Friday, 01 July 2016

Ensuring benefit is paid to landlords not tenants would attract investment

Investors scared off by direct payment plan

Institutional investors are turning their backs on the housing sector because of concerns about plans to pay housing benefit directly to tenants.

The government should rethink one of the main pillars of the Welfare Reform Act as a result warned Mick Kent, chief executive of Bromford Group, on Tuesday.

Mr Kent claimed fears over increased arrears as a result of tenants receiving benefit directly was the main risk factor that prevented institutional investors, such as pension funds and insurance companies, from reducing their expected returns from housing associations.

During a session at the Chartered Institute of Housing’s annual conference on how housing could be used to boost the UK’s ailing economy, Mr Kent challenged Peter Schofield, director general for neighbourhoods at the Communities and Local Government department, to end direct payments.

‘That in itself could go a long way to getting market expectations of yields [for lending to social housing providers] to match what we can deliver.’

Mr Kent said new investors to the sector are demanding returns of at least 7 per cent, as opposed to the 4 per cent to 5 per cent that he believed could be delivered by housing associations.

He later told Inside Housing that the imposition of direct payments was ‘a philosophical argument’ and would not save money.

‘I just think it’s potty,’ added Mr Kent. ‘At a time when everybody is saying that the cupboard is bare why would we want to risk the potential to bring in other sources [of funding].

Bromford Group, which owns and manages 26,000 homes in central England, is involved in running one of five pilot projects to test the impact of direct payments.

Mr Kent said most tenants affected by the change ‘had not yet understood’ that it would apply to them.

Earlier, Mr Schofield had called on social landlords to make themselves more attractive to new investors, having warned that grant funding could no longer be relied on.

Institutional investors are ready and willing to lend to the UK,’ he told delegates. ‘Investors are hungry for exposure to UK infrastructure and we need to encourage them to see housing as a part of that.’

Visit our Housing 2012 microsite for full coverage of the conference and exhibition

Readers' comments (12)

Comments are only open to subscribers of Inside Housing

Already a subscriber?

If you’re already a subscriber to Inside Housing, your subscription may not be linked to your online account. You can link your subscription from within the My Account section of the website and clicking on Link My Account.

Not yet a subscriber?

If you don't yet subscribe to Inside Housing, please visit our subscription page to view our various subscription packages.

Have your say

You must sign in to make a comment

sign in register

Newsletter Sign-up

Related

Articles

  • Landlord reveals findings of direct payment 'pilot'

    18 May 2016

    A housing association is calling for changes to Universal Credit, after its unofficial ‘pilot’ showed tenants receiving housing benefit payments direct are more likely to fall into arrears.

  • Investors could be eyeing HAs in different ways

    21 October 2015

    A London housing association’s low bond price provides the first evidence that investors are drawing greater distinctions between individual landlords after the Budget.

  • Metropolitan roadshowing bond to investors

    22 September 2015

    A London housing association is roadshowing a bond to potential investors, as it prepares to end social landlords’ six-month absence from the bond market.

  • Midland Heart eyes direct labour expansion

    7 July 2015

    One of the largest housing associations in the Midlands will consider expanding its direct maintenance service after it proved ‘more competitive’ than commercial options in its first year.

  • Government study looks to landlords for direct building model

    2 July 2015

    Academics researching a pioneering proposal for direct government commissioning of new housing are studying housing association models to see how they could be mimicked by central government.

IH Subscription