to them. They’ve pulled in lots of cash to see us through anything Brexit throws at us. Well done.

Associations were told to get commercial and build loads more homes. We did what we did on finance. Yes, those development directors are pushing up the numbers. Of course that’s a good thing.

So, we know what to do. When there’s a problem you go out and find people that can fix it. And, crucially, you give them a seat at the top table. You make them directors. We’ve not done that with safety. You don’t see too many directors that can spend all their time on this. Yes, it gets added to other jobs but that’s not the same thing.

You have to fight for safety. If the finance director won’t pay for works you’ve got to stand up to them. So you need to be of the same rank. And money is not the issue anyway. There seems to be no end of money to blow on Emperor’s New Clothes, change-things-for-the-worse IT fiascos. When the development team pleads with you to take some lousy homes to hit their bonus, just say no. And you can only do that if you are round the same table.

When you come to think of it, isn’t it astonishing that your safety team seldom gets to vet new schemes? Housing managers don’t have much of a say either. And when you do get the handover papers, they can have more holes than a Swiss cheese. Then there are the endless battles between the award-winning builders and the poor sods that have to manage and live in the homes. Not to mention the MPs who are spending more time on sorting out new homes than Brexit. Maybe that’s why Theresa can’t get a decision out of the blighters.

So it’s time to appoint directors for safety. That’s what we do when we give a damn. The Bank of England knows this is the best way to get things done. That’s why they are insisting that banks and insurers put a senior executive onto climate change. And there is a lot of cross over. NICE are saying we should not build homes near main roads and the government’s climate change advisory board wants to get gas out of homes.

There’s a lot to do for a safety director. Sign one up now. Don’t wait to be told.

Spring Statement: Housing Overview

Yellow Toy House Sitting On Top Of Coin Stack: Real Estate and Savings Concept

Yesterday, central government fiscal announcement fans, was Spring Statement Day – though it’s hard to tell if anyone noticed/cared as it was also Brexit Day, which it is everyday, of course.

So, would you like to know what was revealed? Why not!

According to chancellor Phillip Hammond, the ‘UK economy continues to grow, with wages increasing and unemployment at historic lows, providing a solid foundation on which to build Britain’s economic future’.

There followed a load more stuff about how well Hammond/the government is doing – which seems particularly remarkable coming from a regime that has somehow managed to achieve less than nothing in two years of absurd Brexit negotiations, but there you go.

Anyway, onto housing, which was promised in the headline.

The government says it is ‘determined to fix the broken housing market,’ and that ‘building more homes in the right places is critical to unlocking productivity growth and makes housing more affordable’.

Apparently, the regime is on track to deliver 300,000 new homes a year, as promised. Hmm.

Moving on, £717 million is to be taken from the £5.5 billion Housing Infrastructure Fund and used to ‘unlock up to 37,000 homes at sites including Old Oak Common in London, the Oxford-Cambridge Arc and Cheshire’.

Meanwhile, via the Affordable Homes Guarantee Scheme, the government says it will guarantee up to £3bn of borrowing by housing associations in England to support delivery of around 30,000 affordable homes.

And another £445 million from the Housing Infrastructure Fund will be deployed to unlock over 22,000 homes over on, again, the Oxford-Cambridge Arc project.

The chancellor also said that the government will hold a spending review, concluding alongside the Budget, which will set departmental budgets, including three-year budgets for resource spending, if an EU exit deal is agreed – so better not hold your breath on that one, then.

Here’s the press release covering everything else that happened. 

Now that’s over you can resume your normal position: staring blankly at Brexit.

 

Towards a housing finance system that works

By Alistair McIntosh, CEO HQN

It’s baffling, isn’t it? You go to see a housing association and they tell you how hard it is to get social rents to stack up. And they’re right. Then you read the new Shelter report which says social housing pays for itself. And they’re right too. How can this be?

It’s because we are looking at everything the wrong way. Shelter is bringing in the savings to benefit bills from charging social rents instead of private rents. They are saying that this is how the Treasury should do its sums.

That’s how to get to the true costs and benefits. But this is not part and parcel of the viability appraisals done by individual associations. And for a very good reason. As things stand it doesn’t matter a jot. They stand or fall based on their own accounts, not those of the UK. This is what is leading to short-term every-man-for-himself thinking. It’s got to change. We must take the blinkers off. And we are not the only ones.

Hitachi is telling our government that they’d get things done faster if they just bit the bullet and nationalised big projects. Of course, they are talking about nuclear power stations. But there is something in this for us, too. If we are building new towns or doing a complex regeneration, it could be a good idea to get government to hold the ring. The risk is just too big for associations, councils or companies to take on by themselves. Something is bound to go wrong. It usually does. You will always hit technical problems that you didn’t foresee. That’s just the way it is. And if you are relying on profits from sales, that will come back to bite you at the worst time.

A few years ago, I was talking to some tenants on an estate that was going to be flattened. And, boy oh boy, did it have issues. Something needed to be done. The developers were promising to replace it with the New Jerusalem.

Yes, every tenant would get a splendid new home. It did look very exciting. What did I say? Don’t bother listening to these promises. The people making them will not be the ones delivering them down the line. There will be some type of cock-up and the plans will change.

