Planning reforms and risk profiles

Updated: Jan 24

Jonathan Walters from The Regulator of Social Housing joins us to answer your questions on planning reforms and risk profiles. Jonathan will be sharing the Regulator's perspective on the sector and how the industry can work to meet the requirements of social housing in 2021 and the future.

Key topics include:

- Stock investment needs versus new supply

- The current risk profile of the sector

- Planning regulations


Jonathan Walters - Having previously been at Ernst and Young and in working in social housing consultancy, Jonathan has been at the Regulator since 2004. He has worked across the organisation and has extensive experience in dealing with funders, government and Registered Providers.

The Regulator webinar transcript.

Christopher Wandel: Good morning and welcome to another big SDS webinar. And today we have Jonathan Walters. Who's joining us from the regulator of social housing. They just literally yesterday got hot off the press. So what we really want to do is give Jonathan the floor for now, but just before we do that, I'm going to let a few more people join.

You'll see that, in the chats we have not only linked to the press release from the regulator yesterday, but also if you'd like to talk to me, Or Ricky, you can book a discovery call with us quite quickly and easily using those links. So welcome Jonathan. It's a real pleasure to have you back.

[00:00:59] There's obviously a lot of anxiety at the moment. Right now, especially with new developing housing associations, the future of planning regulations, as well as the sector risk profile. And of course the ever increasing demand to increase, to raise standards in existing stock while meeting development targets.

So all developing housing associations do have one heck of a burden right now.

Jonathan Walters: Did they do it? Well, I mean, I'll come on and talk about this later, but it is, I think the most difficult period I can remember for the sector. And I think if you're on the board or you're an exam, or you're just working at a housing association or a local authority at the moment, this is, this is tough.

And I, I fear it's going to get tougher. So I should just manage expectations. Now I'm going to be quite depressing for the next sort of 20 or 30 minutes. And then hopefully somebody can come up with a ray of optimism, but that probably won't be me.

Christopher Wandel: Okay. so to everyone joining right now, the idea of today's session is to, to be interactive.

Jonathan has come here to engage with you and to discuss your concerns, uh, directly with you. So. Question and answers. We have some new features on, on this platform and you can like each other's comments and you can upvote each other's questions as well. So we're, we're hoping for a lot of engagement and I will get to as many of the questions as I possibly can.

I think it looks like our attendees have peaked right now, Jonathan. So I'm going to hand the floor over to.

[00:02:36] Jonathan Walters: Thanks very much Chris and however, really, really nice to have me back. I'm really, really glad to be here. I'll talk for 20 minutes, half an hour, and then leave plenty of time for, for discussion.

Anyone that's hopefully seen me speak before. Well, now I'm really up for, you know, challenging questions, difficult questions, you know, so don't leave things unsaid. No regulatory judgments are at risk here. This is absolutely a kind of hopefully a reasonably free and frank discussion.

And I'm not, I'm not gonna judge anybody on how difficult the question is that you asked me. So what I sort of deal is just sketch a little bit, a bit. The risk profile. And if you haven't read it, I commend it to you highly. It came out yesterday as Chris was just saying 20 pages long printed and put it under your pillow, have nightmares, wake up in the morning and then work at how you're going to solve the problems because there's, there's quite a lot in there and it's definitely, it's definitely worth reading.

[00:03:32] But what I'll do is I'll sketch out a little bit. I think the landscape that providers are operating in at the moment, some of the sort of key challenges and risks that we see as a regulator. Talk a little bit about our role and how our role might evolve and how that might have an impact on organizations.

[00:03:47] And then, yeah, we'll, we'll definitely open up the questions and thoughts and comments, so if we start right up at the big macro level, the, thing that obviously is, we have a new new department name. We have a new secretary of state, and we have a new set of ambitions. I think they're going to very much impact on, the sector.

So Michael Gove has been very clear when he's been speaking in. Opinion the luck or whatever we're going to call it. They new department, it's not simply MHCLG with leveling up, suck on the front. It is actually an, new department with a new set of priorities. And that's very much the spirit with which he's, he's approaching this.

[00:04:25] And I think that is that's going to be a really interesting time. What is also made very clear, actually, it's done this in public announcements and private comments and the comments from officials and so forth is be clear that he had actually quite interested in social housing. I think when, when he was arriving, everyone was kind of like, well, you know, how much interest is he going to have, whether the teams are going to be, and clearly the top of his inbox, is putting out plans and working out what leveling up means for this government on what policies fade from that. And obviously he's got an army of new ministers and advisors in, that are going to help with that. And the holdings coming in for a six months to comment, we've got Kemi Baton that, and we've got the other brand and the other brands.

[00:05:04] I think they're really interesting character if anyone's kind of followed his, work over the years when he was at policy exchange and elsewhere, he's clearly got views about social handle. Think about sector, about housing and the economy. And that's definitely worse worth looking into. Those of you, you kind of know Michael goes most from his time at education.

