As always, Social Housing magazine’s Annual Conference last week was a fantastic event. Very well attended by 500+ Chief Executives, finance directors and other key individuals from the sector, The scene was set for some great discussions.
My own plenary session was around partnerships and joint ventures, with some fantastic case studies from L&Q, Places for People and Vivid. With partnerships playing such a crucial role in delivering new homes in the volumes needed, we learnt about how to do it right.
Much of the rest of the day focused on governance issues, and their regulatory impact. Some of the key points included:
1. Funders are increasingly concerned by the attitude of the regulator towards the "for profit" RPs in the sector. There is a concern, from the Regulator, that organisations are becoming registered simply so they can grant shared ownership leases and/or charge higher rents for specialist accommodation. To become registered, for profit organisations are having to demonstrate to the Regulator what they will bring to the sector in terms of new stock, and what protections they have in place for that stock.
2. Some shared ownership properties, like private sales, have been slow to sell recently with some taking more than six months. It is crucial to have sufficient liquidity to be able to wait for the market to recover, and not be overly reliant on quick sales. Where properties are not restricted by section 106 agreement, it is possible to private sell these properties instead, or look at other options such as market rent. If, more usually, a s106 agreement is in place then consider transferring the property to intermediate rent for sale later on.
3. The Regulator stressed that key risks at the moment include exposure to the property market and the uncertain economic environment. As a result, housing providers must stress test for a "No Deal" Brexit, and have strategies in place to deal with this. In addition, it is crucial for organisations to know when and how to call a halt to their development programmes.
4. The Green Paper is likely to result in increased regulation of the consumer standard, without compromising the governance and financial viability checks carried out by the Regulator.
5. The Regulator showed a continuing discomfort with the lease model, but fleshed this out with more detail around their expectations. In particular, they want to see capacity in balance sheets to deal with risks if these crystallise; a thoroughly tested business plan to ensure long and short term viability; no dependence on growth to keep cashflow moving; an ability to meet obligations to residents for the full length of the arrangements; no unmanaged risks; no inappropriate third-party relationships; and no unjustified rent increases. From within the sector itself, however, there is an understanding of the important role that the lease model provides, particularly in providing homes for very vulnerable people. For example Civitas have made available £650 million worth of property for use by RPs over the next 25 years to house vulnerable people who were not otherwise being catered for. The social purpose of some of these organisations, such as Civitas, was also highlighted. Is it time for the sector to decide what "good "looks like for the lease model, and to support these organisations rather than trying to pull them down?
Overall it was a fascinating conference, that did not shy away from the difficult questions. We will certainly be back again next year.