Housing in a time of uncertainty – planning for the future

Richard Capie, Deputy Chief Executive, CIH

Housing is a small part of a much bigger picture

• “The Spending Review will involve more than the allocation of resources. While it will rightly focus on reducing Britain’s record deficit and restoring sound public finances, it will also provide a platform to consider new and radical approaches to public service provision. The scale of the challenge presents an opportunity to take a more fundamental look at the role of government in society and how it can fulfill that role.”

– Housing market remains fragile – record low interest rates, QE and lack of supply providing a degree of insulation

– Affordability has improved if (big if) you can get a mortgage due to current interest rates

– Mortgage finance has dried up for FTB– Housing supply has taken a battering– Government faith largely lies in a new

planning regime which is untested and is causing some transition issues

– Public investment in affordable housing has not been a priority compared with other areas of investment.

– Massive changes in social housing

A new reality – headlines for today

50

55

60

65

70

75

80

85

90

95

Lo

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Source : Regulated Mortgage Survey (and predecessor surveys)

Average LTV for FTB

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009Lo

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Below 50% 50-74% 75-79% 80-84%

85-89% 90-94% 95-99% 100% or over

Source : Regulated Mortgage Survey

Where have all the low deposit mortgages gone?

Help from mum and dad to the fore…

Housing supply has been decimated

102,570 completions in England in 2010, down 13% on 2009

Land values back to 2002 levels

Government response – investment, burdens and planning reform

– DCLG capital budget cut by 74% in CSR– Uneven investment – regional allocations replaced by local funding

frameworks - limited funds will be stretched– Supporting people funding cut by 6% in real terms, local spend

variations under scrutiny post ring-fencing.– Delivering against the new local investment framework– A new, smaller HCA – supporting local government through an enabling

role – A new approach to rents – up to 80% rents (does it work for you?) – a

step towards a revenue driven investment model– But more than rents, also asset management flexibilities, balance sheet

capacity– HRA reform will enable LA self financing but at what price?– Planning is in flux – end of regional strategies, implementation of Open

Source, s106 reforms– New Homes Bonus as a local incentive for housing building– Reducing regulatory burdens – easing regulations and standards

around new housing– Opportunities for innovation from providers – necessity married with

flexibilities

Government response - regulation– Regulation seen as “red-tape” rather than market

shaping– TSA still exists but economic regulatory focus– Rent standard, tenancy standard, turn on powers from

2008 Act, vfm standard– Consumer scrutiny role handed over to local tenant

panels and expectation of greater role for local councilors and MPs

– The end of inspection – for Has and Las (including end to LGPF, CAA, LSPs, LAAs) – the Audit Commission now going…

– Co-regulatory principles still apply – customers are key – opportunities for providers to work with tenants and communities to shape a much more localised offer

– Rugg review dropped - housing management of prs remains variable

– Social housing providers on a journey towards specializing – management, development, care services, prs services.

• Shift from home for life to closer link with welfare provision (based on need with ability to change with circumstances)

• Waiting lists to be tightened up• Local lettings extended• New flexible tenancies introduced for new

tenants - statutory minimum of two years• Ability to review tenancy after this period,

based on eg: income, size of home required etc.

• LAs can discharge homelessness duty in to PRS, homelessness legislation left alone, RP categories continue

• Prioritize transfers and re-lets over RP, ie: more flexibility to let to own tenants

• Local tenure strategies• Change in expectations around housing

managers – increasing active role with tenants• Reforms wanted, but affordable rent and tenure

propositions seen as problematic and poorly thought through

Government response - social housing

Government response – welfare and housing benefit reform

1. LHA caps (£250 1 bed, through £400 4+ bed)2. LHA calculated at 30th percentile rather than 50th3. LHA CPI indexed in future4. HB deductions for additional residents increased5. JSA link – HB cut to 90% for people receiving JSA for 12 months

or more SUCCESS - DROPPED6. HB calculated for working age households based on size of

property they need7. SRR cap to 358. Universal credit caps (household and individual)

• Risk to tenants? Do you know who they are?• Risk to income? Plans around income protection?• Interface with AR model – does it stack up?• Direct payment to tenants• CIH continue to work with government and Parliament

Consequence or contributor?

• Housing as something that will come as a consequence of economic growth, not as a driver of growth per se?

• Housing seen as a private function with reluctant public investment that addresses market failure (revenue funding via welfare), rather than proactive view that sees public role for investment in housing and communities (capital funding via social housing)?

• Is view of housing a new consensus or circumstantial?

• Either way – CIH and your role – switch in emphasis shortly from policy to practice

– What will the changes and reforms mean for your housing markets? (vulnerable home owners, public sector employees, PRS tenants?)

– Who are your existing/future tenants and what will be the impact of reforms on them?

– What measures can you put in place to support them? Where do you draw the line with your responsibilities?

– Securing a financial platform for delivery (existing and future debt, risk profile and viability. benefit and rent reform, new supply, regulatory direction)

– What are your partners going to look like? Local authorities and third sector providers?

– Joint services – opportunity or risk?

Your tenants, your communities, your business – food for thought

– A window exists to consider your own future in a way that hasn’t been possible for a number of years

– Do you have a clear vision that “works” in this new context? Your charitable objectives?

– A social enterprise that serves and delivers for the community? A community-led organisation? A community-owned organisation?

– Are you clear about how you going to define, establish, measure and be held to account around the things that matter to your tenants, your community, your staff?

– Where are you going to be looking for benchmarking and excellence? Housing and beyond….

– Your own efficiency and improvement plans?– Do you have the right skills and competencies? – In your staff teams? As a board?

Finally, shaping your own future