Housing association futures

Under the strapline “Creating a new vision for housing associations” the National Housing Federation is currently facilitating a nationwide conversation within the British social housing community about the future of social housing. Part of that exercise is to gather perspectives on what housing providers will look like, and what they will be doing, in 2033. In this post Alex Marsh offers his perspective. The post first appeared on the HotHouse blog as a contribution to the NHF’s national conversation.

The global financial crisis looks like a critical juncture on the path of housing policy. The old rules of the game have been disrupted. The crash empowered the Coalition government to slash conventional capital funding, introduce the “affordable” rent programme and pursue precarious welfare reform. This combination is setting us off on a new path, which will over time transform the sector.

We have witnessed relatively little structural reform to the broader housing market over the last three years, and it doesn’t look like there is a lot more on the agenda for the next couple. This is a missed opportunity. Unless there is a radical rethink – for example regarding the benefits of subsidizing bricks and mortar rather than people – I don’t see a substantial change in policy direction any time soon.

So what might the world look like if we continue down the path we seem to have set out on?

There is little doubt that by 2033 housing associations will be more commercial organisations. Ever greater reliance upon more complex forms of private finance brings with it changed ways of working. Organisations must take account of new imperatives and professionalise. Professionalisation and commercialisation are not in themselves necessarily bad. But they can undoubtedly come into tension with housing associations’ established mission and values.

At the same time as housing associations are changing, private landlords are becoming more involved in social – or at least “affordable” – renting.

A process of convergence is occurring.

Many see the sector’s future as one dominated by large organisations. Dealing with complexity, managing diversity and mitigating risk effectively will drive organisations to scale. The challenge will be keeping in touch with, and remaining sensitive to, customers’ requirements.

There is a little more debate about whether there a sustainable future for smaller associations. Certainly, at the moment, in relation to the “affordable” rent programme, providers can take the view that they don’t like the offer and can opt out of growth on the terms being offered.

Yet, governments committed to avoiding public spending will look covetously at asset-rich organisations choosing not to mortgage themselves up to the hilt to build property. Government’s problem is that it lacks the direct levers to force changes in behaviour, although through the rules on the “affordable” rent programme and the like it is searching for effective indirect levers.

In the background, of course, is the fear that too much direct government control risks registered providers being deemed public bodies, with consequences for the public accounts.

So governments are going to keep trying to find ways to bend registered providers to their will. As a consequence over the next twenty years I would expect there to be a showdown over independence. The terms of trade will become so unappealing – a lot of rules in exchange for very little money – that housing organisations will break out of the regulatory framework and go it alone.

Currently there are concerns about preserving core mission and values in the face of diversification, commercialisation and greater market exposure. In my view, if we carry on in our current direction, these debates will have been left behind by 2033. We will mainly talk about housing organisations without distinguishing – or necessarily being able to distinguish – those that started out as social landlords. A range of large organisations will hold diverse portfolios of activities, some of which will be sub-market renting. I suspect the idea of a social housing “sector” will seem like a historical curiosity.

The current direction of travel means that in a decade’s time many registered providers will have been pushed up market. They will be housing more of those on middle income in relatively stable work but unable to access owner occupation on a sustainable basis.

Housing low income and benefit dependent households on subsidized rents will be a much smaller part of the overall portfolio. And there is a good chance that it will be viewed philanthropically rather than as core business.

Many of these organisations would not be charities first and foremost.

Low income, benefit-dependent households are more likely to be housed in relatively low specification accommodation in the market sector. It might be that such housing can be controlled by registered providers – who are well placed to work with institutional investors to manage the sort of apartment blocks investors prefer – but it would be a different type of business to social housing as we currently understand it.

Many organisations will successfully grow to reach a scale that is sustainable in this new world. But I expect we are going to witness a number of organisations blow up. Some will go for growth but, in reaching for the next rung of the ladder, will overreach and get into trouble. Our increasingly commercialised world demands new skills of executive teams and boards. Some will assume they have the skills to cope and have fully understood the risks, only to find they are out of their depth. It is clear that the HCA has this possibility very much on its mind.

Bailouts will be required. Orderly takeovers will no doubt be effected. The result will be organisational growth and industrial concentration, as has been the case in banking after the GFC.

On the other hand, I still see space for the small scale, local provider. It may be that such organisations are no longer part of a registered sector, because grant has been paid off and grant funded development has not been attempted for years.

So we could see regulation wither for the large and the small, but for different reasons.

This reading of the future takes our current path and extrapolates. Of course, it could be argued that futures are not given but made. Critical junctures can be manufactured. And then we can set off on a different path. So if this version of the housing future is credible, but not to our taste, then we need to articulate a different one. And find a way to bring it about.

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