Coaching for councils

Coutts, the Queen’s private banker on the Strand, London, seems an uncommon location for a conversation about council housing.

But back in November its wood-panelled rooms played host to a new kind of housing club. At the ungodly hour of 7.30am, a group of invited investors, builders, council officials and consultants, joined the second-ever ‘business breakfast’ laid on by the Housing & Finance Institute (HFI).

The institute aims to get councils “ready” to do “housing business” and was set up in September by lawyer Natalie Elphicke. Establishing the institute was one of the recommendations of the report she co-authored with councillor Keith House on the role of councils in housebuilding.

The report was commissioned by the last coalition government, and the HFI has now been given the seal of approval by George Osborne, who mentioned it in the March 2015 Budget red book - although the Treasury is not directly funding the organisation, which is independent. While government expects it to be funded privately, housing minister Brandon Lewis is a supporter and Judith Armitt, chief executive of Local Partnerships, an advisory body owned jointly by the Treasury and the Local Government Association, sits on its board.

Since then, the HFI has successfully raised resources from private and public sources to fulfil its ambition of becoming an independent adviser on accelerating housing supply.

“Every single player which went into the credit crunch has come out with different aims and ambitions.”

Natalie Elphicke

Ms Elphicke has presided over two such breakfasts attended by Inside Housing with a military manner that, like her report, offers no quarter to excuses. Gripes about borrowing caps, rent cuts and the Right to Buy are greeted with arched eyebrows. Her mantra is served up with strong coffee: there’s investment aplenty to build homes, if only local authorities knew how to attract it.

So what could the HFI do for housing supply in 2016?

In short, according to Ms Elphicke, the institute aims to “sit in the middle” of the housing supply chain which, she says, the financial crisis of 2007 radically altered. “Every single player which went into the credit crunch has come out with different aims and ambitions,” she said at the inaugural breakfast in October. “Business is starting to come back, but the market has changed.”

For example, the supply chain has got more complicated as new developers and investors entered and changed their place in the market. “Legal & General is not just investing,” Ms Elphicke said. “It now owns a house builder, applies for planning permission, and uses your pension pots to build houses.”

Culture change

In this altered environment, councils have to work even harder to understand and attract the increasingly diverse players in the diminished supply chain, she argues. In HFI-speak, this means getting “business ready” and Ms Elphicke and her team have put together a range of programmes to help them.

“We want to reach every council that needs to be reached and change the culture in the sector.”

Cllr Keith House

Business breakfasts, then, are just the beginning.

Cllr House, the leader of Eastleigh Council, has set a particularly challenging goal for the HFI. “We want to reach every council that needs to be reached and change the culture in the sector,” he says. “Our objective is to do that in the course of this parliament.”

The scale of this challenge is, however, a little unclear.

Cllr House says the report that he and Ms Elphicke co-authored found “a very large block” of authorities that “felt they just didn’t know how to deliver”.

They are reluctant to disclose how many councils the HFI helped in its first few months. Ms Elphicke says it is oversubscribed, due to high demand from councils for its help, but says its activity will “click up a notch” in 2016 as the institute expands to service this appetite.

At the time of writing, the HFI appears to employ two full-time members of staff: Ms Elphicke as its chief executive and Claire Coutinho, a programme director, previously employed at the bank Merrill Lynch and the Centre for Social Justice, a right-wing thinktank. Cllr House says he volunteers his time. According to Ms Elphicke, the institute boosts its capacity with “senior and experienced people through effective partnership working”.

The only local authority to announce its participation in the HFI’s “business ready” programme is Stoke, the Staffordshire city whose Labour administration was replaced by a coalition of independent, Conservative and UK Independence Party councillors in May.

Optimistic look

For each council on the programme, the HFI team run an “intensive workshop day” to help them analyse the local housing market, pinpoint their strengths and weaknesses, and identify the best “delivery structures”. Ms Elphicke says it will also put councils in touch with advisers like lawyers or accountants to put their revitalised plans into practice.

Jack Brereton, Stoke’s Conservative cabinet member for regeneration, is optimistic the HFI helped it find ways to accelerate housing supply. “We are keen to deliver double the numbers we are doing each year,” he adds. “It is very useful to have an outside view that evaluates how we are doing and how we can improve.” As a result of its participation, the authority has instituted several reforms (see box).

