Denise Chevin, Research Fellow
The underlying message from my recent report for the Smith Institute, Social hearted, commercially minded: tomorrow’s housing associations, is that change in the housing association world is set to accelerate. The sector which houses two and half million people, has been diversifying for years, and building up a mixed portfolio of housing for different types of tenure. But the cuts to grant and reform of benefits on the one hand combined with less regulation on the other, are creating more freedoms and opportunities and driving change.
Combining a social heart with a commercial mind
One of the key themes, and it’s a tension point that is only going to get more pressing, is the conflicted position the sector is. How do HAs combine their traditional social ethos with a new harder commercial approach – which all agree is necessary?
But, what does the sector mean by commercial? What came across very clearly from my interviews with 50 housing association chief executives and experts is that the modern housing association would see itself running very much on private sector lines – being efficient, focussed and jettisoning activities that don’t bring a clear demonstrable benefit. The social hearted comes when the association ploughs profits back into social housing rather than taking a dividend like the private sector.
Alongside this, associations still see themselves as a force for community good – providing housing services for their tenants.
As the welfare reforms and cuts in housing subsidy begin to bite, there will be increasing conflict of interest between the two different obligations.
The social conscience in the housing association boardrooms is already being pricked by charging the full 80% of market rent and the prospect of more evictions because of increased rent and the bedroom tax. It’s a real conundrum which could damage their reputation.
Certainly, increasing eviction rates by housing associations is concerning councils – and we might see increased tensions there also.
We all know there are things housing associations do for their communities that landlords in the private sector would never contemplate – coffee mornings, after school clubs, training for work, translation services.
They might say, we’ll stop doing those things and donate to local charities – but then do they risk becoming just like any commercial business that just ticks the CSR box?
An overarching question is who they house and what now is their social purpose. The problem is that without social housing grant it becomes impossible to develop low cost homes. Incidentally, that’s a state of affairs that is still yet to dawn on some MPs and local politicians. As my report makes clear, some new tenants in London will see large rent hikes as housing associations increase levels in line with the affordable rent model or market rented housing. So, unless grant returns to build genuinely affordable homes – and at the launch of the report, shadow housing minister Jack Dromey pledged that it would – many of those on low incomes will be priced out of new housing association accommodation.
And what about the bedroom tax and eviction? Edinburgh Council is pledging not to evict any tenant because they can’t pay it. Will housing associations happily submit to being (bedroom) tax collectors and bailiffs for the sake of £15 a week?
Do housing associations want to stay special? Or do they want to be so commercial they are a private company in anything but name? Tough choices really do lie ahead.
Skilling up the board
Allied to this commercial dimension is the question of just how business savvy are associations? That’s not an easy one to judge. Interestingly, Genesis are working with others on a new index to measure how effective housing associations are at managing return on investment – which should provide more of an objective answer to that question.
There is certainly consensus amongst the interviewees that the new opportunities available bring with them greater risks, demanding different skills in the boardroom – skills that some fear housing associations do not always possess. So, whether they can they manage risk, in what is becoming a more complex financial arena, is one of the big questions facing the sector.
There’s a lot of interest in the private rented sector for example, but it’s questionable whether it will really provide the means of cross subsidy opportunities many associations seem to be banking on.
Good leadership and clarity of thought will be absolutely crucial – and getting the right people on boards vital.
One person I interviewed asked why do boards need to be so big. Is it essential or compulsory that there are tenant representatives?
It’s controversial. But his argument is that retailers don’t have customers on their boards. That doesn’t mean you don’t take into consideration their views, but wouldn’t it be better to have a smaller focussed group who can’t hide behind the sheer weight of numbers?
Relationships with tenants
The drive to be more commercial is also manifesting itself in a more business-like approach to tenants. Yes, associations appreciate the need to be more professional in their approach to things like repairs and maintenance. But the sector is also taking a step back and asking what do they get in return?
And are they promising things that we can’t actually afford to deliver, such as weekend repairs or or simple fixes that tenants could do themselves? Has a whole industry been created to deal with anti-social behaviour?
So we are seeing a reappraisal of some services and the emergence of carrots and sticks to encourage tenants to pay their rent and take care of the property. I see this as real notable shift in the outlook of the sector.
It was also interesting to see Family Mosaic’s approach, which is to keep rent levels low for new tenants to encourage them to train and get into work if they don’t already have a job.
There is undoubtedly a wealth of innovation and creative solutions in the sector.
In the face of fiscal austerity, associations are increasingly looking to deliver social value through new types of partnerships and community services, which can also provide new development opportunities, or additional income streams.
One really exciting partnership for example is the One Housing Group and the North London Health Trust. One Housing Group is joining forces with the North London Health Trust to provide accommodation and care for people with mental health problems who otherwise would need hospital care. It’s a real win win situation.
One Housing Group told me that it would cost the health authority £3,000 a week to house a patient on a ward whilst for a housing association is would cost just £700.If housing associations were able to house a third people with these health conditions it could save the NHS £1 billion a year.
It is a unique time in recent history of housing associations. The sector is resilient – it is after all sitting on billions of pounds worth of assets and rental income is stable, at least for now.
Fiscal austerity is nevertheless forcing associations to scrutinise the way they work, make efficiencies and adapt to change quicker than many would like.
There is certainly huge regret that providing traditional low cost housing will be rare unless grant returns. That’s not to say they won’t be building sub-market rents – buts that’s more likely to be between 60 and 80% of market rents.
As organisations become more entrepreneurial, so do the risks they run increase. As a consequence the leadership and capacity and capabilities of housing staff and board members will come under ever more pressure and scrutiny. And they will inevitably need to confront the increasing tension between their commercial minds and social hearts.