HQN The Governor - July 2016

HQN’S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS JULY 2016

Vive l’Europe What Brexit means for housing

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Alex Morton Out of the shadows

Rick Henderson A life in 15 questions The final word Why mergers are not the only route

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Who guards the guards?

"How do we stop the wrong people getting into jobs in the first place? " You wait years for a regression analysis then, just like corporation buses on a rainy day, two of them trundle into view at the same time. Thank God I kept that giant-sized scientific calculator from school. There’s half a chance I can work out what’s going on.

First out of the blocks came the HCA. They’ve crunched all the numbers they can find and they still can’t really explain why the costs of RPs vary so much. It’s over to you to come up with the answers. Pronto.

Meanwhile, another set of boffins are using the same tools to work out why the banks went pop a few years ago. You hear a lot of folk say that if you pay peanuts you get monkeys. Does the opposite rule apply at banks? If you pay handsomely you get geniuses? It seems not.

Cash and bonuses had little to do with how well a banker did. If you take two bankers with the same pay, schooling, demographics and CVs they can behave very differently.

These factors could not predict how many risks they took.

So what did make bankers fly too close to the flames? It was style. Or to put it in the words of the researchers, you need to watch out for ‘innate ability, preferences or personality’. The personal style of the bosses could explain almost half (44%) of a bank’s holdings in derivatives. In fact the author of the study told the FT that ‘most

of the effects that we can analyse can be attributed to the manager-specific effect [style] and very little to the compensation effect. This goes completely in the opposite direction of the usual discussion’.

What are the lessons for us? Well it looks like we will be ratcheting up on risks. So we must have the right people at the helm.

More and more RPs will be working to what I call hair-of-the-dog business plans.

What’s the problem? House prices are too high! What’s the answer? Build more expensive houses for sale! But we think we are the good guys with a cunning plan.

We’ll use the profits to help poorer folk get homes too. Hmm. If this hair-of-the-dog stuff actually worked, Scotland would be the healthiest nation on the planet. We’re not.

How will you manage all this risk? If the researchers are right you don’t need to worry too much about pay. Bonuses won’t make bosses do daft things. Of course the Daily Mail takes a dim view. But there is no evidence that munching on porridge helps you to take better decisions than slurping Dom Perignon. A crackdown on pay will make us feel good. And as usual with things like that, it will achieve nothing.

It’s a worry that the researchers say that identical CVs can produce folk that do things so differently.

But I suppose we know that anyway, though it’s nice to get the maths to back a hunch.

Every time you interview people for a job at any level you see this.

Here’s what really concerns me. Whenever an RP hits the rocks, folk line up to say ‘I told you so’. It was obvious from the getgo that the CEO or FD or chair were rum coves. Good riddance, etc.

OK clever clogs – we believe you are the all-seeing eye. But the question is this: how do we stop the wrong people getting into jobs in the first place? By the time they’re near the top they know the ropes and can dupe us easily.

This is what I think we need to do. Why doesn’t the HCA run the same analysis as has been done on the banks? Some RPs rode out the storm of the crunch while others did not – just like the banks. What were the split factors? Was it down to personalities too? How do we screen out the bosses that could destroy the industry?

Now that’s a study worth paying a fee to the HCA for. And there’s no time to waste.

Those tick-lists you use now are a disaster waiting to happen. At the end of the day the bosses say where the ticks go. What are they really like? How will they behave when the going gets tough? Do they take too many risks? As the Romans used to say – who guards the guards?

Alistair McIntosh, chief executive, HQN 3

CONTENTS

5 Housing

Headlines July 2016 Published by: HQN

A round-up of housing’s current hot topics

Rockingham House St Maurice’s Road York YO31 7JA

11 A Life in 15

Questions

Editorial: Alistair McIntosh Jon Land Kate Murray Jeannie Swales

Homeless Link chief executive Rick Henderson answers some big questions about his life and career

Jack Grocott Email: jon.land@hqnetwork.co.uk Tel: 07740 740417 Advertising: Richard Hawley Email: richard.hawley@hqnetwork.co.uk

12 Alistair's advice workshop

COVER FEATUREs

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The former Downing Street special advisor on housing talks to Kate Murray about his behind-the-scenes influence on the Housing and Planning Act and the future role of social housing

Top tips on in-depth assessments and value for money from HQN’s chief executive

Tel: 0845 4747 004 Designer and Illustrator: Annie Truong Printed by Prontaprint Scarborough. Published four times a year. All rights reserved.

Reproduction in whole or in part without written permission is strictly prohibited.

