5 challenges Government policies have set for housing associations

By Richard Stirk, partner at Bevan Brittan LLP

LAST year’s Budget announcements and Autumn Statement together with the Government’s policy to support home ownership rather than renting have left housing associations across the North and nationwide grappling with the implications for their business plans.

One thing seems clear, the coming year is likely to provide some defining moments within the sector.

Some of the challenges that associations have to contend with are:

1. Deciding how, or even if, they want to carry on developing and providing new stock. Whilst some associations have pared their development teams to the bone, others seem to be determined to push on with development programmes.

Associations wishing to continue providing new social housing for rent will need to find ways of cross-subsidising as they are unlikely to find any support in the short term from a government intent on reducing the benefits bill and creating pathways to ownership.

It is difficult to see how associations can achieve that without moving towards outright sale and/or private market rent.

The release of public land might help but competition with private commercial developers will be fierce, particularly with a lack of labour and expertise within the market. Joint venture agreements or other housing delivery vehicles may provide a suitable alternative.

2. Whether to remain a registered provider at all. The government has hinted at the possibility of de-regulation of the sector or a reduction of the regulator’s role and with grant on a seemingly downward spiral to nothing, some associations will be questioning what benefits registration brings.

However, de-registration is not something associations can undertake lightly. Some things to consider are the impact on tenants, clawback of grant, the effect on loan covenants and the constitutional changes that might be needed to compete as a non-RP commercial body.

3. Assessing the actual (as opposed to projected) impact of the rent cuts and the introduction of Universal Credit on cash flow, and whether internal savings engineered will prove sufficient.

4. Whilst the sector’s two main valuers seem to have set aside their differences on valuation methodology and calculations, they have left the door open to review it on a case by case basis, meaning the possibility of loan covenant and/or asset cover ratio obligations remains a shadow on associations’ plans.

5. The effect of voluntary right to buy is currently unknown, particularly as the regulations have not been issued yet.  At the moment associations can only second guess what the legislation will be and how it will affect assets and cash flow. 

All in all, there is plenty for associations to be thinking about.