Rental Housing: Public-Private Partnerships as Key Delivery Vehicles A role for non profit organisations Olu Olanrewaju

Housing associations- The most successful public private partnership in Europe. 1.What is the role of non-for-profit housing associations in delivering much needed affordable accommodation? 2.What is their Relationship with Government / public sector agencies? 3.Why have they have continued to be successful despite increasing challenges to their viability? Olu Olanrewaju

What is the role of non-for-profit housing associations?  Private, non-profit making organisations  Philanthropic roots  Post war - ‘New’ Housing Associations  1988 Housing Act  Private finance to create ‘mixed funding’ schemes The Restructuring of Housing Provision - Dwelling Stock, by Tenure, Great Britain, (Source: CLG, Housing Statistics) Olu Olanrewaju

What is the role of non-for-profit housing associations ?  1,500 housing associations (relatively constant)  Providers own or manage 2.7m homes (9% of the total housing stock)  85% of turnover comes from renting general needs housing at sub-market rents. 70% of rents are paid directly to Landlords from Housing Benefit.  Currently build 45,000 affordable homes (including shared ownership) and 5,000 private homes every year.  Private finance  Falling grant levels have led to private finance becoming the main source of investment.  By accumulated grant totalled £43.8 billion while drawn-down private finance totalled£ 47.9 billion.  The trends -  In 2014 turnover increased by 5% to £15.6 billion  Surpluses for the sector have continued to rise and total £2.4 billion for 2014, an increase of 22% compared to  The gross book value of the sector’s assets has increased by £6.8 billion to £132.7 billion as providers build new homes and invest in their existing stock  Source: HCA 2014 Global Accounts Olu Olanrewaju

What is HAs relationship with Government / public sector agencies?  Grant funding  £2.9bn capital grant funding has been made available nationally to fund affordable housing over the three year programme period, 2015–18.  Government is moving towards providing guarantees rather than direct grant  Housing benefit to support tenants that are unemployed or part employed  Regulation of regime to protect social housing assets  Housing associations are pro-actively regulated by the Homes and Communities Agency (HCA)  Planning gain –S106  Planning obligations under Section 106 of the Town and Country Planning Act 1990 (as amended) make a development proposal acceptable in planning terms, that would not otherwise be acceptable.  Common uses of S106 agreement are to secure affordable housing  Land  Partnership arrangements between associations and local authorities deal with land transactions and the development process.  Associations invest on council estates within a formal partnership framework where local authorities influence schemes.  In return for land sold at nil or discounted values, local authorities receive nomination rights to new lettings. Olu Olanrewaju

What is the role of non-for-profit housing associations ?  Typical HA governance model  Board  Non Executive Directors with specific skills and expertise sometimes include tenants  Reducing in size  Usually 8-10 members  Committees – at a minimum include Audit and Assurance and Remuneration  Executives  Sometimes sit on the Board  Normally 5 members, including Chief Executive  Departments  Development  Property (Asset Management and Maintenance)  Housing services (often includes other customer facing services like contact centres, lettings etc. )  Finance Olu Olanrewaju

What is the role of non-for-profit housing associations ?  Typical scheme for social rent  Grant per unit 15-20%  Land & Build cost per property £160k  On-costs 10%  Weekly Rent – per unit £ comes to about 65% of market rent  Voids 1.0%  Bad Debts 2.0%  Management Costs £450  Reactive Maintenance £450  Planned Maintenance £550  Depreciation 1.50%  Mixed tenure (cross-subsidy) often including a combination of:  Social Rent  Intermediate Rent  Market Rent  Low cost homeownership  Outright sale Olu Olanrewaju

Why have they have continued to be successful despite increasing challenges to their viability?  The sector remains attractive for both the banks and capital markets :  Strong asset base  Predictable income streams  Government support through housing benefit  Regulation produces favourable pricing.  Banks like a regulated sector – 200 bases points better borrowing rates  Ratings agencies like a regulated sector “Aa2-Aa3”  Commerciality  Cross-subsidy model  Made challenging development schemes stack up through shared ownership and private sale  Developing partnerships beyond Government  Other housing associations, builders, developers and private enterprise. Olu Olanrewaju