Housing White Paper expected soon

Editorial 2

Rent collection 3

Quality of life of residents 4

Asset management and maintenance 6

Right to Buy 8

Demand 10

Care and support 12

Health and safety 14

Human resources and pensions 15

Summary 16

HRS Review No. 84 — November 2016 — Housing and HR

2

Editorial At the Conservative Party Conference, Communities

Secretary Sajid Javid announced that the government would

be producing a Housing White Paper, which is expected to be

published prior to the Autumn Statement on 23rd November.

Housing minister Gavin Barwell subsequently gave some

hints to the RICS that the White Paper would contain :

Measures to speed up both the release of public land and

the planning system to incentivise an increase in supply

Addressing the reasons why the number of homes built is

much less than those for which planning permission is

granted, including resource constraints on local authority

planning departments

Increasing the number of organisations involved in

building houses.

In their submissions to the Autumn Statement, both the

NHF and the CIH called for government investment in

affordable homes to be focused on housebuilding numbers

rather than tenure, and for the Affordable Homes Guarantee

Scheme to be restarted to reduce the cost of new supply.

The NHF also called for:

An additional £3 billion of government investment to

deliver a further 100,000 new homes

A new "buy as you go" product, which would not require

a deposit, allow people to build up equity from day one

and would be cheaper than market renting

The sale of public land to be prioritised on the basis of the

number of homes produced, and how quickly, rather than

to the highest bidder.

If the sector is to be successful in its offer to the

government, we need to have a clear message about what

we are bringing to the table, which would include:

An appetite to significantly increase the rate of supply in

order to bridge the gap between the number of new

homes likely to be delivered by the private sector and the

number needed to meet demand

A determination to make further significant efficiency

improvements in order to maximise the value created by

our activities

Bringing in new products that provide flexibility between

renting and home ownership and that remain affordable

to the customer while also reducing the cost of welfare

benefits

Making greater use of offsite construction to speed up the

delivery of new homes and reduce their costs, while

ensuring that the quality of construction remains high.

In order to deliver a step change in supply, associations

will need to review their risk appetite statements, being

prepared to take on some additional risk in return for the

benefit of higher growth and the social benefit of housing a

greater number of people. Traditionally, the sector has used

very conservative financial planning assumptions, artificially

reducing their development capacity in return for having a

high degree of certainty that financial plans will be met. This

should be replaced by planning broadly in line with forecast

expectations, while maintaining a reasonable and clearly

defined level of contingencies, including sufficient cash to

maintain liquidity in the event that projected sales are

significantly delayed.

Challenging targets should be set for efficiency

improvements - these may be a necessity if the rent cut period

is extended. Associations should consider greater partnership

working in order to improve value for money. It may be

quicker and easier to deliver savings through looser

partnerships such as cost sharing agreements than through

full mergers, which take up a lot of management time and

have not yet demonstrated significant efficiency gains. A

more active approach to asset management, disposing of

relatively poorly performing stock, would also contribute to

delivering greater value for money.

In term of product innovation, we need associations to

try out new ideas, subject them to robust evaluation, refine

them and then bring the most successful products quickly

into the mainstream, to obtain the maximum benefit. There is

certainly room for a “buy as you go” product as the NHF has

proposed; Gentoo and Home Group have already developed

products along these lines. Any successful product will need

to be sufficiently flexible and robust to meet the challenges of

a post-Brexit economy. Now that we have the government

pointing in the right direction, we must step up to the mark.

3

Although housing associations have coped well with the implementation of

welfare reforms to date, there has been an expectation that rent arrears would rise at

some point, particularly as benefit payments are routed via the tenant rather than

directly to the landlord. The HCA's latest quarterly survey for the period ending

June does show a small increase, although it is too early to say if this is part of a

more significant trend. Median rent arrears rose from 3.0% in March to 3.1% in June,

while the mean rose from 3.1% to 3.2%. In addition, median rent collection rates

worsened from 99.7% in March to 99.2% in June, while the mean fell from 99.6% to

98.9%. 24 providers reported rent collection rates of less than 95% during the quarter

to June, compared with 5 in the previous quarter.

In order to prevent and tackle rent arrears, we need to understand the reasons

why those payments are not being made. On 21st October, Flagship Group

published a report based on research undertaken with its tenants on the affordability

of its homes. This found that while the rent was currently unaffordable to only 6% of

tenants, 32% were at risk of their rent becoming unaffordable, due to further welfare

reforms etc. According to the research, the most common reasons for being unable

to pay the rent were unexpected expenses, increases in outgoings and decreases in

income, e.g. due to health problems or job loss. It recommended assessing all tenants

going into arrears for the causes of the problem in order to put in place the necessary

support. It also proposed proactive measures, such as encouraging tenants to build

up at least 4 weeks of credit on their rent accounts and targeting support at groups of

tenants most likely to be affected by planned welfare reforms.

Arrangements are in place for the rent of vulnerable tenants in receipt of

Universal Credit to continue to be paid to the landlord through Alternative Payment

Arrangements (APAs). Under a pilot scheme, social landlords may be given Trusted

Partner status, enabling their tenants who are assessed as being vulnerable to be

given an APA automatically, without the need for an application. On 9th September,

work and pensions minister Damian Hinds published the list of successful bidders to

become Trusted Partner pilots for the purposes of these APAs.

One welfare reform measure that has not yet taken effect is the LHA Cap,

under which the Housing Benefit payable to a social tenant will be restricted to the

Local Housing Allowance paid to private sector tenants in the area. This will mainly

affect single people under 35, in addition to

supported housing tenants, for which a

different system will apply (see the Care

and Support section). According to an

analysis by the NHF, 21.1% of Housing

Benefit eligible housing association tenants

in England would be affected by the LHA

Cap, with an average impact of £20.43. The

region with the highest proportion of

affected households is Yorkshire & the

Humber at 25.5%, while the region with the

highest average impact was London at

£37.69. 86.4% of the affected tenants are

limited to the Shared Accommodation Rate,

which applies to single people aged under

35.