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19 The Last Word

Guest columnist Catherine Little from Soha on the development of a new framework to help housing associations decide their future form and function

ALEX MORTON

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VIVE L'EUROPE Will housing providers sink or swim in a post-Brexit world? Kate Murray gauges opinion from leading sector figures

HOUSING HEADLINES Housing Minister Brandon Lewis

Labour meltdown: Shadow housing team quits

Labour’s housing team, John Healey and Roberta Blackman-Woods, has resigned as shadow ministers in the party’s post-Brexit meltdown.

Will Brandon Remain after Brexit?

Housing

minister Brandon Lewis attempted to calm the nerves of thousands of housing professionals with his post-Brexit address to the Chartered Institute of Housing conference.

The minister, who spoke to delegates at the Manchester conference via Skype from his London office, withdrew from personally appearing at the last minute as Westminster continued to reverberate from the shockwaves created by the EU referendum result.

Mr Lewis said: “The British people voted to leave the European Union. I know that wasn’t how every part of the country voted, but the overall result was clear and must be respected. It is important to understand that – as the PM has said – there will be no immediate changes. As the PM and Chancellor have said, it is inevitable, after Thursday’s vote, that Britain’s economy is going to have to adjust to the new situation we find ourselves in.

It will not be plain sailing in the days ahead but we start from a position of hard-won strength. And we are determined to do the best for Britain. And that includes Britain’s housebuilding sector.” He added that while ‘the world is not as it was before the big result, the need for new homes continues’.

Mr Lewis reiterated the government’s ambition of building a million more homes and creating a million more homeowners by 2020 but admitted the ‘impact of the current uncertainty in the markets has certainly been felt’ by the housing sector. Mr Lewis was a vociferous Remain campaigner despite people in his own constituency of Great Yarmouth overwhelmingly voting to leave the EU. He is also backing Theresa May rather than Boris Johnson in the Conservative Party leadership contest. It means that, long term, his own position as housing minister could be under threat, although he says he remains committed to the job of delivering homes.

Philip Barnes, group land and planning director at Barratt, is someone particularly keen for Mr Lewis to stay. He tweeted: “Uncertain what will happen at top of Govt/ @CommunitiesUK over coming weeks but IMHO do hope @BrandonLewis stays on. #stability #safehands”

John Healey

The pair, who led the fight against the government’s controversial Housing and Planning Bill in the Commons, both stepped down expressing disappointment at Jeremy Corbyn’s ‘ineffectual role’ during the EU referendum campaign and the subsequent political upheaval after the Brexit vote.

It meant the party had no official speaker at the CIH conference at the end of June, a situation that didn’t go unnoticed by housing minister Brandon Lewis, who tweeted: “If anyone spots a Labour housing shadow minister on their travels today do let me know. #labourchaos” In tendering his resignation in a letter to the Labour leader Mr Healey wrote: “I am deeply disappointed by your failure to recognise the turmoil after the Referendum vote, a likely autumn election, the responsibility to hold the Labour Party together and the very wide – and ever – widening – concerns about your leadership require a fresh leadership election, with you stepping aside as Leader to seek a new mandate if you aspire to lead Labour into the coming General Election.”

Ms Blackman-Woods, who resigned on the same day along with more than 20 other Labour shadow ministers, said her decision to resign was not because she had any strong policy differences with Mr Corbyn, especially with regard to housing and planning.

She wrote: “I have seen you as a decent and honest man. However, I think the qualities of a leader must go beyond this to inspire vision, represent a wide range of Labour Party opinion and most importantly of all connect with the public.”

As with other Labour colleagues, Ms Blackman-Woods cited the lacklustre Remain campaign run by the party as the main reason for her resignation, plus the fact she no longer had faith in Jeremy Corbyn’s leadership.

Roberta Blackman-Woods

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Alex morton: out of the shadows Love his ideas or loathe them, Alex Morton has played a leading role in shaping government housing policy over the last five years. Kate Murray talks to the former Number 10 advisor about his behind-the-scenes influence on the Housing and Planning Act and the future role of social housing

Alex Morton, left, with Conservative MP Nick Boles

When the history of housing in the second decade of the 21st century comes to be written, there’s one man whom the astute historian might well place at the centre of it all.

It’s not David Cameron. It’s not George Osborne. It might be the next Tory PM – whoever that happens to be. But right now Alex Morton has a good claim to that starring role. From selling off high value council homes to delivering 200,000 starter homes, from promoting garden cities to demolishing high rise ‘sink’ estates, Mr Morton has played a huge role in shaping today’s housing landscape.

As senior research fellow and then head of housing and planning at the Prime Minister’s favourite think tank Policy Exchange, Mr Morton was 6

responsible for a series of reports which had a big influence on debate in the sector and beyond as housing became an increasingly high-profile political issue. So far, so think-tankish. But then the ‘policy wonk who wants to build 1.5m homes’ (as the Daily Telegraph once memorably styled him) made the move into the inner circles of government as special advisor to the PM on housing and planning. In just over two years at Number 10, he saw a number of his ideas turned from theory into (often controversial) practice.