[00:05:22] I think there, he could come in with a very strong, you know, kind of view of the world that he'd been the shadow. Educational spokesman prior to the 2010 election. So he knew what policy agenda he wants to drive when he arrived at, through the door. I'm not thinking you haven't got some views already, but I think you're very much in kind of questioning, listening most.

[00:05:41] I think that's really good. He's talking to people he's asking really interesting first, all the questions about social housing and how are they going to have the whole, the system fits together. So then there's some really interesting opportunities there for the sector. But one of the things I would say about this government more generally.

[00:05:57] Yeah. It's not. So the Optum, [00:06:00] Boris Johnson era conservative government, as opposed to previous iterations of the conservative party empower recently is that they don't, I think have a very strong view of that social hand thing. So Cameron and Alcorn really didn't like social health. Uh, Theresa May and James broken shot, sadly, sadly missed Gavin ball.

[00:06:19] Well, and those people went when they were kind of empowered that they thought social housing providers is key anchors in communities that were left behind. And so they really wanted to work with social housing providers about reconnecting, broken communities back into, back into them in the mainstream.

[00:06:35] If you like, and we see two very different views, the role of a social housing provider and social housing in the economy. I think the impression I get is from Boris Johnson we've had so far, is it social hanging is, is something that works with, but they're not particularly proud or against that.

[00:06:52] They've got an agenda, that's it to you over here. And it will have an impact on social housing. So planning before access to home ownership, leveling up, all of those things. I think those are the things that go with the thinking about, are there any things about social handle that in so far as it helps them with those other.

If that makes sense.

Christopher Wandel: what was, what was generics output?

[00:07:14] Jonathan Walters: He wasn't interested at all. He was, he was completely he's focused with home ownership, and a real interest in things like starter homes. And, how do you help more people to homeowners? And that is the natural conservative reflex.

Christopher Wandel: speaking to people about the first homes who are now sort of on the fence about it is first home has gone now, do you think.

Jonathan Walters: That's so I wouldn't like to say I don't, I don't know if I'm completely honest. One of the real questions for forego resource planning and the first time it was linked to a lot of the planning.

[00:07:50] So I think all of that is not necessarily in the air book, but I think it's kind of under review. I think that the government is thinking that, you know, that, process through very definitely. It's not a negative political backdrop, nor is it massively favorable. I mean, I think it's really good that ahead of the spending review, both home things and then GLA got their programs announced.

[00:08:12] So that money is kind of out of the door, in terms of the spending with you, it looks to us like it will be reasonably quiet in terms of social housing. So we're not anticipating any big announcements about capital spend or rent policy or anything else in this spending review that we think will impact on the sector?

[00:08:30] I think there will be stuff as we saw yesterday, there will be stuff around there are carbon about, how the social housing sector works with governments to deliver on the zero carbon agenda. I think there might be more announcements around what decent homes too might look like, but without any definitive conclusions.

[00:08:47] So I thought my impression is the spending review will be a quiet one for housing, but it's going to be a really tough one for government generally, because if you look at where health expenditure. It's now 40% for parents. And every time that the government spends is on health, that is crowding out expenditure on other areas, even other areas are really key.

[00:09:06] So once you put education on top of that and defense on top of that, you know, there isn't that much money left over for government to spend on other key priorities, including leveling up, which means I think it will look. The sector and others to, to bring financing and to, to bring support, to deliver those other agendas that they, they want to see delivered.

[00:09:24] So, I think it's going to be quite a tough spending will be, but how they won't necessarily be in the front and center of it, which I think brings us on really to what we've been talking about for a while. And they weren't, when I spoke last time, went to events, we were talking very much about this, which is this.

[00:09:40] The problem the sector faces is that it's being asked to build many, many more new homes, still at ground levels that are much lower than they were 10 or 15 years ago. But they're also being asked to spend significantly more on their stock than they were previously. And I think that has a real big, strategic challenge.

[00:09:58] I think alongside that is how you deliver good quality services to tenants when the media scrutiny on the sector as it is. Establishing a narrative that a lot of that delivery of service attendance. Isn't very good. So if you think of some of the ITV news coverage, it's not being picked up by the BBC Kasia, only something other, other parts of the media.

[00:10:18] Most of those stories are about, you know, tenants. Who've not experienced a good service. The repairs have been done to them but their problems have been addressed. They feel. And the phrase institutional indifference is being bandied about a little bit. They feel like their landlord is not actually interested in the services they deliver.

[00:10:33] So that's, three really tough agendas, I think for organizations to be grappling with. I think you were set by government for the last 10 years has been, how would you build homes with very little grant and the sector locally developed across subsea model, moving into sales activity, more shared ownership, more Amway sale, more commercial activities to try and provide that cross subsidy.