As suggested in Flagship’s report, a

combination of proactive and reactive

measures are required to control rent

arrears. These include encouraging

tenants to build up a moderate credit

balance on their account to protect them

against falling into arrears during times of

financial difficulty. Incentives could be

provided for those whose account does not

fall into arrears over a given time period.

Proactive support could also be

targeted at those most likely to be affected

by measures such as the LHA Cap and the

reduction in the Overall Benefit Cap,

ensuring that they are fully informed

about the changes and have a clear plan to

deal with them. Each association should

maintain and refine data on the individual

tenants affected by these changes and be in

a position to calculate the total impact

before and after their intervention.

Where a tenant does fall into

arrears, this can be dealt with most

effectively be responding quickly and by

engaging with the tenant to ascertain the

reasons behind the arrears. A presentation

on this approach was given at our last

members’ conference.

Rent collection

4

The Overall Benefit Cap was introduced

in 2013 to restrict total benefits per household,

initially to £500 per week. According to figures

published by the DWP on 4th August, the

number of households affected by the Overall

Benefit Cap fell from a peak of 28,434 in

December 2013 to 20,124 in May 2016.

However, on 7th November, the weekly limit

will fall to £384.62 (£442.31 in London), so a rise

in the number of households affected can be

expected.

The bedroom tax or Removal of the Spare

Room Subsidy was another welfare reform

measure introduced in 2013, and has now been

in place long enough for meaningful studies to

be undertaken into its impacts. On 17th

August, the G15's Real London Lives project released the results of such research in

relation to housing association tenants in the capital. This found that 75% of those

affected by the bedroom tax in 2013 were still in the same circumstances in 2015,

with the remainder either no longer claiming Housing Benefit or no longer subject to

the deduction due to a change in circumstances. Only "a handful" of residents in the

study had downsized as a result of the policy. Some of those affected by the policy

had fallen into arrears with their bills, while others had cut back on food or heating.

The impact of further welfare reform measures is expected to increase the extent of

the financial difficulties of these tenants.

Another welfare reform measure that might affect the ability of a tenant to pay

their rent is the changes to Council Tax Benefit, under which the national scheme

was replaced by individual schemes operated by local authorities. According to a

report from the Child Poverty Action Group and Z2K, the number of London

boroughs requiring a contribution from all households to their Council Tax increased

from 24 in 2015/16 to 26 in 2016/17, while eight boroughs increased their minimum

payments. Although the number of Londoners summonsed to court for non-

payment of Council Tax fell from 102,204 in 2014/15 to 98,723 in 2015/16, the number

of claimants referred to bailiffs increased by 51% to 19,000 in 2015/16.

Housing associations should work

with partners across the private, public

and voluntary sectors to remove the

barriers to work identified in the Real

London Lives research and other similar

studies. This might include providing

financial support for people making the

transition into work and providing access

to low-cost childcare and transport.

Quality of life of residents Despite the comprehensive reforms of welfare benefits described in the above

article, many claimants are still experiencing the poverty trap. In September, David

Montague, Chair of the G15 wrote to work and pensions secretary Damian Green,

calling for a fundamental review of the welfare benefit system after the

organisation's Real London Lives project found that, for many, work does not yet

pay. The research found that, while the majority of people in social housing were in

work, more than half of those interviewed said an unexpected bill for as little as £50

would push them into financial hardship. Further barriers to work included the cost

of childcare, unsuitable tax credit arrangements and the high cost of transport.

As the Real London Lives research

shows, the majority of tenants affected by

welfare reforms do not move but try to get

by on reduced income. A range of

measures could be targeted at people in

this position, including supporting

applications for charitable assistance,

being more proactive in matching them

with smaller homes in the area and helping

tenants to access training and employment

opportunities.

Asset management and

development strategies should also be

reviewed to ensure that the homes remain

affordable to people on low incomes. This

could include developing shared

accommodation for single people under 35,

who will be affected by the LHA Cap.

5

While there remain difficulties in moving into employment, the chances of

unemployed people doing so can be significantly improved through the provision of

appropriate training. In August, Manchester Athena, a consortium of fifteen housing

associations in the region, was awarded a £9.7 million contract to help people back

into employment. The organisation's programme aims to help people who are

homeless, long-term unemployed, living with disabilities or health conditions, or

dependent on drugs and alcohol, plus ex-offenders, LGBT people, ethnic minorities

and migrants.

As noted in the Real London Lives research, a small unexpected cost can drive

many low-income households into rent arrears or to take on other debts, which often

come at exorbitant rates of interest, further reinforcing the poverty situation. Back in

2010, the NHF established My Home Finance to offer modest loans to people who

would find it difficult to borrow from lenders other than pay-day lenders and loan

sharks. In March it was reported that the company had failed to secure the

investment required to continue and it had therefore decided either to sell the

business or to conduct an orderly run-down and closure. In June, My Home Finance

ceased trading, with its loan portfolio taken over by Street UK, a Community Interest

Company, which will be working with the housing associations involved to offer

new loans to their tenants. The investment of these associations in My Home Finance

will not be recouped.

Some people with the poorest quality of life belong to so-called troubled

families, defined by the government as involved in crime and anti-social behaviour,

with children not in school, at least one adult on out of work benefits and causing

high costs to the public purse. A specific programme was established by the DCLG

in 2012, with funding delegated to local authorities to work with these families to

improve their circumstances. On 17th October, the DCLG published an independent

evaluation of the programme, which concluded that there was no consistent

evidence that it had improved the lives of the participating families. According to the

report, “The vast majority of impact estimates were statistically insignificant, with a

very small number of positive or negative results,” although there had been “a

detectable impact” in the level of confidence and expectations of those families.

