In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
First, there is now arguably £8.4bn worth of capital funding made available by government through the recent Autumn Statement for “social and affordable” housing development. Whilst there can be arguments over the definitions of these, we should recognise how the housing association sector has achieved a significant turnaround with government about previously being seen as part of the problem and now being viewed as potential allies to solve the UK’s housing shortage. There is now an impression within government that they have done their part in making capital funding available and it is now up to housing associations to deliver the results by using such funding to deliver more affordable housing. Whilst everybody recognises the profile of such property development from social rented through to build for sale has changed, there is an existential question as to whether housing associations can afford to turn down the government’s offer. Are housing associations going to be part of the solution? Understanding how you need to structure yourself to deliver new housing across a wider spectrum of products is key to delivering your future.
Secondly, in 2015/16, 22,000 new homes were delivered nationally by housing associations where the average capital subsidy from government was 15%; this meant that 85% was invested from housing associations’ own balance sheets. When this is added to the additional 18,000 homes that were built without grant, the housing association sector delivered 40,000 new homes in 2015/16 with a net government subsidy of 9%. In these circumstances, the expectations of government to continue to regulate housing associations in the same way is simply unrealistic. This is recognised with the announcement that the deregulatory proposals are to come into force in April 2017 (but were more prompted by the ONS decision rather than decreasing grant rates.) In 2017, therefore, there will be a new playing field for housing associations to play on to determine their own destiny in a much more proportionately regulated, or de-regulated, environment. This in itself will come with its own governance challenges as boards need to stop asking the question: “what does the Regulator want us to do?” and take on their primary responsibility to lead an organisation well and justify their actions later.
The “Form Follows Function” toolkit and full document, to which Anthony Collins Solicitors has fully contributed, sits squarely as an additional tool for housing association boards to articulate their purpose, determine their strategy and adopt appropriate structures to deliver the future. Bearing in mind the strengthening of the Value For Money standard, housing associations will need to have more rigorous appraisals of how they live out their purpose by considering alternative delivery models and who they may need to collaborate with to deliver their objectives. I hope all of this will bring about change that means we will be asking the question “how good are we?” rather than “how big are we?”
Peter Hubbard was a member of the working party that led the “Form Follows Function” project. The full document and toolkit are available to download here.
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