[00:10:57] You're still being sent that question. I, you know, the quantum of grand per unit is not going up massively, even if the level of grantees you move around. Um, but at the same time, the sector was being asked to, to spend and will need to spend significantly more on its existing socking. And I think we rehearsed that a bit last time.

[00:11:14] What's really interesting for us as the regulators, we got everyone's financial forecast in June of this year, and we're using those to look at the individual viability of all providers, but we also look at them all together and say, well, if, if the, if the entire central have executive with one organization, what would his financial position look like?

[00:11:32] And how has that changed year on year? And what's really interesting. Is there. this set of returns compared to the ones we got during the pandemic is ambitions around supplier backup to where they were pre pandemic. So the sector as a whole is forecasting to deliver 60, 70, almost 80,000 units a year.

[00:11:50] For the next five years, that's a pretty goofy supply ambition. You know, she's up there with the highest ever world pre pandemic at the same time, it's forecasting to spend significantly more on ethically listing stock. And a lot of that is around decent homes, building safety and getting to EPCC for, for stock profile.

[00:12:10] So not yet putting the reflecting the full zero carbon spending, but also. But also reflects significant investment in the existing stock. And, you know, we, we know that a number of organizations that actually knew probably weren't spending as much in our stock as we should have been previously. So there is nothing there with a real sense that, that stock investment figure number is going to move around quite a lot, but probably only one direction over the next few years as people work through what they need to spend on.

[00:12:37] On their stock. the consequences of that inevitably is that margins are being squeezed. So you can't make, spend a lot money and still be making as much money as you were previously. So margins are coming down, operating margins are coming down, interest interests are coming down. And also, I think, interestingly, When these forecasts were put together, we were seeing less at right sale assumptions.

[00:13:01] So people are telling us we're not going to make much money out of selling properties, building properties, and selling them as we were previously. Now there's some, I think there was some sense that that is because rating agencies don't like lots of sales activity in business plans. And therefore, if you want to retain your single a or AA credit rating with Moody's and S and P you can't have a plan that's overexposed to sales activities, where people are scaling back the outright sale activity.

[00:13:29] That means the way all of those numbers balance out. If people are having to borrow more, and obviously at the moment, you can borrow all in very cheaply for the 2% all in money for 30 years from the capital markets, you can borrow very cheaply, find it 10 years from the banking markets. Of course, the noises at the moment are that the interest rates aren't going to hold.

[00:13:50] So perhaps some of those assumptions people are making around, um, being able to borrow very cheap. We'll begin to the, we're not going to go back to 5% interest rates anytime [00:14:00] soon. I don't think, but we're poor 0.1 on base. You know, you can say it being 0.5, 1% by the end of next year. So borrowing costs are going to go up, but at the moment, cheap borrowing is how this whole plan, this whole plan stacks up.

[00:14:11] And I think that does very much point to, effect. There's going to have to be on top of his game when it comes to risk management. So when you think of. We haven't, we haven't had to worry about people going bust recently, but I think as a sector develop more, build more, deliver, better quality services to tenants and, taken all that development risk.

[00:14:31] That is that, is a risky, a business proposition. And I think that is right. That is a good thing from the factors, point of view about trends deliver on all these really important to agendas, but for individual organizations, that's going to lead to some quite difficult decisions. And one of the things we've been saying, and it's highlighted in the sector risk profile is that's going to involve housing associations and local authorities and others making some difficult trade-off.

[00:14:55] They're not going to be able to deliver on all the agendas that they would like to build as many homes as they want. They're not gonna be able to get their stock repaired as quickly as they want and not live with. Cause you know, But they're going to have to make some conscious trade and they're gonna need to talk about that in a really sensible and sensitive and intelligent way with our stakeholders, including their tenants, their funders, their sort of strategic partners with the regulator, with home, Finland, whoever, and one of our criticisms of the sector over the years has been as shied away from those difficult conversations.

[00:15:23] And it's trying to just keep everybody happy. And I think the more people do that, the more there's going to be problems subsequently because you are going to let people down. I'm not sure whether there'll be an up-front and the same. We're not going to deliver those number of homes or we're not going to, you know, it's gonna take us 10 years to get to EPCC.

[00:15:39] We're not going to do it in five or whatever, whatever the trade-off is. You're having to make talking about that intelligently and talking to your tenants about it is really important. I think more so than ever. And I think we've got a really interesting test of that coming up this year. So. Thanks Ron.

[00:15:55] Today, we're going to get the September RPI figure. Also a CPI figure, which will be the [00:16:00] benchmark for next year's rent increases and all the forecast. That's going to be quite a chunky number. And if you put 1% on top of a champion and be an even junkie number, so you're going to be asked, potentially asking tenants to pay maybe 5% more rent next year than they are this year.