Take the sale of high value council homes, for example. Back in 2012, Mr Morton’s Policy Exchange report Ending Expensive Social Tenancies was arguing that selling ‘expensive’ council housing could fund the construction of ‘multiple new and quality social homes’. “The biggest question,” he wrote then, “is why

DCLG civil servants have not proposed this policy before.” By last year, the idea had gained such ground that the chancellor, as he was being quizzed over the government’s housing bill plans, stated it as a matter of plain common sense that ‘obviously quite a lot of the public housing stock is very expensive and you could sell some of that housing stock and generate more housing in the area’.

Now, with the housing bill passed into law, up to one in 14 council homes (according to Shelter) could be lost from the sector once forced sales take off to fund the extended Right to Buy. Love his ideas or loathe them, they’ve done what so many in the housing world talked of for so long but failed to deliver: they’ve pushed housing right up the political agenda.

So where next in this fast-changing

world of housing reforms? Now he’s joined public affairs company Field Consulting as a director and, post-Brexit, he’s already had to write the political obituary for the PM he worked alongside, paying tribute to the ‘Cameron approach’ which, as well as traditional areas encompasses caring about ‘issues such as the incentives for those on low and moderate incomes, about trying to stabilise troubled families on benefits, or reaching out to ethnic minority voters’.

Here we ask Mr Morton to look back at some of the change he helped to shape.

understanding on how and why the housing crisis exists. There is now, I hope, a critical mass of people within government that understands how the land and development market work, and understands the politics of housing and planning (eg, why neighbourhood planning really matters). I don’t think that was true in 2010 and I think I have helped grow that understanding a lot – though of course there have been so many other people: from Brandon Lewis, Nick Boles, Gareth Bradford, Oliver Letwin, Ruth Stanier, and many, many more, including countless officials I’ve never met, who have all helped drive this understanding forward.

The Governor: You've been described as one of the key architects of the government's housing reforms. What was your vision for housing back in 2010 - and how far has it been realised?

How much of a priority does housing now have in government? You wrote a few years back that the government needed a reforming direction and narrative - do you think that is now in place? How radical do you think government has been - and where has it not been radical enough?

Alex Morton: The number one goal for me has always been to increase home ownership to the maximum level possible – as the vast majority of the British people want. This then has secondary objectives such as increasing housing supply – you can only have rising home ownership with stable house prices/rents – and this in turn means greater housing supply. There are other important issues, such as how you house those in need of permanent support as well, but the overarching goal is home ownership. I feel we are on a journey and that we are part of the way there.

Housing is one of the top three domestic priorities for the government. You only have to look at the prime minister’s and the chancellor’s speeches and the major legislative and policy changes made since the election to see that. The government has been radical on home ownership and has a clear and popular narrative there. I don’t think they have quite got the narrative and policies right on supply – though I think they are moving in the right direction.

Which policy that you've worked on do you feel has had the most impact?

How likely is it that current policies will deliver the number of new homes we need? What more can we do to up supply?

While the extension of Right to Buy, the sale of high value vacant housing assets, or the creation of the right to build are all important, I actually think my biggest impact is helping

I don’t think we will deliver sufficient homes to really reverse falling home ownership without further changes. Essentially the government needs to be robust on requiring a set number of homes in each area

" I actually think my biggest impact is helping Understanding ON how and why the housing crisis exists " - ALEX MORTON CONTINUED

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then give greater control and focus on design and infrastructure to local areas – and simultaneously change the way that developer and land market models work. The government also needs to stop planning being too focused on abstract technical arguments. Once you have made the core technical decisions (eg, is the flooding risk too great to allow building?) then local people should be in complete charge of informing the details. Too often planners think they should be able to dictate to local people.This requires a major rewiring of parts of the planning system – though we have already seen some changes such as neighbourhood plan referenda that are pushing in this direction.

How do you counter fears that the Right to Buy for housing associations - and the sale of council homes to pay for it - will cause immense social problems in areas of high demand in years to come?

The idea that high value council houses have major social benefits has never had a real evidence base – most notably in employment, where in London, for example, there seems to be a negative correlation between employment rates for social housing tenants and high value social stock. It was always nonsense being lobbied by councils that completely failed to build sufficient homes for years suddenly claiming selling off 1% of our national stock each year and putting every pound from this back into housing would cause a crisis. The real social problems are caused by insufficient supply in general, not million-pound council houses in central London or expensive homes in nice market towns in the south being sold off and the money being put back into homes. Areas need to consider what they are doing to tackle the housing crisis in general, not throw a few crumbs at social housing and consider their task done. No one has a right to live in a Chelsea townhouse at government expense. If no one can afford market rents or homes in huge swathes of England, that is a genuine and immense problem.