The quality of life of people with disabilities may be affected by the suitability

of their home in relation to their specific needs. According to research published on

29th July by the LSE, at least 1.8 million households in England have an identified

need for accessible housing, of whom 580,000 are of working age. At least one in six

of these households, a higher proportion among working-age households, do not

have all of the accessibility features that they need. People with an unmet need for

accessible housing are four times more likely to be unemployed or not seeking work

due to sickness / disability than other disabled people.

One route to funding adaptations to meet the needs of disabled people is

through Disabled Facilities Grants (DFGs). According to a report published in June

by Foundations, the national body for DFGs and Home Improvement Agencies

(HIAs), awareness of DFGs is low, the provision is fragmented and too often older

and disabled people are forced to find solutions on their own. This is despite a 79%

increase in central government funding in 2016/17. The report called for closer

working between HIAs and the NHS, and for a more consistent approach to

contributing towards the cost of adaptations from housing associations.

Our mentality needs to change

from solving the problems of the

organisation to helping the tenants to

solve their problems, which in turn will

have a positive effect on the association

itself. Bromford’s neighbourhood coaches

are a good example of this approach.

We expect that the majority of

housing associations are putting some

effort into helping their tenants into

employment. As the example of

Manchester Athena shows, working in

partnership with other organisations

enables this work to be scaled up, reaching

a larger number of people and contributing

to improved value for money.

In relation to providing access for

tenants to affordable loans, this could be

achieved through signposting to Street

UK, as well as through links with local

credit unions. Clear information should be

provided to tenants to help them avoid

taking on debts at unsustainable rates.

Associations should also have a

clear and well-publicised policy on

making adaptations to their homes to make

them suitable for tenants with disabilities,

including how this is to be funded.

Priority should be given to people of

working age, to reduce barriers to work.

6

In response to the statutory rent cut, housing

associations have had to cut their costs, with the largest area

of spending being on maintaining existing homes. There is

concern that the response of some associations has been to

delay planned maintenance, rather than improving the

efficiency of day-to-day operations. In September, an

analysis by Savills found that, in most regions, the net

present value of the stock of housing association properties

was falling because they were taking this approach. Mervyn

Jones of Savills told Inside Housing: “If housing providers do

not take further action, it is likely this will reduce their

financial capacity to develop homes. There is a risk that it

will potentially seriously affect their business plans as it

feeds into loan covenants.”

In its Sector Risk Profile, published on 21st September, the HCA noted that

mean major repairs cost per unit was forecast to fall from £1,032 in 2016 to £928 in

2020. The regulator said it would seek assurance that Registered Providers were not

failing to maintain their stock or delaying capital investment to future years, adding

that clear plans needed to be in place to deliver the ambitious cost savings that were

planned.

One argument that might be put forward in support of reducing costs is that

planned improvements in the quality of the stock have largely been achieved.

According to the HCA's Statistical Data Return report, published on 11th October,

the number of housing association homes not complying with the Decent Homes

Standard fell from 16,576 (0.7%) in March 2015 to 8,131 (0.3%) in March 2016.

While the Decent Homes Standard has largely been achieved, it is generally

considered not to be a particularly high target, with many housing associations

having already set higher asset management standards for their stock. The sector

currently has a much lower assessed compliance with the Living Home Standard,

launched by Shelter on 17th October. 66% of housing association homes currently

fail the standard, which incorporates 39 attributes across the following five

dimensions:

Affordability - 47% of housing association homes fail , mainly due to the tenants

being worried that rents will go up in the future

Decent Conditions - 29% fail, similar to other rented sectors but much higher

than the 13% achieved by mortgaged owners

Space - 23% fail, this being a particular problem in London

Stability - 12% fail, compared to 25% for the private rented sector, but only 5%

for mortgaged owners.

Neighbourhood - 11% fail, compared with only 3% of mortgaged owners, with

feeling reasonably safe and secure being the most important attribute.

As part of its wider approach to stock improvement, the housing association

sector has also made significant improvements in the energy efficiency its stock,

although the pace of change has slowed due to large cutbacks in government

funding for these measures. On 10th August, the NHF published a paper on the

quality and energy efficiency of housing association stock, which concluded that:

In responding to the rent cut, it is

essential that housing associations achieve

real efficiency improvements and do not

simply delay cyclical programmes, which

would lead to deterioration in the quality

and value of their assets. A more active

approach to churning the assets, replacing

those sold with newer units that are

cheaper to run and maintain, will help to

improve asset values, as well as creating

more balanced communities. Such sales

could also be used for tenants with the

Right to Buy who cannot purchase their

own property, due to Section 106

restrictions, for example.

While the sector’s failure rate

against Shelter’s Living Home Standard is

high, it includes some subjective measures

such as concern about future rent

increases. This could be overcome by the

association giving a guarantee that the

rent will not increase by more than

inflation over a specified period, say five

years. More engagement is also required

with tenants to determine the reason why

they may not feel safe and secure in their

neighbourhood, in order to facilitate an

appropriate response.

The organisation should consider

whether an adopted Living Home

Standard as a target, including setting

goals for improving compliance with the

Standard each year.

Asset management and maintenance

7

Due to the investment in Decent Homes and in new build properties, housing

association properties were in a better state of repair than owner-occupied and

privately rented homes.

Asset performance will be improved through changes in the approach to asset

management, focussing on keeping properties achieving good returns in smaller

geographical areas.

However, progress could be hindered as resources are squeezed by the rent cut

and LHA cap.

In order to reduce fuel poverty, housing associations have an ambition for all

homes to reach Energy Performance Certificate Band C by 2030, although this

will be expensive to achieve.

Properties performing poorly on energy efficiency are mainly those with solid

walls and those built before 1919.

The sector is seeking external investment to deliver the ambition, combining

innovation, collaboration and efficiency through economies of scale.

Taking a more active approach to churning the stock enables associations to

rid themselves of poorly performing assets and provides cash to be spent on more

energy efficient new homes or for retrofitting other existing properties. Data from

two different sources shows an increase in asset disposals in the last financial year.