[00:16:16] At a time when we've said UC credit uplift removed and utility bills are significantly increased. So this is going to be quite difficult conversation with tenants, and we know that lots of landlords are worrying about how they're going to do that, but they're also worrying about the fact, their experience of their own, um, cost inflation.

[00:16:36] So how much they're having to pay for materials. How much I have to pay for skilled labor, how much having to pay for care and support staff, lots of places across the business are experiencing quite high inflation because of what's going on in the wider economy. So I think what we've been hearing from lots of organizations is we, can't not put our answer with actually what we have to put our answer by the full amount, but given the cost inflation where we're experiencing an normalization, if we don't do that, we don't put our rents up.

[00:17:04] Key objectives we want to deliver and people want us to deliver are not going to be delivered if we, if we don't put the rent increase through. And I think this is a really good example of where you're going to have to make a difficult decision, and you're not going to keep everybody happy, whatever you do with rent.

[00:17:18] So if you put rent slipped by. The full amount, you're going to have tenants and people saying, actually it's an impossible, you know, all your, the pressures on our household budget. How can you expect us to pay more? But if you don't and then you don't, you're not delivering the homes or you're not doing the services and you're not doing the repairs because you can't afford it.

[00:17:34] That's all. So. It's going to come back and bite you. So this is a really good early test case. I think your weather sector needs to talk to its stakeholders, honestly, and transparently and talk about some of the trade-off and bring people with them on whatever the journey is. They go on in terms of how they make that efficient.

[00:17:48] The very, very worst thing I think would be lots of handling. For the next six months and saying, this is all terrible. And then just putting your rents up anyway. I think you've got to talk to people and take them on that journey. [00:18:00] And if you're going to put your rental by the filament, you need to think about how you communicate that.

[00:18:03] And I know a lot of organizations are thinking about putting more money into hardship funds. Do you find ways to mitigate it where it's particularly difficult for fuel tenants to, to afford those rents and how do you do. That is neither a really tough, either really tough decision. It also speaks to one of the other concerns we have with the regulator.

[00:18:23] And I think this is coming up more and more. It's just about resilience in the sector. So we talk a lot about financial resilience and your stress testing and all of that stuff. But I'm talking here more about organizational personal resilience. So. I think we are aware it's been a very, very tough 18 months running a housing association or being working for housing association.

[00:18:43] It's not been an easy 18 months, frankly. The next six to 12 months don't look any easier, you know, given what's happening in the wider economy, given how difficult, fees and we might have, with the pandemic and was filled with everything else over the, over the winter and the difficulty about getting skilled access to skilled labor and materials, that's going to be definitely difficult.

[00:19:03] Speaking to a lot of chief execs and senior, senior executive board members, either for themselves or for their colleagues, people are worried about how long can people keep going with this and how organizations look after their staff and try and protect them. This is also going to be really crucial, I think, but that's gonna be really difficult when, when there's so much to do and the agendas are so pressing, but finding that space to invest in the resilience of your staff and your organization is I think going to be, to be really, really important.

[00:19:32] and then I think finally the last bit of, from the sector risk profile that I really want to highlight here. And again, the point that we've made previously and I think is becoming increasingly important is the quality of information about all the challenges your organization is facing and how you get your barrier systems to talk to each other.

[00:19:50] So one of the things that's become apparent as we did I over the past year, is that the quality of stock information. Perhaps where you would want it to be for such asset focused businesses with such a pressing need to invest in stock people to understand the knowledge of their own stock. Isn't, isn't always where people would want it to be.

[00:20:09] And that's before you link into, well, what do we know about our stock and what we know about our tenants and how do we get those systems talk to each other and leverage real insight into what's going on within our business and with our customers. And I think lots of people are really struggling. With that.

[00:20:22] And that's not an easy fix. You know, lots of organizations have multiple systems pretty well. There's been a history of mergers and organizations. You might have three heavy management systems and two stocks, you stock systems and two finance systems, which is basically impossible. But this year, how they're implementing an integrated system is also frightening and keeps getting put off.

[00:20:42] But I think this is an issue that people are going to have to grapple with. And it's coming out actually in some of the ITB coverage where people have been saying, well, how do we know whether we've got tenants in that position or stock in that condition? How do we know what we don't know about our stock in our tenants?

[00:20:58] And when we look at our current information, Can we leverage it from that? Or are there other ways we can do that? Other thing that we can do to get to really understand what's going on within, within our businesses. So I think that is a really difficult issue, but I think if people aren't grappling that we've seen over the past few months, that we'll come back and we'll hurt the sector, frankly, because some of the reputational hits or sector.

[00:21:23] If ITV news or Twitter or whoever is the first person to spot these really significant problems going on in stock and the organization is kind of on the back foot all the time. And I completely get that. That's not a quick fix. That's really hard. You cannot do that tomorrow, but it feels to me that's a really important, really important piece within that.