How much of a place does social housing have in the housing landscape of the future?

If you mean very heavily discounted sub-market rents, given for life after a particular one-off assessment, then this will slowly get less important over time. Indeed, the only reason it makes up 16% of stock is the failure to build enough homes to make market housing more available for all. Most countries do not have such a large state or social housing sector and get by fine. That said, it is not going to vanish tomorrow, nor would it be helpful in the current circumstances of unaffordable market stock for it to go.

Housing associations ' performance in building new homes has been under scrutiny. Do you think they've been delivering?

I think the sector is sometimes criticised too harshly – I did enjoy reading in parts of the press about ‘my views’ when what was set out was totally false. It has faults, but it also engages. It is only in

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danger when it fails to engage. I think that the sector has to be pragmatic – to keep building more homes and particularly shared ownership homes over the next few years as planned. However, they also need to keep their message sharp and keep ahead of the curve – delivery is about politics and helping shape policy as well as spades in the ground.

And how well do you think housing organisations have engaged with the housing reforms?

The National Housing Federation post-election was very much better than before the election and the voluntary Right to Buy has bought a lot of goodwill. But every part of the sector is going to have to keep engaging, and using the right language and sometimes perhaps even helping with the solutions. I find it fascinating when government decisions literally mean billions to companies or housing bodies and associations and yet they won’t hire a public affairs director, or they just think that these decisions are taken in a vacuum. It is remarkably uncommercial and short-termist.

What's next on the horizon for housing? Where should further reforms be focused?

The biggest policy changes coming down the line – if they can be made to work – are the idea of the delivery test and putting local

Outgoing prime minister David Cameron

Campaigners march against the Housing Bill (now Act) in Central London (picture credit: Defend Council Housing)

plans in place in consultation with local people. For years we have had an absurd plan-led system where local plans focused on policies on everything under the sun yet failed to deliver sufficient homes.

In intervening, the key will be consultation with local people – get this right and you will deliver both homes and political plaudits; get this wrong and the policy collapses completely. There has to be a question as well about how planning permissions are turned into homes – the current rate/speed is not acceptable. But any changes to the existing system must not damage the rate of delivery.

The key question for housing associations will be how they position themselves over the next couple of years.

What inspired you to work on housing issues? And what are you aiming to achieve at Field?

It is impossible not to feel that the current housing situation is unfair.

No matter how hard you work in much of the country, a decent home seems unobtainable. My family moved from a council estate in Birmingham to home ownership in the south in the ‘80s – I don’t think this would be possible now. There was clearly a set of systemic failures and I did not think there was a clear centre–right strategy and narrative to try to deal with this unfairness, so I decided to create one. At Field I aim to help continue shaping solutions with those parts of the housing sector that want to be part of the solution rather than the problem. There are many ways to push and change policy, from public affairs to think tanks to working for government directly.

Some of the most interesting elements for me at Field are the role of housing associations, and the planning changes around local plan

intervention. It is a great job in a growing company, and because I don’t have to manage the entire DCLG portfolio, then in some ways I can focus more on housing than in Number 10.

" The only reason [social housing] makes up 16% of stock is the failure to build enough homes to make market housinG more available for all" - alex morton 9

A LIFE IN 15 QUESTIONS Homeless Link chief executive Rick Henderson answers some big questions about his life and career Q10 - Biggest achievement?

Q1 - Tell us about your career and how you ended up in your current role

Performing a duet with Suggs from Madness at a recent charity gig for the Calais migrants. He was a true superstar and a gent.

I wanted to be a hairdresser but ended up being a postman! But my mum always worked in care services so I did too, first in a large Victorian asylum but then in the community where I ended up being a service manager. Then I moved into community development and did my MA in managing mental health services.

I first became a CEO back in 2000 and came to Homeless Link in 2012. It’s without doubt the best job I’ve ever had and I look forward to coming to work every day.

"I COLLECT ENID BLYTON BOOKS AND EVEN HAVE A SIGNED COPY" Q11 - Biggest regret?

My mum died two years ago, a week before I was due to visit her and my dad in their new home in Portugal. I wish I’d had that time with her.

Q2 - Describe yourself in three words

Q12 - Most overused phrase?

Anyone fancy a pint?

Outgoing, optimistic, solid.

Q3 - Favourite place on earth?

It’s a toss-up between Venice and my garden.

Rick Henderson

"ANYONE FANCY A PINT?"

Q13 - Recommend a book

Everybody with an interest in homeless-

ness should read A Street Cat Named Bob

by James Bowen.

