Autumn Statement – challenges and opportunities for housing associations and local authorities

Posted: 29th November 2022 Bekah Ryder, Research & Insights Manager

Set against a backdrop of recession, high inflation, interest rates, increases in public sector net debt, and the biggest drop in living standards on record, the Autumn Statement on 17th November has been declared punishing and painful.

The big news for social housing in England was the announcement of the rent cap, with rent increases limited to 7% in 2023-24. The National Housing Federation announced shortly afterwards that housing providers, representing 80% of shared ownership stock in England, had agreed to a voluntary rent cap of 7% for shared owners. This avoids shared owners being hit with a CPI+1% rent increase on top of higher interest rates on mortgages. The Scottish government had previously announced that both social and private rents in Scotland would be frozen until 31 March 2023, whilst the Welsh government announced social rents there will rise by a maximum of 6.5% from April next year. 

Focusing on England, according to the government’s own impact assessment, a cap of 7% means registered providers of social housing will receive £4.9bn (nominal, £4.6bn present value) less in rental income over the period 2023-28 than would otherwise be the case. This comprises £3.2bn for private registered providers and £1.7bn for local authorities. The impact is likely to be less than the consultation documents suggested, however, as supported housing will be exempt from the cap, with providers able to raise rent by Consumer Price Index plus 1%. It will also vary depending on how many new or relet properties are available, where the rent cap will not apply. 

The Statement also included a number of announcements aimed to bolster income and support for the most vulnerable, including benefits being raised in line with inflation to increase 10.1% in April, £1 billion to extend the Household Support Fund in England over 2023-24 (adding to the £921million available over 2022-23), further Cost of Living payments of up to £900 in 2023-24 for households on eligible low-income benefits, disability benefits and pensioners (on top of £650 in 2022-23), and rises in the National Living Wage (NLW) and National Minimum Wage (NMW) for those aged over 23 years. But there will be no further support over for the coming winter months, at a time when both tenants and staff will be feeling the pinch. 

With these announcements in mind, and the challenges and opportunities that are presented, Altair has considered what the top five things executives will want to talk to their board about, and boards will want to hear from their executives: 

1. How are you prioritising tenants? 

  • It may be easy with financial pressures to cut community investment expenditure or delay investment in asset management, but with rising costs and falling living standards, as well as new consumer regulations, now is the time to focus on tenants. Your executive team and board should ensure that tenants are getting the services and support they need in well-maintained homes and are aware of which of your tenants might be struggling and which homes need investment. 
  • Analysing tenant contact, monitoring repairs data, more regular contact with tenants who have changed payment behaviour, and welfare calls will be more important in the next few months.

2. Revisiting your financial plan, including: 

  • Modelling the impact on key metrics, such as lending covenants, borrowing levels, credit ratings, asset management and development, and revisiting strategies accordingly. 
  • Stress testing, mitigation and recovery plans. 
  • Keeping track of formula rents and actual rents for all properties, including board reporting and assurance on compliance with the Rent Standard. 

3. Revisit procurement, but don’t just focus on the low hanging fruit: 

  • While it is tempting to look at smaller contracts or ‘nice to haves’, the bigger savings are often to be made from reviewing larger procurement contracts, such as repairs and maintenance, focusing on value for money. 
  • Boards and executives may like to contact new and existing stakeholders to open discussions about new partnerships or cost sharing vehicles. This might include sharing services for greater efficiency or joint ventures to diversify income streams. 

4. Consider what lessons you learnt from the impact of the 2015 rent settlement: 

  • The sector has faced challenges on rental income before and it is worth reflecting on what was learnt about refocused priorities, risk appetite, and financial plans previously, and what the longer-term impacts of any changes from this time have been 

5. Prioritise: 

  • Review your risk management strategy, business plan, 30-year financial plan and corporate objectives to ensure you are clear on how you will manage restricted income over the coming period and any anticipated efficiency savings. 
  • Be clear on what your organisation can revisit, push back or reduce. 

It’s certainly not going to be an easy few months, but discussions and planning around the above should put your organisation on a firmer footing for the future.

To discuss your plans and considerations with us, please get in touch with Cathy Beazley, Service Delivery Director at cathy.beazley@altairltd.co.uk.

Did you also see our blog post from Julia Leo, HR Consultancy Director, on how to support and engage your staff over the cost of the living crisis, ‘With the UK buckling under the pressure of the cost-of-living crisis, understand how you can ensure your organisation’s success’? 

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