“We are keen to deliver double the numbers we are doing each year.”

Jack Brereton, Stoke’s Conservative cabinet member for regeneration

Meanwhile, the City of London Corporation has come on board as one of the HFI’s funders and a founding member, in order to further one of its key policy aims - helping to meet the housing needs of all Londoners.  The corporation has committed £120,000 over three years from its policy initiatives fund to help the HFI “become fully operational”, according to council papers.

The corporation’s chair of policy and resources, Mark Boleat, has become the HFI’s first chair. He has clear ideas about the role councils should play in the housing market.

“Most local authorities’ work has been to deal with people they are obliged to house,” he says. “That isn’t enough. They have a far wider duty.” He adds. “It is not about putting in subsidy to help a small number of people.”

While the City of London plans to build 3,700 homes over the next decade, Mr Boleat does not anticipate drawing on the HFI’s services. “That’s not why we did it [awarded the funding]. HFI is for those in need of a bit of hand-holding,” he says. The corporation’s £40,000 annual payment matches the cost of the HFI’s ‘gold membership’, its highest-priced advertised package. Its “business ready” programmes are offered to councils as one-off deals, priced between £2,500 and £5,000, according to an HFI flier.

Other founding members include well-known private firms: the Pinnacle Group and Keepmoat, both of which are represented on HFI’s board. Further familiar faces in its boardoom are Sir Steve Bullock, the Labour mayor of Lewisham, Barbara Spicer, chief executive of Plus Dane Housing, and Peabody’s chair Lord Kerslake.

Also on the board is Judith Armitt, chief executive of Local Partnerships, a body jointly owned by the Local Government Association and the Treasury, although the organisation is not providing funding to the HFI.

“HFI is for those in need of a bit of hand-holding.”

Mark Boleat, chair, HFI

She said councils have put housebuilding second, as they focused on day-to-day services amid huge budget cuts. While some were “very willing” to work with the private sector, “some are not and some choose not to”, Ms Armitt said. “We want to help councils become confident partners,” she added.

Ready for business

Ms Elphicke believes the HFI and its early morning meetings will help rebuild the shrunken supply chain by introducing councils to investors, private firms and consultants, like lawyers. ‘Business ready’ authorities can then pitch themselves to prospective investors at networking events, where established firms and start-ups set out their stall.

The attraction for private industry is clear, according to Ben Denton, business development director at Keepmoat. “Most of the work we do is in partnership with public sector bodies so the more partners involved, the better.” he says.

“We want to help councils become confident partners.”

Judith Armitt, chief executive, Local Partnerships

Whether the HFI’s formula of breakfasts, networking and pitching events, and coaching translates into accelerated supply will be a key test of its success for councils and other observers.

Its approach is welcomed by Eamon McGoldrick, managing director of the National Federation of Arm’s-Length Management Organisations, who attends the breakfasts. He is, however, keen to understand how the HFI measures its success. “I haven’t seen laid out what they aim to do in the next five years. How many local authorities are they going to visit? How many events will they host?”

Mr McGoldrick also notes that the HFI’s ambition to accelerate supply may be held back by government policies, like the social rent cut and the forced sale of high-value homes. While arm’s-length management organisations alone had doubled their output of new homes in the past three years to 903 in 2014/15, he admits that “it doesn’t take much of a brewing storm for councils to go back indoors”.

“I haven’t seen laid out what they aim to do in the next five years.”

Eamon McGoldrick, managing director, National Federation of Arm’s-Length Management Organisations

The HFI view that sufficient investment is already available for extra housing is also disputed by the Chartered Institute of Housing.

Its deputy chief executive Gavin Smart described the Elphicke-House report as “hamstrung” for failing to consider the case for lifting caps on how much councils can borrow to build, a move he sees as the real “game-changer”.

Mr Smart’s view is still roundly rejected by Cllr House. Councils which are serious about building should also learn to overcome “hiccups” of government policy shocks, like social rent cuts and the Right to Buy, he says. They should “take stock and move on”.

Such hard-nosed resilience is the stuff of the “housing business-ready” authority that attracts investment, according to the HFI, it seems. Tea and sympathy is in short supply. Even at breakfast.