Q4 - What would you change about yourself?

To be more able to be ‘in the moment’ and not keep getting distracted. I have a very short attention span and am trying very hard to rectify this.

Q5 - Describe your house.

It’s just a little terrace that we’ve expanded as the kids have grown up. It’s nothing special but it’s home.

Q6 - What makes you angry?

People who confuse patriotism with xenophobia. And wasps.

Q7 - Most treasured possessions?

My sons and I own about 15 guitars between us. None of them are worth much but they have sentimental value and keep us out of trouble.

Cillian Murphy in ‘Peaky Blinders’

Q8 - Best piece of advice you've ever been given?

Treat people how you want to be treated.

Q9 - If you won one million pounds on the Lottery what would you spend it on?

Honestly? I don’t really care much about material stuff so I’d probably give it away.

Q14 - The best piece of television in the last 12 months?

Peaky Blinders – best show of the past 10 years!

Q15 - Tell us a secret about yourself I collect Enid Blyton books and even have a signed copy.

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Top tips for scoring G1/V1 at your IDA

Alistair's Advice Works

1. Start now You can predict what the HCA will want to talk to you about. Are sales stalling? Is the cash running out? Has there been a boardroom bust-up? No problem. Just set the facts out and agree a plan to sort it. Now. Don’t wait for the call.

2. Make life easy for the HCA The HCA teams put a lot of time into getting ready for these. But it’s hard work going through thousands of pages of words and columns of numbers. Help them. You can do that by: • Writing minutes that make sense to outsiders • Producing well-argued reports with clear conclusions • Giving them all the documents they need to get to grips with why you took a certain decision • Making sure all your numbers, facts and figures match and link through all your different reports (and when they don’t – explain why) • Producing short briefing notes on any big issues you have had to deal with.

Stop to think before you hit the send button – read the papers. Plug any gaps.

3. Study the form book There will always be hot topics. Just now the HCA is talking about things like: • How you will manage the voluntary Right to Buy • How you will cope with a possible downturn in sales • Ensuring that you know enough about what it will cost to repair your homes • Making sure you are working towards the national house building targets (and not hoarding cash) • Value for money.

4. Watch out for the worst case scenario Yes, they will look at your stress-testing. Get ready to answer questions about: • Surviving a longer rent cut • Pressure on welfare reform slashing your collection rates • How you group the stresses (some RPs have fanciful notions about sales booming and cheap finance coming in to magically rescue the business plan at pinch points – the HCA will spot this) • How realistic your mitigations are (don’t dismiss merger out of hand).

5. Practice makes perfect It’s no secret what the HCA do when they come to visit. They will: • Interview the chair and chairs of audit and development • Interview senior executives • Observe a board meeting.

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Why don’t you run a few practice interviews? You can easily work out what the HCA will want to talk about.

It will be about the risks you face and the effectiveness of your strategy. We are not saying that you should be automatons. The HCA knows that boards can disagree. That is healthy. But do make sure that facts of the matter are right. And you get top marks when you can show that the board has put in a few good challenges to the executive. That’s your job.

shop

Here are five things we know about the value for money (VfM) after the letter, the review and the regression analysis.

1. Thank your lucky stars the HCA is there They tell the story of RP costs in the best possible way. Yes costs have gone up. But not by as much as inflation. That’s what the HCA proclaims. So is it time for a round of applause? No. You will recall that the government has abolished inflation for RPs. In their eyes there is no need for it. They did the same thing years ago for most council services. And of course costs should have fallen – Decent Homes is more or less at an end and the days of the big spending LSVTs are long gone. Pay the fees to the HCA – they are worth every penny. We hear a lot of grumbling about the HCA. Be careful what you wish for. No one else would have told this story in such a positive way. Period.

Five things we know about VfM after the HCA letter

2. But the HCA does have to deliver They now admit that last year the game was a bogey. What was the point of going in hard on the VfM statements when you were cutting rents? This leniency will last all of five minutes. They’ve gone back to the Audit Commission playbook. Do you remember their old mantra about the golden thread? Well you need to put it through the eye of the needle one more time. The HCA wants to know exactly what you promised to save, how much you did save and what you did with the cash year on year. They will follow the money.

3. An end to the myths The medicine men have told us that getting bigger and selling off remote homes saves money. The HCA computer says NO, it doesn’t! Well their model can’t find any proof that these cures work. Despite these findings you will still be under pressure to merge. Is this a case of not letting the facts get in the way of a good story? Of course not. This time around mergers will be different. And you know what – they might well be. The heat is on.

4. Waffle out – precision in This is the big deal. Who are you benchmarking with? Why did you pick them? What are you doing with each and every home you own? How do you decide whether to keep, improve or sell? And what do you do with the cash you get in?