[00:21:43] given all those challenges, everything's on the plate of having associations. I just want to say a little bit about how some of that is playing out actually with government. So I think government is at the moment broadly sympathetic, but one of the narrative that is beginning to gain traction actually is the housing association sector has got so much on its plate.

[00:22:04] The government can't rely on it to deliver the new homes in the future. So I think there is increasing political interest in the new entrance, the for-profit organizations that are coming into the sector and, you know, the people who are already here like Sage and LNG and MNJ, um, and we've got others who are either just registered or registering publicly registering organizations.

[00:22:25] So we don't the Cathy. And so we've got British land, you know, there there's quite a lot. interesting. There's lots of companies beating the passwords or we haven't gone public yet, who are talking to us. I want it to come into the sector. So there was a really interest from commercial for-profit organizations to come into the sector.

[00:22:41] And one of the questions I think for housing associations is how much you want to accommodate that and say, there's just so much to do here. Let's all put our elbows to the wheel and try and. Oh, how much do you feel that they are a direct competitor and a threat to the secretary? And there's actually a lot of anecdotal evidence.

[00:23:02] There's more people coming bidding for one of the things, what happens is one of the six prices go up. So actually you don't get more homes being even there's more capital coming into the sector to build more homes. You don't get more homefield because what's happening is it's feeding through, into land plan, cost inflation.

[00:23:15] So I think there was some really interesting ways about how all the. questions for Heinz England and the GLA and for government. But some of those I think are for the sector as well, about, about how, how you operate in that environment, where you'd have some commercial competition that you've not perhaps got your used to previously, that is your organization fit enough and ready enough to deal with some of those, some of those challenges.

[00:23:36] So I think that those are really big set of kind of challenges for the sector. And I'll just quickly finish off if that's okay, Chris, and then we'll open it up to questions. We are the regulator. We are still very much an economic regulator. So we are, when we're thinking about the world, you know, we've got a 180 staff, 170 of them are economic regulators.

[00:23:57] A lot of the conversation recently, obviously with consumer regulation and the will to come as we get proactive consumer regulation regime. So it's not here yet today. It's probably going to be another year or two before we have a kind of proactive consumer regulation regime. But already, I think that's affecting the dialogue and the narrative within the sector.

[00:24:14] So as well as all of the challenges I've just been talking about, there is really the big challenge, right? How do you engage with your existing tenants? How would you talk them about what it is they want from their landlord and how you have that as a sensible dialogue? And I think most tenants are not, then they're definitely not cheaper than they're very realistic about what they want and the landlord.

[00:24:30] They don't want gold-plated taps, but they do want a good quality repair service. They want to be listened to when they complain. When something goes wrong and they can play and they want the comeback be dealt with swiftly and they want to be treated with dignity and respect. Some of this is really relatively straightforward stuff, but some organizations are clearly struggling with it and how they engage with their tenants.

[00:24:49] and I think there was gonna be much more focus, obviously from the regulator over the next two or three years on that consumer ranking on that consumer experience piece. How do you listen to your customers? How do you engage with them? How'd you deliver a good service to them and how do you treat them with respect.

[00:25:02] Those are all questions. But I think it speaks to the culture of an organization and really linking back to that resilience piece, I think unhappy and stressed employees. Well deliver a poor quality service to your customers, Dan, and you feel empowered and feel like they're doing a really worthwhile and important job.

[00:25:20] So things hopefully catch some really big challenges for organizations. Those are things I expect the regulators to be talking to you about an idea, but I'm going to, I've taught for 25 minutes. I'm going to stop there and I'm really happy to open out to the questions, thoughts and comments.

Christopher Wandel: Okay, thanks a lot, Jonathan.

[00:25:36] We really appreciate that. So we're now open for questions. Please do keep them coming in. Also, if you'd like to join us, then I can also let you join the actual webinars. So let me know, put your hand up if you'd like to, to join it and I will make you a panelist and you can come and actually have a face-to-face chat.

[00:25:54] So. First question here is from Mike Kirk thank you for your frank opening statements on the current political focus on social housing, which I would characterize as benign indifference, but happy to engage on issues that align with their political imperatives. How do we best engage on leveling up when, despite the name change of the department, this is little more than a slogan rather than a well-thought-out strategy.

Jonathan Walters: Yeah, I think this is, this is really, really interesting because none of us quite know how this is going to play out. So one reading of what's happened is we're going back to, and this is will show my age here. We're going back to the days of John Prescott and the OT PM, um, which was a kind of predecessor of, of what is now de luck and what was previously MH, CLG, where obviously housing communities.

[00:26:45] But with a kind of wider economic regeneration remit. Um, and what we don't really know, I think is where the leveling up is going to be a long-term considered piece. And the initiative that always comes to my mind, partly because I was involved in it at the time, it was the kind of Pathfinder initiative that the new labor administration had, where nine week housing markets in the north and Midlands, and looked at some quite radical interventions in those housing markets to try and address both the housing and the economic.