According to the Statistical Data Return report, disposals from the sector increased

from 2,982 in 2014/15 to 4,406 in 2015/16, while figures published by the DCLG on

20th October showed that there were 4,099 sales by private Registered Providers into

the private sector in 2015/16, compared with 2,803 in 2014/15. The highest number of

sales in any previous year was 3,334 in 2010/11.

Poorly-maintained or expensive-to-run properties are likely to be the cause of

complaints to the landlord. According to an analysis by Housemark the median

number of complaints per 1,000 homes rose from 31.0 in 2014/15 to 33.1 in 2015/16,

with more than half of the complaints in the last year relating to property services.

Causes of the rise in complaints were thought to include increased customer

expectations, the constraint on provider resources as a result of the rent cut and

improved recording processes

Over recent years, a number of providers have sought to reduce the costs and

improve the effectiveness of maintenance by bringing the service in house. On 3rd

October, Sovereign Housing Association brought the remaining 8,000 properties

from its portfolio under the auspices of its in-house maintenance team, at the expiry

of its contract with Mitie. The aim of this move was not only to save money but also

to increase control over the service and improve its quality. 35 additional staff were

recruited to provide the service, alongside an investment in new technology to

improve the scheduling of appointments.

Such a move also removes the risk of the financial failure of the contractor,

which might become a more frequent event in the more difficult trading conditions

expected following the EU referendum. In a trading statement issued on 2nd

August, Lakehouse plc highlighted that there were a number of pending contract

settlements in its Regeneration division, which were expected to have an adverse

impact of £4 million in the current financial year. However, actions being taken to

deal with these problems were “expected to help restore shareholder value in the

medium term.”

The Affordability dimension of the

Living Home Standard notes the potential

trade-off between paying for housing and

paying for heating. If the costs of running

the home are lower, the tenant will have

more funds available for other expenses,

reducing the probability of rent arrears.

Associations should set challenging, long-

term targets for improving the energy

efficiency of their stock. A higher rate of

disposal and replacement, as described

above, will contribute towards meeting

those targets.

Complaints should be used as a

learning tool for the organisation. They

should be properly recorded and

investigated with the complainant

regularly updated on progress. Trends

and the learning from complaints should

be discussed at a high level.

Where they are not already in

existence, the organisation should consider

setting up an in-house contractor, to

improve control and avoid the liability for

20% VAT. Where you continue to do

business with external contractors, these

should be subject to regular independent

checks on their viability, with alternative

providers available to step in if required.

8

A successful housing policy will

both enable the supply of sufficient homes

to keep up with demand and give sufficient

choice so that households can choose a

tenure that is suitable for them, taking

account of the issues highlighted in the

dimensions of the Living Home Standard:

Affordability, Decency, Space, Stability

and the quality of the Neighbourhood.

Helping customers to buy their own

homes, where this is sustainable, will

satisfy the aspiration of many to move into

home ownership and keep more affluent

tenants in the area. It will also reduce the

requirement for welfare benefits to pay the

rent of retired tenants.

One of the problems with the

current Right to Buy scheme, including

those being operated by the associations

participating in the pilots for the

voluntary scheme, is that the value of the

discount as a proportion of the total value

of the property is much greater in low-

value areas than in those where house

prices are higher, even allowing for the

higher level of discounts pertaining to

properties in Greater London. A revised

scheme might have a greater variation in

the maximum discount according to the

area of the country. If not, we risk selling

the majority of properties in areas where it

is not cost-effective to replace them one-for

-one, while selling fewer in higher value

areas where the funds generated could

fund more than one replacement home.

The deal between the NHF and the government on extending the Right to Buy

to all housing association tenants was a controversial move, although it has the

potential to deliver financial benefits to the associations involved, as well as meeting

the aspiration of many tenants to own their own homes. According to research

published by the Council for Mortgage Lenders on 20th October, 30% of social

housing tenants would like to be home owners within two years while 39% would

like to be home owners within ten years. On the other hand 57% would like to

remain in social housing for the next two years, while 46% would like to remain in

social housing for the next ten years. In addition 8% of those in other tenures would

like to be in social housing in two years time and 7% in ten years time.

In January, a Voluntary Right to Buy pilot scheme was established, involving

five housing associations. By August, 2016, 790 households had made an application

under this scheme, which represented only 1.6% of the tenants of the housing

associations taking part in the pilots, although the DCLG said that 5% of eligible

tenants whose home was not excluded had made an application.

At the same time it was reported that Merseyside-based Riverside Group had

increased its planned number of sales under the pilot schemes by 85, owing to low

take-up in higher value areas. By April, 217 tenants had applied to buy in

Merseyside, compared to 96 in London, 16 in Surrey and 69 in Oxfordshire.

Speaking at the NHF Conference in September, by which time the first sales

had been completed under the pilot scheme, Hugh Owen of Riverside said that

demand had been "impaired" in the capital because many tenants required a

mortgage of more than six times their salary in order to buy, although some banks

were prepared to lend at a higher multiplier. Clare Powell of Sovereign Housing

advised associations to identify properties with Section 106 agreements (which

cannot be sold out of affordable housing) at an early stage to reduce the

disappointment felt by potential purchasers when informed that they could not buy.

In preparation for the scheme to be extended across the sector, the NHF

published a briefing note on 12th August, encouraging its members to begin

considering the design of their specific schemes. In particular, the arrangements need

to consider the criteria for exempting properties from sale and how to provide

alternative properties to which the RTB discount will be ported. This is expected to

be largely from the new-build pipeline. Clear information will need to be provided

to tenants, while the process will also need to detect fraudulent applications and

ensure that sufficient replacement properties are built.

