The July Budget announcements, along with the extension to Right to Buy, has created the most significant combination of policy decisions that I’ve experienced in my 35 years in housing.
And it is already changing the face of our sector. More and more associations have or are contemplating tough decisions about priorities, who they house, what homes they build, and the services they provide.
Although there’ll be more detail in the upcoming Housing and Welfare bills, I’d like to share how we’re responding to the challenge laid down by the chancellor.
Start with your purpose
There has been a lot of discussion, both online and off, about how associations will adapt. I see some looking to preserve the social homes they have, while others are upping the commercial aspects of their business – and everything in between.
Of course every association is different, serving diverse communities and with varying business models in place. However, for me, when we’re discussing these big decisions, it’s important to start with our purpose which is to help people in housing need. Keeping that purpose in mind will help as we review our business plan and strategy to make sure they remain appropriate.
Take time to understand the impact
When the announcements were first made the focus was rightly on the benefit cap reduction and the rent decrease. As we’ve spent time picking over the detail it is when you look at the policies all together that the complexities become evident.
A rent reduction not only significantly hits our income, but it also impacts the value of our homes. This could make the cost of the money we borrow more expensive, in turn increasing the cost of building a new home.
A rent reduction is good news for our residents, but the new £20,000 benefit cap will make social housing unaffordable for many families, particularly where we work in the south east. We’ll support where we can, but residents will also have to make tough choices in the future.
These announcements result in a tricky cocktail which could reduce the sector’s ability to build new and affordable homes. But before we choose one path or the other we need a thorough understanding of the impact of those policies over the 30 years of our business plan.
And it is not easy! So we’ve given ourselves some space while we do our financial remodelling. We’ve put signing new development contracts on hold for a few weeks, and in the autumn, with the Board, we’ll take decisions about our future strategy.
Get engaged in the debate
We absolutely support aspiration and housing associations have a vital role in helping the government achieve its ambitions for increased supply and greater homeownership. However we need to be frank about the obstacles and the importance of supporting local partnerships in meeting the needs of our communities.
So we made our submission to the CLG Committee inquiry into the future of housing associations this week.
We showed that the benefit cap hits residents in the south east particularly hard, despite the rent reduction, and we want to work with government to make sure a new Right to Buy policy does not jeopardise the building of more affordable homes.
A chance to challenge ourselves
The bottom line, however, is that the housing sector must innovate and become more efficient. Many of us have been doing this for a number of years through growth in development and through merger, and this will need to continue.
Our sector is once again being asked to step up to the challenge, but in my view this doesn’t mean changing direction. It means adapting to the new reality but continuing to find ways of maintaining a supply of affordable homes to rent and buy – because if we don’t who will?