[00:27:14] Possession of those regions. And I don't know where any of that was built on the back of really serious academic research at the university of Birmingham and elsewhere. What I don't know is whether we've got a kind of beginning of that process that will lead to those kinds of really considered well thought through policy initiatives or whether what we've got is chucking a load of money, marginal red wall constituencies before the next election to get elected.

[00:27:36] And this is me speaking very frankly, and very demonically rather than, um, than a considered perspective. But, but, but I think we don't yet know what that is. I mean, given that you've got the other Brian and Michael Govan, Andy Haldane, for me, that speaks to the former rather than the latter. But what we don't know is the able, the influence of the treasury will be what the influence of number 10 will be, what the political imperative will be.

[00:28:00] The, I mean, the keys, I think so often when you're talking to conservatives ministers, frankly, are around home ownership. That is the thing that tickles a lot of their button. It takes a lot of their buttons. Yeah, I think, well, a lot of the conservative party analysis, why they, it works well in red war constituencies.

[00:28:19] Actually, if you look at it is because they think home ownership with relatively more affordable in those areas. So actually what you were seeing within apart where the national picture was homeownership falling and not those brick wall constituencies, you thought rates of home ownership increasing because you only needed two people on a, a reasonable medium salary.

[00:28:36] And they could, they had, had raised my aspirations to get on the property ladder, whereas obviously in London and the same thing. That you have to be earning an awful lot of money or have external financial help to get on the property ladder. And I think they part leveling up is extending the offer of home ownership more broadly across the north and Midlands, as well as addressing some of the economic factors.

[00:28:57] So I think. And when it should be still the currency in the language that the government deals with and is really interesting. There are, these really are straws in the wind, but Michael gold has been talking publicly about needing to build more social housing. And, and what we don't quite know is how that's going to play out, play out for him.

[00:29:12] So I think keep, keep talking about social housing as well, but I think always remember to talk to the government at home initiative. Okay.

[00:29:19] Christopher Wandel: Thank you. Thank you, Jonathan. And thank you, Mike, for your question. Moving on to another question now, David Brown, another aspect of Gove’s brief. Was the union. Do you think this means money prioritized outside of England?

[00:29:35] Jonathan Walters: That's not the impression I've got because you know, one of the great beef in the north of England has been relatively speaking Scotland, Northern Ireland, and Wales get significantly more under the Barnet formula than, than depressed regions in England. so I'm not sure that just chucking money at the situation.

[00:29:55] Is the issue. And, I am no expert on, on politics and Scotland, Wales and Northern Ireland, but it feels to me that it isn't all just about money and previous governments have tried spending more in other areas, not necessarily with, with a great deal of success. In the sense I get actually leveling up as an English agenda and the union is, it's more about trying to hold Scotland tight and close.

[00:30:19] Christopher Wandel: Okay. That makes sense. Thank you. So here's one from Rob Shelton. Given the focus on the environment and sustainability, is there any appetite from the regulator to support, to standardize set of metrics, to measure the sustainability of new houses?

[00:30:39] Jonathan Walters: So I don't think it's an area where there will be regulatory metrics. One of the things we are very keen to encourage them. We're encouraging where we see it happening or where groups of organizations are coming together to work on work on these issues, whether that's around metrics. And we've seen that actually with the SG reporting metrics.

[00:30:56] In fact, they've actually been quite good at getting yourself together to come up with metrics, report ESG for lending purposes. And I think there's definitely an initiative there that can be built on into. In terms of other, other metrics, one of them just going slightly wider than that, the question that would ask one of our just slight worries at the moment actually is when it comes to their carbon and the route map and how you get made to include civil digesting.

[00:31:20] What was announced yesterday is one of the problems up till now has being governments kind of being sat there saying to the sector, well, let's see what you've come up with. you know, you could go off and try a few things and come back and tell us what works. And the second is kind of exactly the thing to get me.

[00:31:33] Will you give us a strategic lead about what it is you want? What are the technologies you want the back and we'll, we'll follow your strategic lead. There's been a bit of a standoff for the past 18 months. It's definitely felt like haven't quite worked out with it. Yesterday's announcement. We'll, we'll kind of crack that I suspect not.

[00:31:49] but I think the dialogue is not quite happening where it's misfiring at the moment between the sector and government about. The choreography on their own carbon. And they play that in the social housing sector. There's anxiety

[00:32:02] Christopher Wandel: levels over the technology that needs to be used and the investment we're running out of money.

[00:32:08] Keep, if we invest in technology, it needs to be replaced every five years. This is what I'm hearing. Then we're going to end up drawing so that there is, there's a very real anxiety there. Do you think the government will budge on that and perhaps sort of do some sort of a program where they can back it up the surgeon tech.