Right to Buy

9

In terms of others learning from the

pilot schemes, it is important to be able to

identify properties subject to Section 106

agreements that cannot be sold to their

tenants and to let potential purchasers

know at an early stage that they would

need to buy an alternative property if

exercising their Right to Buy. Other

properties that are exempt from the scheme

due to the policy of the association should

also be clearly flagged. Consideration also

needs to be given to ways in which fraud

might be perpetrated through the process

and appropriate controls established to

identify when it is being committed.

In most areas of the country, it will

be in an association’s financial interest to

participate in the voluntary scheme. If this

is not the case, it would be advisable to

wait for the government to publish the

Home Ownership Criteria, against which

those not taking part will be judged, as

well as understanding any sanctions that

may be applied if the criteria are not met.

While the Labour Party may be

speaking out against the Right to Buy, we

expect that the policy is more likely to be

constrained by the cost of providing

compensation to the housing associations

than any political objections. Associations

must make a prudent (high-side) estimate

of the properties to be replaced under the

policy and plan to replace them within

three years, varying voluntary disposals as

required to balance the programme.

Autumn

The briefing note sets out the government's proposed arrangements for

compensating associations for the discounts given to tenants against the market

value of the property sold. These will be 70% on sale with the remaining 30% paid

when a replacement home was started.

By virtue of this being a voluntary agreement, housing associations are not

obliged to participate in the extended Right to Buy, although, under the Housing

and Planning Act 2016, they are required to comply with, as yet unpublished “home

ownership criteria.” In August, it was reported that South Yorkshire Housing

Association was considering not participating in the scheme, following changes in

the association's risk profile due to the implications of Brexit and the imposition of

the LHA Cap. The association is unsure it will be able to afford to replace properties

sold in low value areas.

In relation to the existing Right to Buy scheme applicable to local authorities

and stock transfer associations, there has recently been a gradually rising trend in

the number of sales. According to data published by the DCLG on 22nd September,

there were 12,829 Right to Buy sales by local authorities in the year to 30th June, up

from 12,246 in the year to March. In the year to June, 2,240 properties were acquired

or started on site to replace those sold, up from 2,125 in the year to March.

The latest data for housing associations relates to a slightly earlier period.

According to figures published by the DCLG on 20th October, there were 3,977 sales

by housing associations under the Right to Buy in 2015/16, plus 1,359 other sales to

tenants, a total of 5,336. This compared with a total of 5,162 sales to tenants in

2014/15 and 16,404 in 2003/04. In 2015/16, the average discount per property was

£58,120, 52% of the market value.

While the current government has switched its focus away from home

ownership towards increasing supply across a range of tenures, the Right to Buy

remains a popular policy and one that it is unlikely to abandon, even if the cost of

extending the policy means that its scope may be more restricted than originally

envisaged. While in power between 1997 and 2010, the Labour Party continued the

policy, although the value of the discounts was reduced. If they did return to

government at the next election, which currently appears unlikely, they have vowed

to suspend the measure. Shadow housing minister Teresa Pearce told the Labour

Party Conference on 25th September that in a time of housing shortage, the policy

made no sense at all.

10

In the wake of the screening of

Cathy Come Home, fifty years ago ,

many housing associations were

established to tackle homelessness, so it is

incumbent on the sector to maximise its

contribution to meeting this objective. It

can demonstrate this by:

Stepping up its contribution to new

supply, helping to equalize supply and

demand in the area

Ensuring that all properties remain

affordable to the target group, taking

account of service charges and

running costs, in addition to the rent

Seeking to make more efficient use of

the existing stock by better matching

homes with the needs of the tenants,

on the basis of size and accessibility to

employment etc.

Speeding up void processes to

minimise the time that a property is

empty (Irwell Valley aims to let

planned voids in reasonable repair on

the same day)

Ensuring vulnerable tenants receive

appropriate support to enable them to

sustain their tenancies.

There continues to be high

demand for housing association

properties, with void rates in the

sector remaining at a low level.

According to the HCA's latest

quarterly survey for the period

ending June , the median void loss

remained unchanged from March at

1.1%, while the mean was also

unchanged at 1.5%.

This is in the context of levels of

statutory homelessness that have

been increasing steadily since 2010,

although they are still well below the

levels recorded in the mid-2000s.

According to a statistical release,

published by the DCLG on 28th

September, 15,170 households were

accepted as statutorily homeless in

the quarter to June, up by 10% on the same quarter in 2015. Compared with June

2015, the number of households with children in bed and breakfast for more than six

weeks had increased from 880 to 1,140. Of the 73,120 households in temporary

accommodation on 30th June, 20,660 (28%) were in accommodation in another local

authority district, up from 17,640 (26%) a year earlier.

In July the Local Government Association agreed to develop best practice

guidance for local authorities sending people to live in other areas, covering issues

such as notifying the receiving authority and taking account of the impact on local

services such as schools and health services.

The increase in levels of homelessness has been a matter for concern in

parliament, producing both an investigation into the causes of the increase and a

private member’s bill aimed at addressing these issues. A report, published by the

House of Commons Communities & Local Government Committee on 18th August

found clear evidence that homelessness, particularly long-term homelessness, was

increasing, driven by a decline in the affordability of the private rented sector and a

shortage of social housing. It also noted significant variations in the level of support

provided by local authorities to homeless people, particularly those judged not to be

in priority need. It called for an increase in housing supply, including more homes

for sub-market rent, the placement of homeless families outside their local authority

area to be used only as a last resort, for the government to support the Homelessness

Reduction Bill (see below), and for supported accommodation to be fully exempt

from the rent cut.

Speaking at an event in his Croydon constituency on 3rd September, housing

minister Gavin Barwell said that there was cross-party consensus on the need to

tackle homelessness, describing rough sleeping as "probably the most visible

indicator of the profound housing problems that we have in this country that it is

now my job to tackle. He said that action is needed not only from the government

but also through community engagement.

