10 challenges for tomorrow’s housing associations

By Paul Hackett, director of the Smith Institute

“the only difference between saints and sinners is that every saint has a past and every sinner has a future” (Oscar Wilde)

In twenty years time we may look back on today’s housing associations as saints battling against all the odds to protect their tenants and provide homes for the most vulnerable. But will tomorrow’s housing associations be remembered in the same way?  As the pressure builds to become bigger, more commercial, and more market-orientated will associations be seen in 2033 as essentially private landlords, with a small minority of vulnerable and low income tenants?  Or will they succeed as independent organisations still focused on their charitable core values and continuing to provide mainly homes and services for the less well off?

The only thing we know about the future is that it will be different.  But how different will in part depend on housing associations themselves.  Associations will have to adjust to a rapidly changing world, but what are the main challenges that that lie ahead?  It’s a long list but here are my top ten to think about.

1. There’s a BIG world out there?

Whether you’re a housing association or a company manufacturing widgets, you can’t escape the global economy.  As we all saw with the financial crash in 2008, when things go badly wrong in one place it’s impossible to contain the fallout.  And it’s not just economic shocks that spread around the planet super-fast. Computer viruses, epidemics, energy problems, conflicts. They will connect us all in ways we probably can’t imagine.  Similarly, the next phase of the digital age may arrive in no time and completely change the way we live and work.

So, don’t forget the big things when you are planning the little things.  You can’t predict mega events, but don’t forget they’re out there.

2. It’s the economy stupid?

By 2033 the UK will certainly no longer be the sixth largest economy in the world. We might struggle to stay in the top ten. But we will still be relatively  prosperous.

Most economists expect the economy to get back to trend growth of between 2.4% pa by 2020. There will of course be ups and downs, but by 2033 we will be richer.  Enough growth to justify an increase housing grant?

But will the wealth be shared out, with more skilled employment and resources for those who need it?  The rich could get even richer and the poor even poorer.  If that happens we stay with a low wage economy, more under-employment and more in-work poverty.  And that means large numbers of tenants in sub-market housing on benefits.

Economic geography is also important. Unless there is some real policy change, the gap between London and the South East, and the rest of the country will get worse – and possible unbridgeable.  Lots of opportunities to cross-subsidise and grow in prosperous places, but few options to be “commercially minded and socially hearted” where values are low and there’s no growth and no surplus.

Is scaling up (and mergers) the only way forward?  Can you blend your localism with commercialism in an ever more fragmented economy? And, in the future will associations only want to compete in the high demand areas?

3. Can you increase supply, and, if so, what’s the magic number?

The housing market is dysfunctional, and that doesn’t look like changing soon. We are building about the same number of social unit as we did 20 years ago, and ten times less than 40 years ago. Private build has been roughly the same (given the economic cycles) for decades.

Even ignoring the backlog, we need 230,000 new homes a year to stand still (whether they are for rent or sale).  We all know the barriers: planning, land values, mortgage finance, public attitudes.  Also, new build is a small part of the market and house prices won’t fall until we build big (Kate Barker said over 300K a year).  But, what should the sector be aiming for – what is the magic number?

Councils can add to the mix – maybe 5-10K a year.  Housebuilders can supply more homes to let. But, should the sector contribute 60K a year, or 90K a year, which is three times the current rate. How is that even worth considering without big subsidies for sub-market housing?  Will the ‘Robin Hood’ model of cross-subsidy eventually mean less not more?

4. Who are homes for in 2033?

Today’s baby boomers are tomorrow’s tenants, and there will be a lot more of them. A lot more single people, a lot more lone parents, more older people, a lot more very old, and a lot more of Eastern European origin.

Also, there will be fewer home owners, fewer people with good pensions.  That will mean some people will have to work longer, which will change the profile of who you house.

Are housing associations prepared for an ageing and more diverse society?  Are you part of the adult social care solution and can you offer the range of services people will need at the cost they can afford?  Does it matter if you stay small and stick to the knitting?

5. When will housing become ‘affordable’?

I don’t know what will be affordable in 2033, but it has to be better than today. In one part of the country you have places where social and private rents are the same, in London the gap is so wide people can’t afford to live in anything but social housing.

