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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.

Landlords awash with dosh: But will it be enough?

By Alistair McIntosh, HQN CEO

Breaking Bad was a classic box set, wasn’t it? The hero of the hour was Walter White. He spent a lot of his time looking after huge piles of cash. My goodness, we do need him back, don’t we? Housing associations have exactly the same problem as he did. (Though I hasten to add that the money has come from bonds not drugs.)

There’s not a landlord in the country that isn’t ready for the Credit Crunch of yore. We are awash with dosh. That’s great as it shows we are learning from the past. But is liquidity enough to see us through the next crisis? Well, it’s a start but there’s still a lot of hazards to watch out for.

The dream scenario is that you have cash when no one else does. So you can snap up sites and blocks for a song. It’s a good idea and it worked like stink for some last time out.

But will it go so well now? You could be outbid by firms from stronger economies. The power of the Dollar or Euro or Renminbi might swat your peely-wally Pound aside. Then what do you? You could be sitting on cash that earns less in interest than you are paying for it. And inflation could be eating away at it, too. Your cash will be evaporating. Not so much the Angel’s share but the special place in Hell’s share.

But there’s plenty of things you could do with the money. You could bail out your suppliers. Some of them are bound to run short. They just can’t raise money as easily as associations. You need to keep the builders and IT firms going so you could have no option other than to prop them up. And if we go back to austerity the axe will fall on benefits. That means you might need to help tenants get by. Also, it could be the time to go easy on the shared owners. And there’s more. What if we get the riots the police are warning us about? Will you have to spend more money on security? The list goes on.

What’s the problem? Well, if you don’t do what you said with the cash from the bond, that could affect your credit rating. That means when you ask for more money the price goes up. The business just isn’t as strong as you told them it would be. And there’s a penalty for that.

Of course I am painting a bleak picture. Yes, it is tremendous that associations have gone out and got cash. But please do keep stress testing. Too many of us thought that market sales or private rents were the answer to everything. They’re not. As Newton said, for every action there is an equal and opposite reaction.

In other words, whatever you do has an upside and a downside.  And on no account blame Brexit for your ills. That won’t wash. You must have noticed Nigel Farage’s long campaign. If you didn’t have it on the radar then we’ve got to ask a big question. What else are you missing? Don’t fall into that trap.


Push hard for grant and don’t rely on building homes for sale

By Alistair McIntosh, HQN CEO

Isn’t it great that house prices are coming down in London? Will young folk get on the ladder?

Can we shut down the bank of mum and dad? Is it time to get out the bunting?

Well, that’s not quite how our housing associations see it.

L&Q says its net margin on sales has been slashed from 16% to 7%. That’s cracking news for anyone looking to buy. It’s a chink of light for our hard-working millennials, so why the glum faces?

Housing associations use the cash from sales to pay for social homes, that’s the only way to build them. You’ve got to rob the struggling Peter to help pay to house the even poorer Paul. So when the sales fall, the worst-off get shafted.

How did we get into this pickle? George Osborne cut the rents and held the grants down. Housing associations had to find a Plan B.

Getting money in by selling homes was seen as the way to plug the gap. That’s looking shaky now. You should get hold of the Evening Standard.

It’s advert after advert from housing associations trying to shift homes. Who’s the winner here? Take a step forward, Mr Osborne.

He edits the paper, so we are paying his wages.

There’s got to be a better way of doing things. And there is. You get a glimpse of it in the latest trading statement from Countryside Properties.

They’ve seen sales fall. What did they do? They bought a firm that builds affordable homes for associations and private rented homes for a government and local authority pension-backed fund. It’s going OK. Public money sure helps them along the way.

And there’s no shortage of this cash pile at all. Councils are spending billions of it on shops and offices and any MP who says yes to Theresa May’s deal gets a nice bonus for their area.

Housing should be first in the queue. Why? The boffins at Capital Economics have told Shelter to tell the government that social housing pays for itself. So, let’s get behind that report.

Andrew Neil is astonished that it hasn’t got more traction. We all need to push harder on this.

Let’s start by going back to higher grants. If our goal is to make housing more affordable, why are we complicit in driving up prices? I don’t get it.

It just antagonises the public, who by and large have no hope of buying these homes. And to make matters worse, the people who do buy the homes aren’t happy either. No one says what their satisfaction figures are in the adverts, do they? And there’s a reason for that.

The unhappy experience of Inside Housing’s Peter Apps when he bought is par for the course.

When you’re in a hole, stop digging.

And it’s about to get a lot worse. The pound is sinking against the dollar, that’s bringing the Americans over in droves looking for bargains.

Warren Buffett himself has set up an estate agency in the heart of the West End.

