Tuesday, 17 January 2017

Landlords rein in pay ahead of rent cut

Housing associations are reining in pay and cutting back on previously protected tenants’ services in a bid to cope with the impact of government policy.

That is a key finding from an annual survey of large landlords by auditors RSM (formerly known as Baker Tilly), published exclusively by Inside Housing this week.

RENT CUT GRAPH 1

The survey carried out last month is the first by RSM since government announcements of policies including the Right to Buy, Pay to Stay and the social housing rent cut.

The Health of the Sector survey shows just 59% of 131 respondents now expect to give their staff a pay rise over the next 12 months, compared to 93% in its similar 2015 survey. Just one in 10 expect to increase pay by 2% or more - the figure was more than 50% a year ago.

Similarly, more than half of landlords - 52% - are reviewing pension arrangements, up from 43% the previous year.

Recruitment is also being cut back, with 47% of providers reducing or considering reducing the hiring of new staff, up from 30%.

The report said the 1% annual social housing rent cut has left registered providers “little option” but to make significant efficiency savings.

It said: “We are seeing many RPs taking action now to ensure they remain fit for the future.”

The findings also show a marked increase in the proportion of landlords cutting back on services to tenants. A total of 41% of respondents say their landlord is considering cutting back on tenant services or have already done so.

Previous RSM surveys showed these services were largely protected from cuts, with just 19% cutting services in 2015 and 16% in 2014.

The survey also reveals an increase in the proportion of respondents who think there will be further failures in the sector, up to 75%, compared to 60% a year ago.  

Despite the wider economy growing, 58% said it feels like they are operating in a recessionary environment, a similar figure to the previous two years.

Gary Moreton, head of social housing at RSM, said: “What we are seeing now is almost a complete reversal of the commercial sector. While the country is out of recession, the social housing sector has come under increased scrutiny.

“Future rent cuts, welfare reforms and other regulatory changes are pushing the sector into implementing further cost-saving measures.”

The findings reveal that many landlords are wary about further deregulation in the sector. Although 80% disagreed with the Office for National Statistics’ decision to reclassify associations as public, just 57% think it is sensible for the government to dilute regulation in order to reverse it.

“This is perhaps indicative of some concern within the sector about the impact of diluting the regulator’s powers,” said Mr Moreton.

Nearly three-quarters of landlords (74%) are in favour of the Homes and Communities Agency’s new, more forensic approach to regulation through in-depth assessments.

No increase in development plans despite Right to Buy

Two in three respondents to a survey say their housing association is planning no increase to its development plans after 2016, despite expected sales under the Right to Buy.

A survey by RSM (formerly Baker Tilly) shows 66% of respondents say their development plans will either decrease or remain unchanged after 2016, with one in three saying they will increase their development.

It also shows 62% expect more than 5% of their housing stock to be sold under the Right to Buy in the next five years.

“While the government may be keen to see an increase in homeownership through the introduction of Right to Buy, it is looking like the scheme may not help with filling the current shortage of affordable homes across the country,” says Gary Moreton, head of social housing at RSM.

The survey also illustrates an ongoing trend towards less reliance on government capital subsidy in a lower grant environment. A total of 48% of respondents are using their own resources to fund development. The report says “the sector is disillusioned with the grant regime” as only 26% of respondents disagree that grant is becoming less worthwhile, compared to 30% a year ago.

The survey also shows 43% are reducing development plans for social homes, or are considering doing so. By contrast, 55% are increasing market value properties or are thinking of doing so, while the figure for the development of low-cost homeownership properties stands at 62%.

RENT CUT GRAPH 3

In numbers

75%
Respondents who consider there are more registered provider failures to come (up from 60% in 2015)

26%
Respondents who do not think grant is becoming less worthwhile (30% last year)

43%
Respondents who have or are considering reducing plans to build social rented homes

55%
Respondents who have or are considering increasing development of market value properties

47%
Respondents who have reduced or are considering reducing recruitment of new staff

57%
Respondents who think it is sensible for the government to dilute regulation

RSM sent a list of survey questions to 400 of the largest associations in England, Wales and Scotland and received 131 responses from individuals working at the associations. It is possible there is some duplication (ie more than one response from different staff at each landlord). Around 14% of respondents were from landlords owning 20,000 homes or more. The figures were compared to those from similar exercises by RSM in previous years. The responses are not necessarily from the exact same landlords.

Opinion

Gary Moreton

Our survey shows RPs have made some tough choices over the past 12 months

GARY MORETON 150px

Faced with some of the toughest challenges the sector has ever seen, we’ve seen registered providers (RPs) across the country respond with their usual guile, grit and determination.

Our latest survey shows that the sector has had to make some difficult decisions over the last 12 months to protect and maintain their viability.

Unsurprisingly, nearly all respondents (89%) have made cost savings, but we are now seeing the sector’s workforcebecoming increasingly affected by the cutbacks.

A total of 29% of respondents have already implemented redundancy plans, and 66% of English associations expect job losses by June 2016. Recruitment across the sector is also reducing, with 47% of RPs having reduced, or considering reducing, recruitment of new staff, up from 30% in 2015.

Even tenant services, protected by most RPs in previous years, are now becoming increasingly vulnerable, with 41% of respondents in our latest survey having made, or considering making, reductions in this area, more than double the figure of 12 months ago.

While the sector is making significant cutbacks, there still remains a commitment to development. Two-thirds of the sector say their development plans won’t reduce, with one-third seeking to increase development after 2016.

The sector has once again demonstrated its ability to adapt and change, and to carry on building new homes through adversity.

With further challenges ahead, it’s now more important than ever that the sector remains agile and ready to react.

Gary Moreton, head of social housing, RSM (formerly Baker Tilly)

 

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