Loud and clear came the message that the impact of Welfare Reform tops the sector’s worry list. There has been a good deal of commentary and debate. At the dinners there was undoubtedly a widespread sense of doom and gloom. Many are in agreement on the need for some reform but worry that the implementation process is ill-conceived and may have appalling outcomes.
Whilst welfare reform is not the creation of HAs, associations are on the front line of implementation. They feel a responsibility to give help to those who need it and will undoubtedly bear some of the costs. This will impact on the other things they are able to achieve. There appears to be no government recognition of the costs HAs will bear and of the impact on future development capacity and housing supply.
HAs may well take some of the flack when the consequences start to be seen and felt. Specific welfare reform stories will emerge in the press and they may struggle to defend evictions when they are placed opposite substantial surpluses. HAs may be guilty by association. Organisations need to be ready to manage their reputations and might become more adept at liaising with stakeholders such as government and media as a sector. The sector’s diversity in the sector has, to date, made it difficult to generate a sector-wide voice that is audible to the general population, although David Orr of the National Housing Federation has been outspoken in his recent comments.
My conversations suggested that in some quarters, whilst acknowledging the blackness of the welfare reform cloud, there was a potential “silver lining” - organisations may be strengthened by the challenge posed by welfare reform and the flexibility they need to develop. Together with diversification and growth, this can create a self-sustaining organisational dynamism. It encourages boards, management and staff to grow and innovate, which can be channelled to benefit customers and society more generally. Welfare reform could also offer an opportunity to engage with tenants on a different discussion: not how they maximise their benefits but how they can bridge their personal funding gap. Successes here could help to offset what will undoubtedly be a stressful time for those staff who engage with tenants daily.
Other effects could be as diverse as an increase in right-to-buy to a potential rise in domestic violence – triggered initially from council tax reform rather than “bedroom tax”.
It is becoming apparent that tough times are the new normal. It is probably reasonable to assume that the UK is part-way through a difficult decade. The current generation of senior management has not experienced anything like this. Tough times are driving local authorities to do less, so housing associations are expected to take on more – perhaps the last vestiges of The Big Society. Those that thrive will be the ones that sharpen up, for example:
- Managing diversification so that it does not compromise the core purpose - by avoiding taking on the impossible, and ensuring the right operational and executive skills are in place to deliver. Since our discussions, the HCA’s discussion paper suggests there will be increased regulatory focus on this more diverse activity which may impact significantly on some organisations.
- Building boards with the right skills and the tenacity to challenge and hold to account a more diverse business
- Accepting challenging circumstances as an opportunity to drive efficiencies and improve focus.
- Understanding, separating and managing risks effectively.
- Codifying commercial principles and understanding not only best practice, but exit triggers and exit routes.
- Understanding your neighbourhoods and doing the right things in the right places – a common theme on my tour around the country has been that opportunities are geographically dependent.
Housing associations occupy an interesting middle ground between the public and private sectors. On the positive side, HAs are untainted by discredited democracy and discredited banks, although welfare reform poses reputational risk as specific stories about eviction (or worse) come out. However, one might argue that they do not have naturally clear lines of accountability, whereas a plc board will always have a close eye on shareholders. Should housing chiefs expect to simply hold themselves to account?
I am seeing increasing stratification in the sector, which was illustrated by the range of views expressed around the value of diversifying vs. “sticking to the knitting” of providing good housing and good housing services. Organisations need to be clear on and comfortable with their own balance between providing new housing and improving communities. Some of this is driven by a mix of scale and geography. This is part of an increasing imperative that every organisation has a clear strategy – a point reinforced by Julian Ashby of the HCA in a recent presentation to audit committee chairs at a KPMG-hosted event
I speculated about a phenomenon of a “squeezed middle” for housing associations – with the very large and the very focused (of whatever size) having striking advantages over those who are neither. Large national organisations have greater organisational and financial capacity but need a clear view of their positioning in different locations. Geographically-focused ones can leverage their local scale (whether or not this is absolute) and should benefit from strong local accountability. Other mid-sized organisations with a sufficiently clear purpose/focus could also thrive.
However, that squeezed middle could include quite big organisations, who at some point reach the difficult conclusion that they are not big enough. This may be a gloomy prospect for affected organisations, but the underlying business will still be there – the question is who will be doing it. Perhaps the most passionate – or even angriest!
Whether an organisation decides to focus on commerciality or on purely delivering great tenant service, these are different means to a similar end: the core purpose is housing those in need. The current challenges may help organisations to reconnect with their charitable objectives.
Despite the emerging stratification and general lack of consensus across the whole sector (if such a thing exists), we did seem to settle on a degree of commonality: strong moral values that are in some ways similar to those seen in the public sector. However, there was a sense that these moral values can lead housing providers to try to solve too many problems. The example was given of the Netherlands, where those with mental health or drug problems sleeping on the streets are not classified as homeless. This level of compartmentalisation is not a good thing but the common English approach where providers help in the background does not seem to be right either. Non-core, non-housing projects need to be done:
- well – not dabbling
- transparently – so that expenditure (inputs) are understood and outputs are duly credited
- where there is genuine demand – e.g. tenant newsletters are not popular across all demographics
A boundary needs to be set, otherwise a provider could end up like a miniature local authority, but certainly an LSVT can argue that investment in the local community is protecting its assets.
We agreed on the importance of house-building to the wider economy and discussed what would trigger changes in government policy that would in turn drive house-building. “Generation rent” might be moved to vote or march, but it is not clear at what point they will spring into action. Or are there other ways for housing to raise its political profile to the level of health and education? In the meantime, the government seems to lack the impetus to overcome NIMBYism and change the planning system in a way that would make it easier for supply to increase. Further, and again subsequent to our dinner discussions, the proposal in the HCA’s discussion paper to ring-fence social housing assets undoubtedly runs counter to the government’s stated agenda to get more houses built.
My colleagues and I would be delighted to discuss these and other sector matters with you.