What is happening at Cosmo?
12/03/2013 10:25 am
After a flurry of articles and much concern amongst investors and looming deadlines regarding the crisis at cosmopolitan its all gone... well... a bit quiet.
Not a good sign.
When will the sector, government and the HCA "grasp the nettle" and change the basis of regulation and activity to drive good behaviours, stablise an effcient focussed sector for the next century of housing supply?
The answer at Cosmo aoppears straight forward.
Lift all of the assets and libailities relating to, and secured directly by, social housing properties. De-register Cosmopolitan and leave the executive and board sort the rest of their non sector mess out.
Going forwards the following 10 point plan could be used to ensuree that these situations (unfortunately Cosmopolitan will not be last) are resolved quickly for the benefit of all.
1. Regulate the sector with periodic licences (say 3Y licences) giving current housing associations the ability to opt out, transfer publicly funded stock and no longer be supported by government
2. Target operating efficiency improvements and reduce the number of housing associations (say to 800 within 5Y and 500 within 10Y)
3. Have all grants and surpluses (unless taxed) repatriated to the Regulator
4. Centralise purchasing and delivery of all new homes to maximise efficiency and standardise publicly funded housing procurement
5. Allocate new completed units to licenced operators based on bids driven by operating efficiency and effectiveness of wider licenced activity
6. Performance review of allocated units and repatriation to other licensed operators in event of under-performance
7. Revoke lifetime tenancies and grant publicly funded housing rented occupants 2Y tenancies
8. Review the needs of publicly funded rented occupants every 2Y and include reference to the needs of communities as well as individuals (balancing communities to encourage employment and employability preventing sink estates)
9. Nationally encourage and process a low cost home ownership offer to working families in social rented housing embedding them in their current communities preventing residualisation and releasing capital to be centrally reinvested in new supply
10. Ring-fence non-social housing activity, assets and liabilities in licenced operators from 'private sector' activity
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12/03/2013 1:34 pm
1 - temporay 3yr licences would make RPs unfundable
2 - do you see a smaller amount of large housing providers as a good thing? Local and specialist providers would suffer
3 - these are used as loan covenants ansd security to ensure schemes are delivered. In your worl no-one should make a profit or surplus (does this inlcude all charities?)
4 - been tried on a regional level and failed. Please see IH article only 3 weeks ago.
5 - interesting. Who would bid for a 3yr agreement? Better off being unregulated (or is that your intended direction of travel?)
6 - this is done but only as a last resort of a failing RP
7 - removal of security of tenure? (again, like the private sector?)
8 - please desribe what you mean by "publicly funded rented occupants". Nothing like segregating and stigmatising different elements of the community eh?
9 - I have no idea what this means!
10 - this is done through subsidiaries currently as HCA regs and I&P restrictions don't allow 'for profit' activities.
I will forgive some of the basic issues as you are clearly new to this sector of the housing world, however some of the other proposals you have are steererd by politics - and we all differ on thsoe aspects!!!
13/03/2013 11:26 am
Dear C'mon sense
1. Licencing works in a number of regulated sectors where capital intensive activity needs to be funded e.g. rail transport, air transport... and in these cases the licences can be revoked at any time.
Licencing or contract award by regulators is used to drive performance and good behaviours and to provide the regulator with ultimate sanction.
In exchange for this sanction the regulator underpins the services - regulatory support.
In the housing sector the regulator has this underpinning role but no clear ultimate sanction to drive behaviour and performance.
As for being unfundable, clearly these other regualted licenced sectors have no such issues.
Regulators make clear statements regarding their role and the method of underpinning - such as operation of last resort or pricing reviewe felxinbility - to provide comfort to funders.
2. Yes - I wish we lived in a world where capital was unlimited and efficiencies were not required to ensure that housing delivery can keep pace with housing need but alas this is Brtain in 2013.
The luxuries of small, compartively top heavy, local or specialist providers duplicating cost bases and inefficiencies is simply something that needs to be eradicated for the sake of housing those in need - after all that is that not the primary motiove for the sector.
Typical objections to this rationalisation come from sector executives (who would unfortunately suffer) rather than tenants. Indeed, I have yet to meet a homeless person that would prefer to sleep rough to protect diversity and localised supply in the sector.
3 & 4. Public sector funding in the form of planning gain supression (s.106) or tax payer cash (grant) is subordinated to debt funding and given there is no ongoing payment obligations to government for this funding repatriation of value if released (SHG) to a "central pot" should not affect funding covenants (which should be against asset values of properties on the balance sheets of HAs or the post operating cash flows available to service funding.