Demand

11

In addition to their social role in

combatting homelessness, associations also

have a role in supporting the economy by

providing homes for working people. For

associations operating in high value areas,

there may be an opportunity to enter into

agreements with large local businesses to

provide sub-market accommodation for

their employees in return for a subsidy

from the company. With their economies

of scale, asssociations should be able to

provide this service more efficiently than

most private landlords, while the

companies may also be more willing to do

business with a not-for profit organisation

with a strong reputation in assisting its

employees to meet their housing needs.

The Homelessness Reduction Bill, a private member’s bill sponsored by

Conservative MP Bob Blackman, has been gathering support as it becomes more

refined through the process of parliamentary scrutiny. On 14th September, local

government minister Marcus Jones told the DCLG Select Committee enquiry into the

Bill that he was "very sympathetic" to its aims, and on the 28th October the bill

passed its second reading with government support.

The Bill was initially opposed by the Local Government Association because

of a requirement to provide accommodation for 56 days for all homeless households.

Their Chairman Lord Porter said: "Simply adding more duties to councils is not the

answer to tackling homelessness. The only viable long-term solutions are increasing

the availability of suitable affordable housing and addressing other underlying

causes of homelessness." Clauses in the bill requiring homeless households to co-

operate with the assistance provided to avoid being deemed intentionally homeless

were also criticised by homeless charities Crisis, St Mungo's and Shelter.

On 21st October, a revised draft of the Bill was published, with the clauses

that had provoked the opposition described above removed. The Bill, which now has

the support of the Local Government Association and the government, had its

second reading in the House of Commons on 28th October.

At its most acute, homelessness involves sleeping on the streets, a particular

issue in the capital, but also a problem in many other towns and cities. On 6th

October, Sadiq Khan announced a No Nights Sleeping Rough

taskforce, which will include central government, London

boroughs with high levels of street homelessness, charities

working with homeless people and other public sector

organisations. The first meeting of the taskforce considered the

future funding of supported housing and mental health

provision for rough sleepers.

On 17th October, Theresa May and Sajid Javid announced

a new Homelessness Prevention Programme, including

£20 million for local authorities to pilot new initiatives to tackle

homelessness in their area, £10 million for targeted support for

those at imminent risk of sleeping rough or those new to the

streets and £10 million in Social Impact Bonds to help long-term

rough sleepers with the most complex needs. The government's

approach to tackling homelessness will now focus on the

underlying issues that can lead to somebody losing their home.

In addition to the severe human consequences of the

shortage of housing, there are also significant economic

consequences as firms in high-valuing areas struggle to recruit

workers because they cannot afford to live in the area. According

to a survey by Grant Thornton, 84% of businesses in London

believe that the capital's housing shortage and high housing costs

pose a risk to its economic growth, with 72% concerned about the

impact on staff recruitment and retention. 21% of those surveyed

said that they might need to relocate their business to cope with

the cost pressures.

12

The viability of supported housing schemes

has been progressively reduced through

reductions in revenue support from local

authorities, and has been further threatened by the

statutory rent cut and plans to apply the Local

Housing Allowance (LHA) in the social housing

sector. Following lobbying from disability

charities and Women’s Aid, as well as Prime

Minister’s Questions from Jeremy Corbyn, the

government came to a decision about the future

funding arrangements in this sub-sector.

On 15th September, a written statement from

work and pensions secretary Damian Green

informed the House of Commons of this decision.

The application of the LHA cap in the supported

housing sector will be deferred until April 2019,

after which core rent and service charges will be

funded by Housing Benefit or Universal Credit up to the applicable LHA rate (the

shared accommodation rate for under-35s will not apply). The government will then

devolve ring-fenced funding to local authorities to provide "top up" funding to meet

the additional costs of providing supported, as opposed to general needs,

accommodation. Further negotiation will take place with the sector on the funding

arrangements for very short-term accommodation, such as refuges, which will be on

similar principles although the mechanism may be different. The 1% per annum rent

cut will apply to supported housing from April 2017, except for "specialist supported

housing," while co-operatives, almshouses, community land trusts and refuges will

be exempt from both the LHA cap and the rent cut.

Concern was raised that uncertainty over how the top-up system might work

will hold back investment in additional supported housing schemes, while the ring

fence could be removed at some point in the future (as happened with Supporting

People funding), leading to the diversion of funds to other areas. In its response to

the announcement, the NHF said it was concerned about how the new model would

work in practice, with unanswered questions in relation to the size of the devolved

funding and whether it will receive an annual uplift. It raised particular worries in

relation to sheltered housing and urged the government to continue to fund housing

costs through the benefit system for this sub-sector.

For some time, housing-related support providers have been attempting to

forge closer relationships with the health service, with a view to introducing services

that would benefit both patients and the public purse. The key strategy is that, by

providing additional supported housing, patients can be moved out of hospital more

quickly, enabling them to be in more homely surroundings and freeing up health

resources for people in more acute need. On 20th September, the NHF published

three reports from the New NHS Alliance and The King’s Fund on connecting

housing and health. These suggest that housing associations wishing to work with

the health service should not only provide good quality, fit-for-purpose evidence,

appropriately packaged, but also be in a position to spot opportunities and get the

timing right. An essential ingredient is a strong business case, which requires:

Care and support

Bearing in mind the experience

with Community Care and Supporting

People, there remains a significant risk

over the longer term that funding to meet

the overall costs of providing supported

housing will reduce, as ring fences are

removed and these services have to fight it

out with many other calls on the resources

of local authorities. We expect the sector

to continue to lobby for greater safeguards

to be applied to this specific funding pot

but these are likely to wither over time.

In the mean time, we expect

providers of both housing-related support

and intensive housing management to

enter into dialogue with their local

authorities about funding for their services

from April 2019, emphasising the value of

the services being provided and gathering

an understanding of the priorities of the

commissioners.

With the uncertainty over this

funding stream expected to continue, this

sub-sector is on the lookout for alternative

sources of funding, with the NHS

identified as one with significant potential.

There will also be opportunities in working

with the Home Office, National Probation

Service and Community Rehabilitation

Companies in providing housing and

support for ex-offenders.

