The High Court has ruled that retrospective changes to the LGPS exit credits regime were lawful – and gave some helpful guidance around the new discretion to pay an exit credit.
Sometimes half an hour at a conference gives you the reality that has been staring you in the face all along. That was my experience yesterday afternoon watching the “Change is on the Horizon” session with Fiona McGregor, Richard Blakeway, Danielle Oum and Lord Bob Kerslake at the #VirtualHousingFestival so here’s what I am walking away with.
Our Current Position
Whisper it softly but housing associations have done quite well during the pandemic. Rent arrears across the sector have only gone from 2.1% to 2.8% and cash interest cover is at 143% compared with the previous forecast of 118%. Admittedly, voids loss is the highest recorded level ever and the improved cash position is due to a £153m sector shortfall in spending on capitalised repairs and maintenance expenditure because of lockdown. But, compared with the havoc wreaked in many other sectors, housing associations are yet to feel the full impact of the pandemic.
What’s round the corner then?
With the end of furlough in October and the Bank of England forecasting the unemployment rate doubling to 7.5%, some 2.5m people, this could disproportionately affect housing association residents. Confidentially, many chief executives expect to see the biggest drops in their rental income from February to June 2021. When you then add the catch-up repairs needed from lockdown, the increased capital expenditure not spent this year and the economic uncertainties of Brexit, next year could be very challenging without taking into account the regulatory changes.
What are the changes in regulation?
With the Government confirming that the Housing White Paper will be published this calendar year, the Regulator (RSH) and the Housing Ombudsman Service are already making the changes they can to bring about new levels of transparency and accountability by housing associations for their residents. The Ombudsman will publish all of its decisions, naming landlords save in exceptional cases, and publish ‘individual landlord reports’ for all its 2,300 members - you only need to check yesterday’s Inside Housing headlines for a taste of things to come. Alongside its new Memorandum of Understanding with the RSH, it will also be using its new statutory powers to dig further where it identifies systemic issues at a landlord and pass its findings onto the RSH for potential regulatory enforcement action. Bearing in mind 38% of all Ombudsman complaints relate to responsive repairs, housing associations have been forewarned to get their houses in order (no pun intended).
Is that it?
No. Having doubled the number of enforcement regulatory notices it published last year, the RSH is already enforcing regulatory requirements in relation to health & safety. The RSH expects the White Paper to confirm a proactive regulatory approach to the Consumer Standards and this will be quite some work for ‘someone’. Housing associations need to re-examine what information they currently give to tenants, how they report to Boards and what complete transparency to customers would look like over service standards and complaints handling. For example, do you currently publish your appeal success rates at each stage of your complaints procedure? The current ‘serious detriment’ threshold that limits regulatory action will be reviewed and so that ‘someone’ will be marking your homework very closely.
But isn’t it all about our Purpose?
Of course it is. On the day after publication of the study linking increased Covid-19 infection rates with deprivation and poverty, Danielle Oum (Chair at whg) was right to remind us of the nexus between housing and health. With the disproportionate impact on the BAME community from Covid-19, the Ombudsman specifically identified the need for housing associations to collaborate to address race and health inequalities as part of the inclusion agenda and tenant accountability.
Is that it?
One more – with 30-year business plans, next year housing associations will no longer be able to ignore the net zero carbon government pledges for 2050. Alongside the immediate need to invest in building safety post-Grenfell, you will need to model achieving EPC Band A, a cost Lord Bob Kerslake estimated at £11,000 per property for Peabody. This will force housing associations not only to make realistic expenditure forecasts to meet these targets but also decide whether the type of housing stock you hold is truly affordable bearing in mind its investment need.
After all this, what you have left over is to build new homes and solve the affordable housing crisis. However, without a strategic change of investment in the sector as advocated by Lord Bob, what do you think the future capacity of the sector for new build truly is?
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