I would like to see all HA's generate profits/surpluses from their operations - the key here is operations - surpluses created by a release of public sector provided value is not a surplus generated by the HA. It is a capital release and post repayment of the relevant funding amount shoudl be returned to the public purse.
My proposal to repatriate this capital release to teh public purse is to ensure a consistent and efficient delivery channel.
Hundreds of HAs designing, building or competing for developer properties serves only to drive up the price for the benefit of house builders and squander public funding.
Given planning requires and affodable delivery element, if house builders wish to build then they should need to compete on price to a central procurement pot for funding to deliver this.
This would give a better deal for public funding and a better deal for builders as this centralised process could be easier and quicker to deal with and provide greater certainty.
Once delivered the central procurement function would then offer units to HAs based on their bids to operate efficiently.
Government procurement is notoriously difficult and historically also not the most efficient, however, the sector's cost:value performance of new units sets a very low bar for this model to deliver real improvements.
Furthermore, centralised delivery would be infinately more controllable and not reliant on thousands of people in hundreds of oragisantions all influencing (slowing down) delivery.
If government were serious about getting Britain building and addressing the housing waiting list the HCA should clawback all SHG and grant and deliver programmes centrally.
After all, if every time we tried, failed and never tried again we would never have WD-40!
5. HA's confident of delivery and performance should be happy to bid for licenced properties. If your argument is that HAs cannoty be sure to do a good job and therefore would not bid then they should not be custodians of public funding or landlo9rds to vunerable families. At some point the sector needs to step-up and have the courage of its convictions.
6. This should be a matter of course for the regualtor. A number of KPIs already exist but the ability to enforce does not. Why not introduce fines to centrally fund new delivery as a performance measure?
7. This may be sensitive issue but we are in a housing crisis. Social housing should provide support to those who need it but for many who no longer need this support due to improvement in their circumstances this support cannot, in all fairness to those in need and unserved by the sector, continue to provided.
8. Publically funded rented occupants means those in receipt of tax payer monies to fund their housing provision. Unless you feel otherwise I see no stigma attaching to those in receipt of assistance from the government - indeed for many hard working families across the UK there is no visual recognistion of this support and this should continue. However, for some households in sink estates government support has become an unfortnate accepted way of life. The need to balance community needs with the needs of the individual is to safeguard against the Daily Mail stories of generations without reference points of working families.
9. There are significant numbers of working families in social rented accomodation earning above the national average wage. These families could easily become low cost home owners with teh right product embedding them as owners in their communities - delivering mixed communities. This transition from rented to low cost tenure significantly increases the importance of the property to the occupant and the value of the property to the HA - releasing an initial sale amount as well as lower costs of ongoing management.
10. Whilst these activities may be undertaken through subsidiaries this is by no means the same as ring-fencing as there are clearly issues in the sector relating to parent comapny support to for profit activities.
As an open minded individual I start every day a new - afterall there was one point in history when someone claimed the earth was no longer flat.
Attempting to bring logic, order and impartiality to a sector which is fuelled self-interest, spanish customs and flat-earthism will always be met by those who are swift to judge, label or assume.
Thank your for taking the time to post.
13/03/2013 3:14 pm
You're welcome. However you are still considerably wide of the mark!!
13/03/2013 4:42 pm
The presumption that the solution is short term 'licences' shows a lack of understanding of how the social housing sector operates. Surprising on this forum!!
13/03/2013 4:56 pm
Is the objection to licencing on this forum based on personal or sector risk?
Almost all regulated sectors operate under licences, franchises, concessions or contracts.
They are either defined in term or rolling.
If the only objection is the term then instigate them on a roilling basis.
But put them in place so that regulation has real teeth.
Teeth to stop c.75p in every £1 being wasted on duplicitious costs.
Teeth to enure that tax payer cash for is not being wasted to drive house builder profits and cost:value ratios in excess of 100%.
Teeth to ensure that investors can look to real sanctions and clear steps in the event of sector potential defaults.
In the long established experienced views of regular commentators to this discussion section be wide of the mark but that's simply because the mark has failed to be moved with the times.
Put another way... if understanding the sector means accepting the status quo of low ambition, even lower delivery, over inflated operating bases, duplication of providers (leading to in some cases over 50 HAs in a loca authority and over 300 in London alone) then you are quite right... I neither understand nor wish to understand the sector.
I wish it to change and drive housing forward for the very people the sector was created to serve... those in need of housing.