Damian Green, work and pensions secretary (Photo: The Health Hotel)

13

The recommendations of the reports

recently published by the NHF are

pertinent to all potential sources of

funding. You need to understand the

position of the funder and what its key

objectives are. You need to be able to

demonstrate to them that you are efficient,

trustworthy and able to deliver outcomes

that meet their objectives. You need robust

evidence on outcomes and financial effects

to back up your case. And you must

deliver your case in an interesting, logical

and convincing manner.

While you will take greater account

of social value than a private company like

Mears, the Board must be clear about

maintaining the viability of the

association, which might require it to walk

away from loss-making contracts. You

may also need to review your ability to

staff contracts effectively in the light of the

vote for Brexit.

Organisations working with

vulnerable groups have the opportunity to

take advantage of the effort and support

that some people are willing to provide on

a voluntary basis. This might be

harnessed to help with the resettlement of

refugees from Syria, for example.

Understanding the context and drivers of health partners

Ensuring that they know enough about you to trust you

Being able to describe the link between your intervention and outcomes,

including how these outcomes are measured

The use of appropriate, persuasive economic evidence, including reductions in

costs to the health service and improved health outcomes

Sequencing the business case to get attention, hold interest, convince and follow

through.

While many housing associations are involved in providing housing-related

support or intensive housing management, a smaller number are involved in the

provision of domestic or residential care services. In this sector also, there are

significant financial pressures, mainly due to the resource constraints on local

authorities to fund these services. Commenting on the organisation’s interim results

for the six months to 30th June, David Miles of Mears Group described the care

market as “challenging.” Mears’ strategy is to focus on “maintaining a portfolio of

high quality contracts at sustainable margins,” while exiting unsustainable contracts.

In September, Housing & Care 21 announced that it had decided to dispose of

its home care service to focus solely on providing retirement housing and extra care

accommodation. The home care business had a turnover of £29.2 million in 2015/16,

with 90% of its income coming from local authority contracts. The association

decided to withdraw from this market because of pressure on council budgets and

difficulties in recruiting good quality care workers.

Despite these financial pressures, there remain long-term opportunities for

housing associations to provide accommodation and support for vulnerable people,

with needs becoming greater over time because of the ageing of the population. In

August, Central Bedfordshire Council launched a prospectus seeking to attract

investment from developers, housing associations, architects and investors in

housing provision for older people. It is seeking to build six affordable extra care

schemes by 2020, plus extra care flats for sale and private rent, while replacing five

council-owned care homes with new facilities.

There are also opportunities for providers of services for people with learning

difficulties for which new capital funding is available from the government, aimed

at making increased use of technology in accommodation for this client group, to

enable more people to live independently. On 15th September, the Department of

Health announced the opening of a £25 million fund to bids from individual

councils or groups of local authorities, in partnership with local partners such as

housing associations, for between £10,000 and £3 million. The deadline for

submission was 28th October.

Probably less remunerative but certainly worthwhile is the provision of

accommodation for refugees displaced by the war in Syria. A report published by

the National Audit Office on 13th September highlighted that one of the greatest

barriers to local authority participation in the Syrian Vulnerable Person

Resettlement Programme was their capacity to secure suitable, affordable

accommodation, which is diminished by the Overall Benefit Cap. Housing

associations were encouraged to play a bigger role in providing accommodation

and support for refugees in a session at the NHF Conference later in September.

14

Communication with tenants

through various channels provide an

opportunity to remind them about the

safety concerns raised in relation to

specific models of tumble dryers. It may

also be useful to provide more general

advice with regard to fire safety, including

ensuring that fire alarms are regularly

tested.

Since many housing associations

have failed to keep up with undertaking

fire risk assessments and implementing the

control measures arising from them, you

should seek frequent assurance that all

relevant buildings are covered, that no

assessments are overdue for review and

that control measures are being

implemented within reasonable timescales.

Any non-compliance should be rectified

speedily and effectively.

Following a major fire in August at a tower block in Shepherds Bush

belonging to Hammersmith & Fulham Council, the focus of this edition’s health and

safety section is on fires caused by faulty white goods. On 26th August, the London

Fire Brigade (LFB) issued a statement blaming the fire on a faulty Indesit tumble

dryer and calling on Indesit's parent company Whirlpool to change its safety advice

relating to the product involved, which is already the subject of a safety notice.

While the manufacturer currently advises that the product may be used provided

that it is monitored, the LFB believe that customers should immediately stop using

all such products until they have been modified by an engineer. The fault affects

some Hotpoint, Indesit and Creda machines manufactured between April 2004 and

September 2015. Consumers can check whether their product is affected here.

Local MP, Andy Slaughter told the House of Commons that a senior fire officer

had told him when arriving at the site of the fire, that he expected to be dealing with

"multiple serious injuries and fatalities." While the internal fire compartmentation

prevented the spread of the fire within the block, investigations are taking place to

see whether external cladding facilitated the spread of the fire up the outside of the

building.

On 17th October, the LFB released figures showing that its firefighters had

attended 2,072 fires cased by white goods in the previous five years, at an estimated

cost to the economy of £118 million.

Health and safety

Mermaid Tower, Deptford following fire damage in 2011 (Photo: Stephen Craven)

15

The human resources strategies of

housing associations need to balance the

need to improve efficiency and to reduce

costs against the need to compete for staff

with other organisations, on the basis of

pay, conditions and job satisfaction. Staff

resources need to be aligned to the

objectives of the organisation, which may

be changing in response to the economic

and political environment.

You should regularly review and

reassess your liabilities for pension

contributions and consider whether any

change in required in your pension

strategy. This will need to balance the

impact on staff morale, recruitment and

retention with the risk reduction achieved

by stopping further access to or ceasing

further accrual to defined benefit schemes.

