Social Housing Conference
In April we co-hosted a breakfast conference with Grant Thornton to discuss the challenges and opportunities facing the social housing sector in 2017.
Presentations were given by a range of experts across a variety of fields, providing real insight into the sector generally, as well as the changes and challenges that are facing the sector in the remainder of 2017 and further into the future.
New Neighbourhood Planning Bill
Marco Mauro, Associate and planning expert in our Real Estate team, began the presentation by speaking about the new Neighbourhood Planning Bill which is currently making its way through Parliament, and whether the conditions to secure affordable housing can work in practice and the difficulties of pre-commencement conditions.
Marco outlined the existing requirements for imposing planning conditions under the National Planning Policy Framework. He went on to discuss the draconian enforcement powers that Local Authorities may currently utilise upon a breach of a condition and the lack of a statutory right of appeal for breaches of conditions.
Marco considered the Whitley Principle and why pre-commencement conditions can be problematic, and how the Government is addressing this to some degree through clause 13 of the Neighbourhood Planning Bill, which will restrict a Local Authority’s ability to impose such conditions without applicant consent unless they are of a prescribed nature.
Aileen Evans, currently Group Director of Operations at Grand Union Housing Group and who is to take up the role of Chief Executive in June, spoke passionately about her vision for housing associations and their role in 2017.
Aileen highlighted the range of services housing associations also provide, alongside providing homes. She spoke about the unhelpful position the Government have adopted viewing housing associations as only a housing provider. Aileen stressed the importance and value of these additional ventures and ‘profit for a purpose’; Grand Union has for example acquired large properties to rent at market value to provide profit which can then be repurposed to further subsidise the properties and services they are providing to those in need.
The growing need for more social housing was also outlined, exhibiting recent data that shows homelessness in Milton Keynes has doubled over the last five years and is likely to continue unless properly addressed with the necessary resources.
Aileen concluded by setting out who Grand Union supports – those with low income/support needs/trying to get on the housing ladder. She gave examples of people who had been let down by the current lack of housing available for those in need and how going forward, it is for housing associations such as Grand Union to ensure that these stories do not repeat.
Funding in the sector
Ray Tierney, Relationship Director of social housing at Lloyds Bank gave an informative overview of funding in the sector and the current trends taking place.
There are various credit challenges facing the sector and Ray specifically mentioned the increased political risk brought around by factors including Brexit and other challenges such as demand and capacity.
He also spoke about the strong governance management teams that Lloyds regularly encountered with housing associations and how this has led to a growth in confidence among funders in the sector and a strong commitment to the sector from the Head of Lloyds. However Ray did point out that it was Lloyds’ belief that a Housing Association would default on a covenant at some point in the near future.
Opportunities in the social housing sector
Next up were Adrian Willmott, Practice Leader for UK & ROI (Public Entities & Social Housing), and Steve Harry, Senior Vice President (Risk Finance), both of Marsh Insurance. Adrian spoke about why they moved into the social housing sector and future opportunities.
Steve discussed the use of big data and analytics in optimising the purchase of insurance. He explained that by assuming more risk, Housing Associations and others can save substantial sums through reduced premiums and consequently insurance premium tax. This has increased from 5% to 10% since 2010, and is due to rise again to 12% from 1 June. He predicted that it could increase to 20% in years to come, without assuming substantially more risk by understanding the loss curve data and probability of loss.
Marsh conducts this analysis through the use of their Economic Cost of Risk (ECOR) model creates value for clients by enabling an accurate comparison of differing programme structures. This model also helps clients to decide where to deploy insurance, based on cost-effectiveness and therefore reap the benefits of good risk management.
The conference was rounded up by Laura Brierley, Audit Director at Grant Thornton, who discussed their continued work and key findings from their cross sector review of board effectiveness from 2015.
The review is based on a survey of CEOs, chairpersons, CFOs, board members, directors and company secretaries across a range of sectors including housing. The aim is to gain insight into the operation of an effective board and to identify the challenges facing them.
Whilst talking about the perspectives required by a boardroom Laura echoed many of the sentiments mentioned by Ray in his presentation noting how the housing sector scored particularly highly in the management section of Grant Thornton’s DLMA analysis.
Laura highlighted healthy signs that board members of housing associations spoke up. Laura went on to explain the review did reveal that board members were happy to challenge each other and create the necessary debate for successful management.
It also showed the confidence the housing association sector holds over the other sectors surveyed, when it comes to the processes that are in place to evaluate performance and the transparent and rigorous process of recruiting non-executive directors.