It won’t be for the better. The risk would be a lot less if the state was in charge from the get-go. And of course it would bring in investors and experts to do the day to day lifting. If we gave tenants firm promises at the start we could break some logjams, couldn’t we?

So, for the really big stuff I think we do need to look to government. But most of the time councils and associations are the right answer. The Green Paper needs to make them more accountable. But how do we put them on a better financial footing? We need a new financial regime for housing.

At the moment we have a clash. Housing associations and councils struggle to put the money in place to build homes at social rents. It doesn’t stack up. Yet the Treasury should be crying out for them to save money and boost the economy. How do we get back on track?

First things first. The Treasury should run a check on the Shelter figures. They will be right as Capital Economics put them together and they are a top-notch outfit. But there is always room for debate on these things as there are so many assumptions about what happens and when. So knock the heads together and just agree a figure on the savings and use it to boost the grants to councils and associations today. That’s a quick fix.

But we also need to change how we do accounts for social housing. These need to show the savings to the benefits bill of low rents. And landlords must be compensated for this by the government so they can stay viable. According to the Shelter figures, there should be enough money in there to keep the landlords and the Treasury sweet.

Does this sound fanciful? Well, it’s the best I can do. And it’s a hell of a lot better than going on a roller coaster ride of relying on sales. You’re bound to come off at some point. It’s time for a fresh start. We will need to save money and boost the economy under Brexit. Cutting rents and building homes is a win-win. Go for it.

Are you meeting the VfM standard? You can use the Global Accounts from the RSH to check!

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By Alistair McIntosh, HQN CEO

You’ve got to be on top of VfM. Ask anyone that’s been through an IDA. It’s top of the agenda. You will get a grilling on:

  • Your understanding of your own costs
  • Making sure you are spending the right amount on keeping the homes safe
  • Knowing who your peers are and why costs differ
  • Taking steps to save money without putting safety at stake
  • Whether you are building as many homes as you can.

Your board need to have the facts and figures at their fingertips. The answers to many of these questions can be found in the Global Accounts.

Does it look like you are spending more than others on managing the homes? Do your repair costs seem very low? You will be asked to justify these. So, you must get ready for this.

It could be that management costs are high because your tenants need more care. Or your stock survey may say you need to do less work than others. But you must be precise in what you say. If your figures look odd, you will be asked why.

Ian Parker, Lead Associate of the HQN Housing Finance Network, has taken the Global Accounts data from the RSH and turned it into an easy to use model. You can see at a glance:

  • Where you sit on all of the VfM metrics against the entire data set
  • How you compare to any group of peers you choose
  • Graphs and charts of these comparisons that can go straight into board reports and your accounts
  • A breakdown of your cost per unit across – for example – management, maintenance and service charges
  • Your rates of building social and non-social housing versus others.

This will give you a great start on getting to grips with your VfM. It will also help with preparing for the sorts of league tables that are mooted in the Green Paper. (Do take care though. The costs for this year are worked out on a different basis than before. The RSH asked you to exclude leasehold homes sold through the RTB or 100% staircasing this time around. All things being equal this will lead to some higher costs per unit.)

Ian’s model also lets you compare and contrast key data from the financial statements you send into the RSH. The VfM Code of Practice says you do need to consider whether you are better off standing alone or merging. And this is one way of starting to think about the pros and cons. You can see whether there is any scope to do more if you pooled your financial strength and asset base.

These new models are available to members of The Housing Finance Network – if you’d like to join, or simply would like more information on these models or the network, then please visit the website here or get in touch: hqn@hqnetwork.co.uk / 01904 557150

Making council housebuilding great again

By Emma Lindley, HQN associate

As someone who has only been working in local government since January, the challenges facing councils to develop new homes has felt pretty overwhelming and impossible to navigate at times.

In my first few weeks, I was attending meetings on developing a council housebuilding company and desperately trying to get my head around how we build something when we have land and money in the General Fund, no borrowing capacity in the Housing Revenue Account but some land, and a proposed housing company with no access to cheap funding or land. And on top of that, working in an area of low value making it hard to achieve viability on sites.

I was badly in need of help from those in the know and those who were making it work. This is where the recent council housebuilding event organised by this network came in.

If I was struggling, surely others were too and, sure enough, a couple of weeks ago around 30 delegates attended an event which considered the opportunities and barriers to council housebuilding.

We heard from a range of speakers who took us through the options, the finances, legal issues, and shared what’s working for them and what’s not. Overall, I took away three things:

  1. Be really clear on what you want to achieve, you can build houses for a whole host of reasons: to generate a capital income, create a revenue stream, regenerate areas, replace outdated stock, increase density on sites, make best use of land, tackle other public policy issues such as enabling those with varying specialist needs to live independently for longer, meet a wider range of housing needs such as market and intermediate rent. What you certainly mustn’t do is set up a housing company just because everyone else is
  2. Identify the approach that best suits what you want to achieve above and don’t worry if this looks different to what everyone else is doing, there are so many options available
  3. Be in it for the long term. Getting a programme up and running is far from an overnight process; many councils have limited development experience in recent years (decades, even). Be clear from the outset on the timescales involved with the key players and persevere

If you’re thinking you wish you’d been at this event, then you’re in luck as we’re running it again in January – and there’s even an option to have a HQN associate deliver a workshop based on this event in-house, tailored to your needs.

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