The future social housing provider Kath Scanlon LSE London Switchee 7 February 2018

Context Housing White Paper Social housing green paper to come Austerity and cutbacks ‘Housing crisis’-- not just in London Grenfell

Our research What will social housing providers look like in future in terms of operation structure customer demographics ?

What do associations do? Seen from outside They provide low-cost housing for low-income or vulnerable people Seen from within They provide housing. Some of it is low-cost.

‘It is really important to create mixed communities and not to provide housing only for the two ends of the (income) spectrum.’ Housing association executive ‘The real need is social housing, not affordable or intermediate rent.’ head of housing, London borough

Social care? Core to mission of some HAs but funding increasingly difficult ‘At the moment it’s difficult to make social care work and some or even most associations are avoiding it.’ major investor ‘Before when associations weren’t subject to the LHA cap we could address those right at the bottom, who need support as well as a house. Now it’s catastrophic.’ government official]’

As well as… Building maintenance and commercial for-profit work Community activities Debt & welfare advice Jobs training IT skills

Four big challenges The macro economic environment Demographic trends The welfare regime The organisation of the sector

Macro economy Housing associations increasingly operate in same space as for-profit developers—and face the same risks ‘There are big concerns about the property market. Everybody needs to know their exit strategy and its cost. There’s a case for associations being involved in build for sale but they need to be sensible and aware of the need to slow down or stop if necessary.’ major investor

Macro economy ‘With commercial activity, you have the choice between investing your profits in your market activity to make more money, or gifting the profits to the charitable bit. In the first case you are very exposed if the market turns down.’ round table participant A ‘You mean when it turns down.’ round table participant B

Demographics: More older households

Fewer aged 25-34 with children

…but more 25-34 sharers

Welfare changes Welfare cap and universal credit mean more tenants will have problems making rent payments Some HAs refusing local authority nominations ‘The sector will probably drift upmarket—not intentionally but because that’s the way the incentives line up.’ senior government official

Industry structure Trend for bigger organisations to merge Why? No clear efficiency gains past a certain size Joint working arrangements could be as effective

‘Some mergers are fine—but some are just vanity projects.’ government official ‘All the evidence shows that big associations are more efficient but small ones are more popular.’ politician Medium-sized associations ‘are ideal for innovation: if there’s a good idea, they’re the optimum size to try it out.’ round table participant

Concerns Continuing trend for mergers risks over-concentration of borrowing among a few lenders—HAs may turn increasingly to equity investors Diversification: a positive way to parlay expertise or a dilution of social mission? ‘Most of the accounts suggest that returns on market development and other activities are lower and the risks are higher—so why don’t associations stick with the core?’ major investor

Four areas of opportunity Working with public landowners to build schemes that are mostly / entirely affordable local authorities or other public bodies contribute land at below market value housing associations bring development expertise that most councils have lost.

Mayor of London recently sold 7-acre site in north London to Catalyst and Swan for all-affordable scheme of 330 shared-ownership homes.

Improving links between health and social care HAs could deliver both care and physical improvements in the home (not just within their own stock), and help reduce bed blocking However— Scale of need is enormous Expenditure from one pot, benefits to another

Building, owning and managing private rented stock Uses associations’ skills in providing rented housing Profits cross-subsidise affordable homes

Embracing digital working, artificial intelligence and MMC PLACE Ladywell

Questions? Brandon Street Housing LB Southwark/L&Q Metaphorm Architects, 2012