All posts from: April 2012
Today’s Inside Housing brought with it the perhaps less-than-surprising news that social landlords think they will be able to build fewer subsidised homes if there is less subsidy.
In terms of news stories, it seems to be on a par with ‘dog bites man’ or ‘Joey Barton angers (insert appropriate team name) fans’, but this is more than a case of stating the bleeding obvious.
Some in the sector have developed a slightly fatalistic attitude over the continuation of grant funding for affordable – sorry, ‘affordable’ – housing. There are two broad churches among the doom-mongers: the first thinks there will be a further cut to the level of subsidy for the 2015-19 programme ahead of a total cut next time round; the other, smaller group, predicts the doomsday scenario of a zero-grant future coming round as early as 2015.
Whatever happens, it is entirely sensible for housing associations to start scribbling on the backs of envelopes to try and work out how they can do more with less.
Fans of ‘The Wire’, will be familiar with the phrase as the battlecry of senior management as they cut staff numbers in the semi-fictionalised world of The Baltimore Sun newsroom. As the show’s creator David Simon once explained, this was a bit of a joke. ‘You don’t do more with less,’ he said. ‘You do less with less.’
And that’s exactly what those housing associations that have done the modelling so far have found. What is shocking is how much less they can do.
Given current funding levels mean that the HCA is only able to provide around £20,000 for every new home, landlords are no strangers to having to find money elsewhere to deliver. So the revelation that Helena Partnerships would see the proportion of homes it can offer at sub-market rent drop from one in two to one in 12 if grant disappeared is truly alarming.
Ok, some might say, that’s a northern LSVT. Pressure on gearing is always going to be tighter and it’s a lot harder to attract alternative finance. But even in London, heavyweights such as L&Q think that only one in five homes might be affordable if the funding plug is pulled.
Grant Shapps has used his favourite tool (that’s Twitter, by the way) to laud the affordable homes programme, highlighting the fact that associations have upped their annual surplus since the regime was introduced. But all this really shows is that they are stockpiling against the nuclear winter that is another funding cut.
A third school of thought within the sector says that these kind of guessing games will just encourage Whitehall to wield the axe once again. If we show we are figuring out another way to do it, runs the argument, they will just let us get on with it.
If anything, the eyebrow-raising figures some of these landlords have produced show just the opposite: if the case for continued subsidy is to be made, we need to show what might happen without it.
The ranks of those people trying to bring institutional investors into the social housing fold were swelled this week by an unlikely source.
Well-known friend o’ the City Ken Livingstone has urged pension funds to come to the rescue of the sector and is talking to councils about a scheme that would see them pool their resources to make a direct investment in building new homes.
It’s an idea that’s hard to criticise. But it might also sound just the tiniest bit familiar. Earlier this week, London Councils – the umbrella organisation for the capital’s local authorities – started talks to create a ‘London mutual’, aimed at getting an impressive sounding £30 billion invested in infrastructure, including (presumably) housing.
In fact, every man and his dog in social housing has been trying to conjure ways to get these investors to take some of the financial burden off the government and the banks, many of whom are owned by the government now anyway. So far, no one has succeeded in any significant way.
And therein lies Ken’s problem: if people more fluent in the language of big business haven’t managed to convince the fund managers that social housing is the place to put their clients’ billions, what chance is he going to have?
That’s not being disrespectful. Ken’s staunch allegiance to the kind of ideological politics that went out of fashion a generation ago is admired and reviled in equal measure. Yet no one on either side is likely to claim that he is the best envoy to send to the City, red cap in hand, and plead the case for social housing.
What we need is a Trojan horse, not a battering ram. Even with housing becoming increasingly central to the London mayoral race, it doesn’t look like any of the candidates are capable of filling that role.
With institutional investors still very much the Holy Grail for housing associations desperately working out how to operate in a grant-restricted world, they could do worse than look to the valleys.
In Wales, a quiet revolution in social housing finance could be taking place. A development company – Devco Wales No 1 – is seeking out an ambitious £1 billion from pension funds, insurers and the like to build up to 10,000 homes in the principality.
The model is pretty simple: the money raised will be used to fund construction, with investors being repaid through rental income.
What is expected to attract these big beasts of the investment world is the security offered by rent. Yes, that security is under threat to some extent from the introduction of direct payments. But all in all, as the global economy struggles from one crisis to the next, social housing has become an increasingly safe bet.
And yet these mysterious investors are still just parading around the edge of the pool in their cash-filled Speedos, unwilling to take the plunge.
To be fair to the government, it is trying to tempt them into the water. The signs are that the new consultation on REITs could be used to access some of this wall of cash, but it’s an avenue that’s open mainly to the bigger fish.
Meanwhile, the communities and local government select committee’s report into social housing finance – expected to emerge within weeks – is understood to be focused very firmly on how to snare these investors.
But it looks, strangely, like the Welsh might have beaten everyone to the punch. It just needs someone to take the bait.