Soon you won’t just be bidding against other associations which have all gone shopping for bumper bonds, you will be up against rivals with cheap money. That’s when it gets interesting.

For the record, I quit the game after being outbid by cheap Japanese money for what is now the Landmark London hotel in Marylebone in the 1980s. So, what do I know?

Well, I’d push hard for grant and keep out of speculation.

You might lose money at some point – but worse, you’ll lose your friends and your kids will never move out.

By Alistair McIntosh, HQN Chief Exective.

Article first published by Inside Housing on 04.02.19.


Attention, members: You’re going to enjoy this…

You have an amazing idea. It’s been scurrying around your techie mind for weeks, months – maybe even years. You’d love to experiment, develop it, and see it come to life – but you haven’t got the resources.

Is it a system that’s going to revolutionise your customer services? An innovative piece of amazing digital design that’ll make life easier for your business and colleagues?

Tell us your idea and how bloomin’ brilliant it is and you could be the happy beneficiary of a rather incredibly awesome package of possibility!

Working in conjunction with Amazon Web Services, we’re delighted to bring you our tiptop FREE TO ENTER Housing Innovators competition which offers:

  • $20,000 of credit for use on the AWS platform to be used during the course of a year
  • AWS support
  • Named Solution Architect support throughout the project
  • Monthly business reviews
  • Free online training resources
  • Quick start set-ups of standardised AWS cloud environments that support workloads classified as United Kingdom (UK) OFFICIAL
  • 50% discounted AWS architecting and developing classroom training 3-day course

If we didn’t say it loud enough already, the competition is FREE to our members to enter.

Simply send us your idea in no more than 300 words by 31 March 2019. Our panel of judges will decide on the best idea and the winner will be announced in May.

To enter or ask any questions, please email hqn@hqnetwork.co.uk

Over 630,000 living in ‘hazardous conditions’, report

A major report has revealed that 631,000 people in England are living in ‘hazardous conditions’.

In response to 2017’s Grenfell Tower disaster, and commissioned by homelessness charity Shelter, ‘A Vision for Social Housing’ consulted over 31,000 people from across the country and brought together 16 commissioners from across the political spectrum.

The report reveals that 3.1 million people in England need a social home – and of the 1.27m in greatest need: 631,000 live in hazardous conditions; 240,000 live in overcrowded accommodation; 194,00 live with ill health or disability; 128,000 are rough sleeping and hidden; and 79,900 are homeless and in temporary accommodation.

Asking ‘what is the future of social housing’, the authors state that the country is ‘feeling the effects of 40 years of failure in housing policy’ and specifically blame:

  • A failure to build enough homes. Over the past five years, housebuilding has averaged 166,000 a year, yet government wants to deliver 300,000 homes a year
  • Huge waiting lists for social homes. Today, 277,000 people are homeless
  • The explosion in the numbers renting privately, unable to buy or access social housing
  • Huge rises in welfare costs to government, driven by more people renting privately at higher costs

According to the report, if the crisis is to be solved, 3m new social homes must be built over the next 20 years.

The commission warns that without a ‘radically different approach’ the country faces a future in which:

  • A generation of young families will be trapped renting privately for their whole lives, while more and more will face living in dangerous accommodation or going into debt
  • By 2040, as many as one-third of 60-year-olds could be renting privately, facing unaffordable rent increases or eviction at any point
  • £billions more in welfare costs will be paid to private landlords due to a lack of more affordable social housing
  • Over the next 20 years, hundreds of thousands more people will be forced into homelessness by insecure tenancies and sky-high housing costs

Nadine, a private renter who contributed to the report, lives with her teenage daughter and works two jobs – yet still struggles to keep up with the rent. She said: ‘My rent is over half my monthly income, so that’s where most of my money goes. It’s hard to afford other things we need. I am cutting back and doing the best I can, but there are times we can’t live on the money we’ve got.

‘We budget on our food and it’s very rare that I buy anything full price. I shop around to take advantage of all the vouchers and deals I can get.

‘No one should have to spend more than a third of their income on rent. If they are going to set a minimum wage, then there should be places you can afford to rent on that income – how can it be a living wage if you can’t find anywhere to live on it?’

One of those who contributed to the report’s recommendations on reforming social renting was Rob Gershon, Lead of the HQN Residents’ Network, who said: ‘I’ve always thought of myself as incredibly lucky to be a social housing tenant… On the two occasions I’ve come to rely on social housing, it has been there to make sure my family has had somewhere to live.’

The commission recommends:

  • Setting clearer standards
  • Ensuring speedier redress for individual complaints
  • Proactive enforcement of regulation to protect social renters
  • Giving residents a voice in landlord governance and decision-making
  • Giving residents a voice in decisions made by national, regional, and local government

Click here to download the full report.