The third in the series of special reports ahead of the Place North West Social Housing Forum, sponsored by Vinci, KPMG and Hill Dickinson, taking place tomorrow at Lancashire County Cricket Club, outlines the sector's predictions for this week's government spending review.
The run up to Chancellor George Osborne's comprehensive spending review (CSR) on Wednesday has been jittery for social housing providers to say the least.
The abolition this month of the Tenants Services Authority in the 'bonfire of the quangos' confirmed for many the feeling that housing has become the poor relative of social policy.
Nick Atkin, chief executive of Halton Housing Trust said: "There's a general vacuum in housing policy and its impact has been an inertia within the housing profession.
"Lots of things that the previous government was in the process of introducing, for instance, warmer homes and retrofit, [have seen] a bit of a pause. Also, lots of the policy has been changed, for instance the tools for ASB will be scrapped, which is fine, but there's no explanation of what will take its place."
Atkin warns that housing associations should think proactively about their funding and development models rather than wait for the CSR and its fallout to provide answers: "There will be very little funding next year for new home provision across the country, the HCA are anticipating significant cuts so we've frontloaded all our development to this year and brought forward some funding streams to this financial year because we know the facilities from the HCA are going to be really difficult to come by from hereon in."
Richard Ashdown, director in Jones Lang LaSalle's residential team, said: "Practically everybody in the affordable housing sector expects cuts in the National Affordable Housing Programme, the main instrument for delivering grants for new development.
"Many registered providers have already begun to explore an increased level of private development, the profits from which could cross-subsidise development of affordable housing. Such private development may be via joint ventures with private house builders, or perhaps through direct procurement."
Charlotte Harrison, director of policy and strategy with the Northern Housing Consortium says that, having looked at the emergency budget in June, "housing's certainly not one of the protected departments – they've been modelling 25-40% worth of cuts."
However, she is optimistic about growth for housing providers in the north: "Although we're expecting some big cuts to come in housing, there are indications that the government recognises that the north has been more reliant on public sector funding in the past so it might need more support in making the transition to private sector investment."
Harrison says that now regional targets are gone, the local authority will be rewarded in tax incentives for promoting housing growth. Conversely local authorities that don't do this will be penalised. "It's quite a different feel, not only moving away from grants but it's also at local level," which she says will vary across neighbouring local authorities.
"Once the local authorities get greater control over incentives, it will change the relationship between local authorities and housing associations. It was already on that path through the single conversation that the HCA started but local authorities will have much wider strategic powers and will look to see housing associations working with them more."
Efficiency is paramount, she says. Shared services, starting from shared back office functions to sharing chief executives will be the way forward.
Graham Archibald, partner at Hill Dickinson, said: "The need to make efficiency savings is apparent throughout the sector, as it is in society at large, and all are wary of the impending economic belt tightening and how this may impact on the operation of current housing stock and future development. The difficulties in the current economic climate for the sector are illustrated by the collapse of Connaught and the fallout from the need for social housing providers to look elsewhere at very short notice for alternative contractors, in some cases at significant financial cost."
This is a view echoed by Bill Enevoldson, head of public sector at KPMG in Manchester, who added: "Social Housing is likely to see some draconian cuts both in direct and indirect funding in the CSR. Now more than ever it is essential that what funding is left is used as efficiently as possible. Ensuring that there is some flexibility in how the public funding will be deployed will be essential."
The Northern Housing Consortium is also starting to look at remodelling rent to see how banks will be more amenable. "At the moment we're not quite sure about where rent policy will go and how it is structured and that's a conversation we need to have with the banks right now in terms of what potential model for rent policy would help them sustain lending."
For Claire Griffiths, managing director (regenerational and commercial development) of Plus Dane housing group, the issue is getting development done, and quickly.
"The last few months [of 2010] is just going to be delivery, delivery, delivery," Griffiths says. "Because what we're in now is the tail end of a massive funding programme and we've really got to maximise on that and deliver schemes by the end of the financial year to take advantage of what's left of that programme. And I anticipate that there will be slippage [not meeting the target of having to start by March]. If you can have a batch of schemes ready to go there's a chance to secure funding before the end of the financial year."
Griffiths says the abolition of the planning targets will make a difference to future programmes, "especially in rural areas. I'm concerned in local authority areas outside the metropolitan areas it's going to be incredibly hard to get planning because of the abolition of regional spatial strategies which was the basis on which a lot of planning decisions were made". She says in Cheshire, Lancashire and Cumbria there are lots of rural areas. "We are concentrating on making sure that we're working on schemes which are high priorities with local authorities." This would mean focusing on schemes in housing market renewal areas in Liverpool and Cheshire.
Bob Taylor, chief executive of Knowsley Housing Trust says they will have to make around £7m of savings in the next 12 months. He says his organisation will not just possibly lose revenue from potential rental income and housing benefit cuts (the majority of its tenants are on some form of benefit), "but the government is pushing VAT up to 20% from 17.5% from January 2011 and we can't reclaim that," he says.
Séan Stafford, director of development and investment at New Charter Housing Trust Group is concerned about delivering sustainability in the face of cuts.
"At the moment, all social housing has to achieve the Code for Sustainable Homes level three. [But] from April 2011, they all have to achieve level four. To get to level three it just means being a bit more clever about toilets flushing etc. But there will be a significant cost in order to deliver code four," he says.
The Place North West Social Housing Forum, sponsored by Vinci, KPMG and Hill Dickinson, takes place tomorrow 19 October at Lancashire County Cricket Club.