Altair’s Sector Stocktake Q4 2019-20

At Altair, we see housing associations, local authorities and private developers face new and growing challenges every day. Constant political, policy, economic and regulatory change means organisations are actively re-evaluating risk and exposure. To help you keep abreast with these sector and wider changes, we’ve compiled the following extracts to form our social housing sector stocktake to keep you up to date on what you need to know from Q4 2019.

Politics

Rishi Sunak’s Budget 2020

Boris Johnson’s political manoeuvre to call for a general election was successful as his Conservative government was re-elected with a large majority. Following this success, his Withdrawal Bill passed in Parliament and the UK left the EU. More recently, Johnson’s cabinet underwent a reshuffle and Christopher Pincher was appointed Minster of State for Housing, replacing Ester McVey. Robert Jenrick remains appointed as the Secretary of State for Housing Communities and Local Government. With this leadership, the Government’s position on housing is particularly orientated towards home ownership.

Rishi Sunak’s 2020 Budget contained significant spending on infrastructure with housing funding on the list of core investments. Spends include: £12 billion towards the Affordable Homes Programme, £650 million fund to combat homelessness and £1 billion for a Building Safety Fund for residential blocks over 18 meters.

Policy and Legislation

Following the 2020 Budget announcement, the Ministry of Communities, Housing and Local Government released the document ‘Planning for the Future’ that contained a high-level set of plans to tackle issues in housing, house-building and homelessness. The document promised a planning white paper, a social housing white paper and reforms to support home ownership.

Social landlords’ rents rise

After consultations that ended in Summer 2019, the Regulator of Social Housing (RSH) announced a change to the Rent Standard that came into force on the 1st April 2020. All social landlords will be able to raise rents based on an annual increase of no more than CPI+1% over the next five years. 94% of Registered Providers (RPs) are expected to increase their rents by the maximum amount allowable.

Other legislative changes include EU workers’ rights being removed from the Withdraw Agreement and an extension of Homes (Fitness for Human Habitation) Act to cover existing statutory periodic tenancies.

The Grenfell inquiry has continued to progress, though there have been significant delays due to witness and evidence issues. It is likely that COVID-19 will cause further delays in this process. Current evidence given suggests there was an awareness of and lack of action regarding the combustibility of the cladding by both the contractor and the architect. It has been estimated that social landlords have a £10 billion bill to fix fire safety issues related to Grenfell.

COVID-19

COVID-19 represents an unprecedent challenge for the UK’s economy and the housing sector. We have seen organisations assess the diversity of risk COVID-19 presents and quickly respond with remedial action. Challenges from COVID-19 are ubiquitous in the sector’s various activities. There are HR and cultural challenges with a greater likelihood of more sick pay and a required shift to teleworking. Also, social housing providers need to consider the possibility of rent arrears, deferred maintenance costs, and methods to undertake emergency repairs whilst residents are isolating. COVID-19 is likely to cause a downturn in the property market, increase the risk around construction sites and constrict housebuilding supply chains. Importantly, the National Housing Federation (NHF) has confirmed housing associations will not evict any tenants as a result of the COVID-19 pandemic. We do recognise that government policies may mitigate the potency of these challenges.

The Housing Market and the Economy

The UK economy has been and will continue to be significantly impacted by COVID-19. The extent and severity of this impact is not yet fully known nor quantified. Prior to COVID-19, property prices had grown by 2.2% (as of December 2019), though the overall market was still subdued due to the legacy of uncertainty from Brexit and the 2019 general election. Growth was seen in all regions, however there were slowdowns in South East and West Midlands. London remains the most expensive area in the UK.

The UK government has effectively shut down the UK property market following the UK’s COVID-19 outbreak; banks are no longer able to value properties and predominately are not offering mortgages. To protect homeowners, the government has implemented measures allowing homeowners to have a 3-month mortgage holiday providing beneficial temporary relief. For renters, the government has paused eviction proceedings. However, many commentators argue that this protection is not enough for renters during this crisis.

Regulation and Governance

The RSH has published a series of responses to the COVID-19 pandemic. Notably, their programme of in-depth assessments (IDAs) will be paused, data submission deadlines delayed and a survey to assess the key operational risks of COVID-19 will be sent out to RPs. In addition, RSH do not require RPs to reflect the impact of the current circumstances in their value for money (VFM) reporting. We expect RSH will publish further advice throughout the crisis.

Unconnected to Coronavirus, RSH published on 5th March 2020 an updated ‘Regulating the Standards’ document. This document sets out the approach of the Regulator and how it ensures its standards are being met. The key new measure introduced in this document is the 2020 Rent Standard. Accompanying this new standard, RSH updated the requirements of their statistical data return.

Instances of non-compliance with the RSH’s standards have been present in the sector. In light of Grenfell and the Hackitt Review, several organisations have been found in breach of fire safety regulations. Elsewhere there have been breaches in the Home Standard, regarding asbestos, gas or electrical safety, and the Economic Standards. Not all breaches have resulted in non-compliant judgements; swift actions by RPs have resulted in unchanged compliant ratings.

The NHF are seeking to review their Code of Governance. As part of this, the NHF opened a consultation with key stakeholders to inform a new forthcoming Code of Governance. We have provided a response to this detailing our wish that the new Code of Governance suitably reflects the special relationship of housing associations to their tenants, is attuned to the different sizes of housing associations and pioneers on diversity and inclusion.

Innovation in the Sector

There has been substantial innovation in the sector over the last quarter as well as in the last year. We have seen an increased use of smart technologies and data; sensors have been utilised by some providers to assist with real-time programmes of maintenance, cloud-based CCTV has been employed for quick reactions to anti-social behaviour and a sector-wide data standard is emerging. There has been further innovation regarding new developments, where modular housing is increasingly sought after, sustainability, where higher standards of sustainable living are being achieved in social housing dwellings, and HR, where programmes of open holiday entitlement, transparency on pay reporting and mental health are being implemented.

We here at Altair are always striving to ensure our clients are equipped with the knowledge and advice they need to deliver quality services for the people and communities that they serve. If you’d like to commission a copy of our full quarterly stocktake, or further sector updates, research or analysis, please e-mail our lead research analyst Cassidy Curls at Cassidy.curls@altairltd.co.uk

Written by Simon Hill, Graduate at Altair. Click here to view his profile and get in touch.