The problem is real wages haven’t kept pace. We’ve had 30 years of worsening income inequality and house price inflation. The average earnings to house prices ratio was roughly 1:3 in the 1990s – it is now 6:1 and in London 9:1. That sort of ratio is unsustainable.

And, housing association rents have consistently been rising above incomes – which hardly help.

Maybe it’s time to end rent controls and embrace price discrimination and differential rents?  Will the private rented sector become more affordable and more competitive, if so how should you respond?  And, will the future finally see strong growth in the intermediate market?

 6. Will grant come back?

Subsidised housing needs subsidy, but how much?  Less grant means more private finance, which is likely to be more expensive in the future (it can’t get much cheaper!).  There is also a worry that the ‘gold rush’ in the bond markets could fall away if an association gets into financial problems.  The Dutch housing association crash proved very expensive and raises concerns about deregulation and privatisation of the sector.

The elephant in the room is Housing Benefit, which is underpinning much of the sectors’ borrowing. Can associations survive without HB?

A world without grant offers new freedoms but new risks, but how will it affect sub-market housing?  Can the sector navigate a new sustainable funding path using pension funds and the capital markets?

7. An end to the welfare reforms?

When will there be an end to the regressive welfare reforms that are doing more harm than good?  Part of the problem is that public attitudes have hardened against social transfers and the welfare state. Will the country’s social conscious and unwritten social contract inevitably dissolve, which will surely be to the detriment of the sector?

Despite all the demand management and cost savings we can dream of, welfare costs will continue to rise (especially healthcare). Can associations do more to help, and become part of the solution?  Should the sector be advocating more radical ideas, such as switching Housing Benefit revenue to capital investment in new homes – easy to say, but hard to do?

8. Who will be your friends?

The sector has arguably struggled to be loved, not least by local and national politicians.  It’s been making new friends recently and has shown that it can do much more than social housing.  But expectations of what associations can do (and afford) are rising.  As we (hopefully) move from austerity to posterity, will  relationships change? Where do associations belong regarding the brave new world of localism and city regions?  Are you connected enough in the right places?

The direction of flight is towards more local, private services, with the councils providing the safety net – perhaps more often on a cross-border basis.  Where do associations fit into this, and is the future about more collaboration. But how easy is it to really pool resources?

Self-financing of council housing under the new HRA regime could offer exciting opportunities, as could the NHS Trusts who are looking for alternative ways of coping with demand. But does the sector have the capacity and capability to do things differently and forge new partnerships, not least with the private sector?

9. Less will be more?

Will there be 1,500 or so housing associations in 2033? Few people believe it. Some say under 100, others under a 1,000.  Can the sector grow as it is without more mergers, and what support should government and the Natfed be giving?  There is of course a concern that big may not be best and that if associations lose their charitable status (perhaps in order to merge with a private business) then they could go the way of the Co-op – and be sold to hedge funds!

What is a fit for purpose association, and how big and how professional should it be?  And, in a world of localism and bespoke personalised services will less  really be more?

10. Can we have some political certainty, please?

Why is housing (and social housing in particular) so marked down in Whitehall? Is it because the policy is divided up between so many departments, with HMT and DWP focused on the benefit bill and CLG and BiS on supply?  No.10 are only interested in the popular politics of housing, which means pandering to the housing have’s– after all what Prime Minister wants to pledge lower house prices or tax home owners (much better to tax the poor). However, the growth of ‘generation rent’ and price volatility throws a big spanner in the works.

The intransigence towards housing policy probably explains why we have had 15 housing ministers in 15 years.  Will we get another 20 before 2033!

Surely it is time for a more adult conversation with the public on housing and housing subsidy, and (god forbid!) a cross-party consensus on more affordable homes of all types.  Alas, I fear common sense will be sacrificed on the voting alter.  If so, be prepared.  Tomorrow’s housing policies may include a new right to buy for the sector; new incentives/regulations to force associations to sweat their assets; new forms of subsidy (perhaps through a dedicated housing bank); and rent reforms. The next election may decide whether we have more support for the sector, or a lot less.


The sector has a fantastic survival instinct, and although life is going to get harder and a lot more complex housing associations aren’t going away anytime soon.  They will be here in 2033, but in what form? Certainly, tomorrow’s housing association will have to be more resilient and adapt to a more pressured market economy. But hopefully they will hold true to their values and continue to offer what others can’t.

This article first appeared on Hot House



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