You must be able to explain why your costs are where they are. It’s all about getting to grips with the global accounts and where you sit versus others on: • Headline social housing cost • Management • Service charges • Maintenance • Major repairs • Other social housing costs.

And knowing the impact on you of the big HCA cost drivers like: • Running supported housing • Housing for older people • Recent stock transfers.

5. Yes, there are beefs – but keep these in proportion The HCA is a force for good. Every day they face attacks from top people that want your costs to go down. So let’s not go to town on this. Instead get ready to explain the impact at an IDA of things like: • Your service charges looking high because they do not take into account income.

And the big problem with regression analysis is that it can make no allowances for quality or need. The HCA will just not know off the bat if high or low maintenance costs are a good or a bad thing. It’s your job to work that out and convince them of your way of thinking.

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vive l'europe Kate Murray takes a look at the housing landscape in the wake of the UK’s historic decision to leave the EU

Housing

association chief executives and chairs surveying their to-do lists a month ago would have seen plenty to keep them busy.

But by Friday June 24, as it became clear that the UK had voted to leave the European Union, their lists had got a whole lot longer – and more daunting.

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procurement rules, the availability of skilled, construction workers and European investment? Would the housing sectors of the home nations already taking very different paths post-devolution find themselves facing very different futures in a post-Brexit Europe? And what about the impact on tenants, communities and businesses if a recession and fresh wave of austerity were to hit in the aftermath of the result?

There’s still a housing crisis to resolve. It’s just that in the wake of the Brexit vote, many of the assumptions housing associations had made about how they were going to try to do that were suddenly looking very shaky.

If even those at the head of the Vote Leave campaign didn’t have a plan for the post-Brexit world, it’s hardly surprising that uncertainty has been swirling around the housing sector.

Would the housing market collapse, taking their business plans with it?

Would they still be able to put together those innovative finance deals they’d been drawing up? What would happen to

As Chartered Institute of Housing chief executive Terrie Alafat put it in her opening speech to the CIH conference a few days after the referendum result: “Our country, and housing, is in uncharted territory.” Yet while much is uncertain, there are some

challenges which remain unchanged and some fresh ones we might well anticipate. It’s these ‘known knowns and known unknowns’, to paraphrase Donald Rumsfeld, that the housing sector is now trying to get to grips with – while keeping one eye out for the unknown unknowns looming around the corner. So what’s not changed?

Most obviously – though it’s easy to sideline it in the midst of a political crisis of this magnitude – housing providers still have a big job to do.

Sinead Butters, chief executive of Aspire Housing Group and chair of the PlaceShapers group of community-focused housing associations, says while we might not yet understand the full implications of the Brexit vote, housing associations will continue to ‘champion their social purpose’.

“We will move forward with our plans

to build more homes and put our customers at the centre of everything we do, maintaining a strong, independent, diverse, values-driven housing association sector,” she said. Of course, associations will have different ways of doing that, but the delineation of the housing sector in England, between those which see their primary function as development and those that don’t, has been growing more marked for some time now and won’t necessarily change as a result of a Brexit.The merger debate too is likely to continue to rage.

Some might argue that the pressure to merge might be even more intense now, if only to protect organisations from the risks posed by potential housing market problems. Conversely though, you could argue that consolidation and retrenchment rather than taking a step into the unknown, will be favoured in the months ahead.

And merger isn’t just about big being better anyhow. As Geeta Nanda, chief executive of Thames Valley Housing Group and deputy chief executive of the new organisation being formed out of the merger with Genesis Housing, put it just days before the referendum: “Different people respond in different ways – I wouldn’t say everyone should be merging but everyone needs to be thinking ‘how can we do more and what’s the right way for our organisation to achieve that?’

“For us size wasn’t the driver – it was about not sitting on our laurels. It was about combining with another organisation which had different skills so we could both bring something to the party.

That’s motored us forward.”

For Ms Butters too ‘size is the wrong question – it’s about how good you are’. Before the referendum, with changes over the last

few months and years putting fresh demands on housing providers associations had been demonstrating ‘pockets of real brilliance’, she added. “We’re not ready to sit back and say it’s all too hard – anything worth fighting for is.”

But what will be the immediate issues for housing in this new world?

For Matthew Bailes, chief executive of Paradigm Housing, the Brexit vote just adds to housing associations’ long list of challenges. His association, like others, has already been getting stuck into thinking about what to do next. The first concern for the sector should be the impact on the housing market when developing new affordable homes depends on a healthy sales market, Mr Bailes stressed.

“The thing we all need to think about is that development rests on selling properties whether outright or for shared ownership.