[00:32:26] Jonathan Walters: So, I mean, I think this is one of the things that's gonna be kicking around in the spending review. So I'm hoping after the spending here, we might get a bit more, a bit more clarity on this. the impression that I get, and I think I've said this before here, but, I think the government's going to use and look sector and use it to drive whatever the right technology is before it really tries to roll it out to homeowners.

[00:32:48] And also crucially, I think to build the capacity of a supply chain so that the unit costs comes down, So that when they're asking homeowners to pay for this tech and this technology that, you know, it's a more acceptable proposition. So one of the conversations I was involved in yesterday popped to this, the problem was that if it goes wrong, you're basically asking the poorest members of society to, to, you know, experiment with a load of kit that we don't know whether it works properly.

[00:33:16] And they're the ones that are least able to pay for higher how pair pay the higher energy costs if it doesn't work for them. So I think there's a, there's a real, the real challenge there. And I think getting that dialogue right is, is proving quite tricky.

[00:33:30] Christopher Wandel: Thank you, Jonathan, please keep your questions coming in Jonathan.

[00:33:33] I was just looking at the paper myself, and one of the key bullet points you've highlighted is the current macro economic climate is uncertain and boards will need to manage their access to labor skills and materials, particularly as these effects, service attends and new developments. That how, how is employed meant to, to manage labor and skills and materials in this kind of.

[00:33:58] Jonathan Walters: So, I mean, the first thing always is information. So knowing where you are is a really cool. To start. So hopefully this is on, this is on boards and click the exact teams agendas. it's one of the things that's really easy to say. It's really hard to do in labor markets. And we can, we've been hearing for six months or more of, you know, typically in the sub-market, you know, subcontracting well, People just, just leaving sites and moving on.

[00:34:21] We're hearing about HS too, just sucking an awful lot of skilled labor from other parts of the country. Similarly was increasingly pointed in some of that. So then there were a lot of challenges. A lot of this will turn clear that whether you've got your own DLO or not, and how much you've outsourced it.

[00:34:41] I think a lot of it was. But people that have got fixed price contracts with companies. I think one of the real challenges is that the real danger of everyone is held those fixed price contracts. Those companies will not survive, but clearly boards don't want to just sign blank checks and pay for unnecessary cost increases.

[00:34:59] I think having, having proper and, you know, proper client managing your clients of your sub-contractors, I think is incredibly important. But this is not easy. I think one of the things you're back to this kind of conversations point, if you're experiencing those difficulties, accessing supplies and labor, you need to be talking to people who are going to be affected by it.

[00:35:19] you know, and talking to your tenants and explaining why things are gonna take, it's going to take longer and why it's going to be difficult. And I, I, I feel. Over the course of the winter, the sector is going to get more negative press coverage because it is going to struggle to deliver a lot of these, a lot of the repair.

[00:35:38] And there is still quite a backlog of repairs to catch up with from various lockdowns and, you know, plan works programs and, you know, replacements are key components and so forth are far behind where they would have been. I think some of this is about understanding where you are, it's about reputation management and some of those back clienting, you know, your sub-contractors, but ultimately you've got a limited budget.

[00:36:00] You can't just be held to ransom by other, so it's one of those where there's not an easy question. I think our plea is that, you know, you know where you are and you talk intelligently to your stakeholders about.

[00:36:13] Christopher Wandel: Thank you. Thank you for that clarification. Very, very helpful. One here from Mike Anderson. Thanks for the interesting remarks. My question was regarding the point in rent setting in the sector profile. Are there any plans to look at how the impact is on supported housing providers as the current legislation seems not to consider us and instead treat us like a general needs housing

Jonathan Walters: association. Yeah. Space. I mean, I think rents generally is difficult for government, but I think supported housing is really difficult and people will probably know the regulator we've been having all sorts of problems with, uh, particular models of support is having probation. particularly in the exempt school is having spatial specialized support is everything space.

[00:37:00] And then you've got the kind of more general support is housing. A lot of housing associations still provide where there is a degree of uplift. No, the charge 10% more for supportive housing than you can for general needs, but it is, it is quite quite limited. this is where I get to compare a little bit because the rents that we set are actually set for us by government.

[00:37:21] So we don't, we don't get to choose what the rent settlement is. All the rent increase with that. So that's a government decision. Directly to us. And then we ensure it happens through regulations. there is an awful lot of conversations going on in government at the moment about what the post 2025 rent settlement looks like.

[00:37:39] So what, so at the moment, we're on CPI, plus one till 2025, following the four years of rent cuts. The real focus on government at the moment is what does a long-term sustainable rent settlement look like after 2025? And, um, Supported housing plays into that levels of service charges play in to that. as those just general needs rent levels.