Human resources strategy will also

need to take account of the forthcoming

implementation of the Apprenticeship

Levy, reviewing payroll data to ensure that

it is accurate and that the Levy is not

applied to any non-applicable costs, while

taking advantage of the Levy to fund

apprenticeship schemes that will benefit

both the business and the people taking

part in the schemes.

The ability of housing associations to recruit and

retain their staff has recently become reduced, owing to

the impact of the rent cut and the country’s decision to

leave the European Union. According to a survey

conducted in July by EMA Business and Management

Consultancy, 32% of housing associations would not be

making a pay increase this year. 60% said that they

would be making a pay award of less than 2%,

compared with an average increase in the private sector

of 3.5%. Other responses to the rent cut included

making pay cuts (3%), making staff redundant (41%),

amending staff terms and conditions (13%) and

reducing development programmes (16%). Ian

Robertson of EMA warned of greater competition for

staff from the private sector, which is increasingly

offering more flexible working arrangements.

With the lower value of their stock making it more

difficult to respond to the rent cut with more active asset management strategies,

housing associations in the north of England have often had to make more significant

cuts in their staffing budgets in response to the rent cuts. According to its 2015/16

annual report, Gentoo Group made 330 redundancies as it restructured in the face of

the rent cut, which included a fundamental review of its operating model. In the same

year, Incommunities paid £2.6 million in voluntary severance to 92 members of staff in

2015/16, contributing to an annual loss of £800,000. The association estimates that the

rent cut will cost it £28imillion by 2020.

The impacts of Brexit include the potential for a long-term tightening in the

labour market, particularly in the construction industry, as well as a more immediate

reduction in the value of pension fund investments. Following the referendum result,

Brian Berry of the Federation of Master Builders said that the UK construction

industry was “heavily reliant” on migrant workers from Europe, with 12% of British

construction workers being of non-UK origin. He called on the government not to

turn off the tap of construction workers if they wanted to achieve their housebuilding

targets.

Writing in Social Housing, Steve Simpkins of KPMG noted that between the end

of March and the end of August, FRS102 pensions liabilities had increased by more

than 20%, and called for associations to assess the impact of the increased funding

shortfall on their business. Options include restricting defined benefit accrual and

turning off the defined benefit tap altogether, although he said that the latter could be

"beyond costly" and would crystallise a very high level of debt.

In April 2017, companies with an annual salary bill of more than £3 million will

become liable for the Apprenticeship Levy, at a rate of 0.5% of the salary bill above

that level. Those contributing to the Levy will receive vouchers that can be spent on

apprenticeships within that company within eighteen months of the contribution

being made. Writing in Social Housing, Sharon Gilkes of Grant Thornton advised

associations to calculate the cost of the Apprenticeship Levy to them, to review

training budgets and workforce structures to identify opportunities to use the levy, to

actively manage staff-related costs such as fuel and expenses and to ensure payroll

data is up-to-date.

Human resources and pensions

Hargreaves Risk and Strategy 48 Broomfield Avenue London N13 4JN Tel: 020 8245 0737

Email: John Hargreaves: j.hargreaves@HargreavesRS.co.uk Chris Mansfield: c.mansfield@HargreavesRS.co.uk Sharron Preston: s.preston@HargreavesRS.co.uk Website: www.HargreavesRS.co.uk

Summary of the key points in this Review

A Housing White Paper is expected to be published in

November, setting out a range of measures to boost new

supply (Page 2)

The CIH and NHF are both lobbying for capital funding to be

directed at a wider range of tenures and for government loan

guarantees to be restarted (2)

The NHF is also proposing a “buy-as-you-go” product ,

which would enable people to buy without a mortgage (2)

Research by Flagship and the NHF shows that the LHA Cap

will make social housing unaffordable to a significant

proportion of tenants; both proactive and reactive responses

are required (3)

Although the number of people affected by the Overall

Benefit Cap has been falling, this is expected to change when

the level pf the cap is reduced on 7th November (4)

The Real London Lives study shows that 75% of people

affected by the bedroom tax are trying to manage on lower

income, rather than downsizing or moving into work (4)

A consortium of housing associations has won a contract to

help vulnerable people in Manchester into employment (5)

My Home Finance, the low-cost loans company established by

the NHF, has ceased trading. Its loans are being taken over by

Community Interest Company, Street UK (5)

Two reports highlight the problems experienced by disabled

people whose homes require adaptations (5)

There is concern among valuers and regulators that some

associations have responded to the rent cut by delaying

planned maintenance, reducing the value of their stock (6)

Shelter has produced a new Living Home Standard , which

66% of housing association homes do not currently meet (6)

A paper from the NHF sets out an ambition for all homes in

the sector to meet EPC Band C by 2030 (7)

Data shows a significant increase in the rate of property

disposals out of the sector between 14/15 and 15/16 (7)

CML research shows 39% of social tenants would like to be

home owners within ten years (8)

The Right to Buy pilots have produced a number of

learning points, with demand much higher in lower-value

areas than in London (8, 9)

Median void rates in the sector are unchanged at 1.1% (10)

Homelessness is increasing, with a rising proportion of

people accommodated outside of their local area (10)

Bob Blackman’s Homelessness Reduction Bill achieved

government support on its second reading (11)

The high cost of housing is making it difficult for businesses

in London to recruit staff (11)

From April 2019, Housing Benefit for supported housing

tenants will be subject to the LHA Cap, with funding

devolved to local authorities to meet the higher costs of

housing management in this sub-sector (12)

The NHF has published guidance on how to present a

business case to health providers, which are being seen as a

potential alternative source of funding for support (12, 13)

White goods are blamed for a high number of domestic

fires, with particular concern about specific Whirlpool

products, which require modifications (14)

Many associations have responded to the rent cut by

cutting jobs and reducing terms and conditions (15)

There is concern about the impact of Brexit on the supply

of labour in the construction industry and on the value of

pension investments (15)

Associations need to prepare for the introduction of the

Apprenticeship Levy next April (15).