Anecdotally people are already pulling out [of buying], or asking for a haircut on the price agreed,” he said. “When you are asking people to lever a large multiple of their income to buy and you have a supply strategy that rests on that, it’s a real problem. If prices start to slide even by 10 to 15% and people think that’s going to continue, they will not borrow to buy new homes – and that includes housing associations.”

Mr Bailes said associations like his would be monitoring the sales market closely, sharpening the debate they had already been having under the stress-testing banner. But he stressed that government would now have a key role in stabilising the market – and that might mean injecting investment into affordable housing to keep housebuilding going and to encourage economic growth.

“I’d be surprised if people in government weren’t already thinking about what they do to encourage people to build despite all the circumstances,” he said. “In the past the sub-market sector kept the

"In the past the sub-market sector kept the ship afloat. Now we haven't got a grant-funded submarket rent programme, which is the way we used to stabilise things" - matthew bailes CONTINUE CONTINUED

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ship afloat. Now we haven’t got a grant-funded sub-market rent programme, which is the way we used to stabilise things.”

Dr Stewart Smyth, senior lecturer in accounting at Sheffield University’s management school, said associations which had planned on the basis of healthy sales would now be thinking again.

“I have real empathy for those working in housing associations on their business plans – it’s almost like every couple of months or so they’ve had to be ripped up and started again after things like the budget changes, the ONS decision and now this,” he said. “Some of the bigger HAs have have funding available to get them over short-term humps but they may decide quickly to cut back on new developments and concentrate on core business to see what happens.”

He too suggested that the Brexit vote might open up a fresh debate over public investment in social housing. “Many people have argued for a long period of time that there is no other substitute for direct government finance being put into housing associations and councils to build houses as that’s the only way you’re going to get anywhere near the levels we need and address the issue of where poor people live,” he said.

Beyond that, he added, the whole issue of borrowing off the government balance sheet could now be back on the table.

“There’s a possibility that now in this wider debate about what is the nature of the exit from the EU that those kind of issues can be raised,” he said. “If you’re being told you’ve got your sovereignty back and can make decisions about how you spend your money then you can also make decisions about how you raise it. It would mean big political changes too for that to happen but it does open up the space for that debate.”

But while the huge issue of how housing providers will continue to finance and develop homes post-Brexit will dominate organisations’ thinking in the months ahead, there will be other real challenges to address.

Firstly the communities where housing providers work could well be hit by the fall-out of economic uncertainty and a new wave of austerity. Will the inter-generational divide seen in the Brexit decision be exacerbated if young people are expected, once again, to bear the brunt of a fresh spending squeeze? And how can the housing world respond? Especially when it is somehow perceived to be part of the problem.

“The reason why this has happened does boil down to the fact that the losers in the process of globalisation and mass migration – or the people who perceived themselves to be – haven’t been dealt with terribly effectively by the elites, political and otherwise,” said Matthew Bailes. “Housing is a part of that in some areas – there’s a resentment of immigration driven by housing outcomes for people and the decision to stop building at sub-market rent doesn’t look

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like it had hose people in mind. A lot of people are going to be worse off as a result of this – they have voted against something but not voted for something that’s clear to them or anyone else.”

As HQN chief executive Alistair McIntosh points out, two-thirds of council and housing association tenants voted to leave the EU, when more than three-quarters of chief executives of large HAs polled by Inside Housing thought that Brexit would be bad news.

“It’s a real problem for the sector. Chief executives have once again found themselves on the wrong side of the argument – they have come down on one side and tenants on the other and that fundamentally weakens their lobbying position,” he said. “The political and business leadership have been told to think again by the public in huge numbers.”

In particular, he added, landlords would need to think very carefully about how tenant satisfaction has been going down while they’ve been increasingly been bearing down on housing management spending. “There’s an incredible lot of anger out there,” he said.

“Before we go about business as usual, we have to reflect on the dressing down that we’ve all been given. We are in an absolutely new era.”

How this will play out is perhaps the biggest unknown of all.

Housing providers, proud of their role as the glue in their communities, will have a big role in putting a fractured post-Brexit landscape back together again.

Michael Gove – new PM for Brexit Britain?

who are the leavers - and what will happen to them?

“A majority of those working fulltime or part-time voted to remain in the EU; most of those not working voted to leave. More than half of those retired on a private pension voted to leave, as did two-thirds of those retired on a state pension.

“Among private renters and people with mortgages, a small majority (55% and 54%) voted to remain; those who owned their homes outright voted to leave by 55% to 45%. Around two-thirds of council and housing association tenants voted to leave.”

The biggest policy changes coming down the line – if they can be

made to work – are the idea of the delivery test and putting local Ashcroft, on his with local people. For years we have plans- Lord in place in consultation polling, had referendum an absurd plan-led system where local plans focused on policies Conservative on everything underHome the sun yet failed to deliver sufficient homes. In intervening, the key will be consultation with local people – get this right and you will deliver both homes and political plaudits; get this wrong and the policy collapses completely.

"An increase in inflation following [the post-referendum] dramatic fall in the pound will have a disproportionate impact on the poorest 10% of households."

- IPPR analysis

“The result of the EU referendum shows we cannot afford to return to business as usual for the poorest people and places across the UK. For too long, areas that have traditionally been overlooked, particularly in the North of England, have been left behind as Britain’s economic growth is unequally shared.”

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- Julia Unwin, chief executive, Joseph Rowntree Foundation

There has to be a question as well about how planning permissions are turned into homes – the current rate/speed is not acceptable.

But any changes to the existing system must not damage the rate of delivery. The key question for housing associations will be how they position themselves over the next couple of years.

What inspired you to work on housing issues? And what are you aiming to achieve at Field?

€

It is impossible not to feel that the current housing situation is unfair.

No matter how hard you work in much of the country, a decent home seems unobtainable. My family moved from a council estate in Birmingham to home ownership in the south in the 80s – I don’t think this would be possible now. There was clearly a set of systemic failures and I did not think there was a clear centre–right strategy and narrative to try to deal with this unfairness, so I decided to create one. At Field I aim to help continue shaping solutions with those parts of the housing sector that want to be part of the solution rather than the problem. There are many ways to push and change policy, from public affairs to think tanks to working for government directly.

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The Last Word Mergers are not the only route At its heart, we want the framework to: • Support the business objectives of the individual organisation, recognising the importance of an independent and diverse sector • Help associations think about the best way to deliver these objectives • Support the engagement of stakeholders, including the local authorities that have the duty to meet housing need and the residents who live in our properties (their homes).

Catherine Little

ASSISTANT DIRECTOR OF STRATEGY AND GOVERNANCE SOHA HOUSING

It

started with a quiet shock over the NHF merger code. At Soha, we read the code and were surprised by a number of things, not least that tenants were barely mentioned.

As we spoke with colleagues in the sector, it became clear that we were not alone in our unease and in feeling we did not wish to sign up to the code. Several of us met up. Our reasons differed, but we all felt the code didn’t meet the needs of our organisations.

An Inside Housing poll said that up to 40% of associations were not intending to sign up and we began to see the need for an alternative. After all, we’re a diverse sector, already signed up to different codes of governance, for example.

Our thinking soon clarified and that’s where the NHF code leaves this story.

The 11 associations funding the joint project have decided that the way forward is a framework. This will support individual associations to produce their own approach to produce their own approach to structure and partnerships.

It won’t be a mergers framework because we don’t believe that mergers are the only way to deliver efficient working. Evidence suggests that the majority of mergers don’t achieve anticipated gains. Nor is there any evidence to suggest that larger housing associations are more cost-efficient. If the two CIH publications making the point were not enough (the more recent, Does Size Matter?, was published in 2012), the HCA’s most recent regression analysis echoes its findings: there is no clear correlation between size and efficiency.

"evidence suggests that the majority of mergers don't achieve anticipated gains" - Catherine Little We recognise the importance of the government agenda to build more housing. It’s notable that Inside Housing’s Top 50 Developers in 2015 were across the full range of sizes of associations (in percentage terms). At Soha, we’re pleased to have had organic growth of around 4% of housing stock in recent years. However, building is not and should not be the only focus of the sector. We have existing homes and communities where many of us have an enormous impact.

It may be that a partnership with, or acquisition of, a local organisation that is not another housing association is the best

path to deliver business objectives. It may be that stock rationalisation from larger associations to locally-based management makes sense. It may be that a merger does give the right outcomes for residents, stakeholders and the business, but it is far from the only route.

Now we need your help.

We’re pleased that HQN will be producing the framework for us, with Anthony Collins Solicitors providing legal advice.

In short, the framework is likely to include: • Principles that can be applied to any housing association • Case studies and examples to help navigate through decision-making • Guidance on producing an organisational strategic document on structure.

CEOs have received an outline of what the framework will include and an invitation to give feedback and get more involved in its development. Please do look out for your email or contact info@hqnetwork.co.uk if you think you’ve missed it.

We are also consulting with the tenants of the 11 associations on the steering group, in partnership with TPAS and the HQN Residents’ Network. As Carole Burchett (Soha’s tenant scrutiny group chair) says: “We tenants won’t leave for another job or when our time on the board finishes.We’re in it for the long haul!”

Tenants play a crucial role in the decision-making during any stock transfer: the same should be true for other major decisions about the ownership and management of their homes.

If you would like to run a tenant consultation session, please get in touch.

We look forward to hearing from you.

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