[00:38:05] The government, I think it's fair to say it was really badly scarred. And I don't know if you remember two or three longer than that three or four years ago now they infused the local handling allowance. They stole, it said they were getting fused to local housing allowance into social rented properties on the assumption that will most social rents must be below the local housing allowance.

[00:38:23] This is just a bit of tidying up, but what it had was a really devastating impact on prices in supported housing. are above the LHI for very good reasons. What that did though, I think would really unnerve government about you know, kind of one of those classic things. You pull the lever over here and the trapdoor over there opens that you never, you never expected to happen.

[00:38:46] And what that has made government really nervous about is doing anything in the supportive housing space for fear of unintended perverse consequence. So, this is a very long winded way of saying actually you're not going to get an answer on any changes to support is having any time soon. But I do think there is a period between now and probably next year, while government is doing it.

[00:39:06] Thinking about the post 2025 renters, when to have a discussion with government about what. Might mean for support is housing, but I think being very conscious of the fact that the government is very nervous about supported housing because it's got a very recent memory of doing something it's all relatively, uncontentious, turning out to be very difficult.

[00:39:24] And actually it's a bit like council tax, reevaluation, adult, social care, even social housing when it's the government's really nervous about doing anything in those areas because they, boop there will be winners and losers to whatever they do. And the losers will make a lot of noise. And therefore often it's, it's a let sleeping dogs lie approach, which then you then build up, it prefers consequences, but on a quiet basis, rather than the big bang of that.

[00:39:47] And the dangerous and less people are having that conversation. That's what will happen. We'll just roll over where we always rent in both general needs and supported for, for years to come. So I think we have a once in a 10 year opportunity to have that conversation over the next year with done.

[00:40:02] Christopher Wandel: Thank you very much, Jonathan, again, very substantial.

We really appreciate that response. Certainly not probably the answer one to hear because you know, we have a future framework. so here's one from Mike Kirk, How do you think that the sector can best approach? True. Modern and methods of construction. Now I laugh and give because what we're doing, we've talked about this over and over again, and it's been brought up quite a few times.

[00:40:28] We've actually got a whole webinar we're doing on the 2nd of November, only based on modern methods of construction. We've got Devonshire’s Neil Toner talking about contracts and other speakers, but I'll just finish his question here when there are still very real issues in terms of London. Not generally currently enabling charging of such homes by RPS and mortgage lenders.

[00:40:54] Also not currently lending on these sorts of properties. Do you sense any appetite from the government to help drive this forward?

[00:41:04] Jonathan Walters: It's a really good few glass mechanical question about MMC, which I would not be well-placed to answer, just go into your webinar instead. Um, so, so in terms of lender and then the charging, it's an issue that comes up very regularly.

[00:41:18]and we meet, we meet with the UK finance quarterly. And so this is something we talk to the lenders about regularly. It really at moment comes down to the individual risk appetite of individual lenders. I think that the question was implying. I think it's proving really hard to get a lot of credit committees over the line internally.

[00:41:41] So I think you're right. Some, some pressure from the government. I think, I think that the big role here for home England as well, I mean, it's, it's obviously a big promoter of, of modern methods of construction and it also. It doesn't do quite a lot of lending itself. And it does like, it has quite a lot of contact with lenders and funders.

[00:41:59] So I think we are all talking to them. These are independent commercial organizations that have their own risk appetite. So it's really hard to force anyone, but I think the pressure was being wrapped up behind the scenes. I know how frustrating it is because it does come up. It does come up fairly regularly over

[00:42:14] Christopher Wandel: the last year or so.

[00:42:15] How is England we're talking about. An initiative that they were championing to employ, to increase the supply chain and to bring the costs down. I've never heard a thing about that. Did that disappear or is that still bubbling? This do now.

[00:42:31] Jonathan Walters: So obviously there's been a change of. England, and I think there's been a period of sort of being with Peter Freeman coming in.

[00:42:39] I think he's been sort of conducting a bit of a strategic review of, of the organization and, you know, and just making sure he's comfortable with where it's going. So I think some things have kind of been put on hold while. They've recruited the new sheet exactly. and he's getting his feet under the table.

[00:42:55] So I think when the new chairman and chief executive kind of working through their priorities. So I would expect as, you know, as that strategic review concludes and they kind of push on that. I think you will see more from them, but I think there have definitely been a hiatus.

[00:43:10] Christopher Wandel: Thank you. I've got a question here from Nikki vines.

[00:43:12] How will the introduction of the first homes 10 year impact on the view of the risk profile of the sector?

[00:43:21] Jonathan Walters: Um, so it's a sales product, like other sales products. and if you're a provider a first time that you're taking on sales risk clearly that, that kind of planning and government support piece in this, in this picture as well.

[00:43:38] Just like more, more sales risks are given completely on necessarily the regulator. We don't have a problem with sales and I know the rating agencies. I'm waiting for a plan that is purely dependent on sales is a risky one. That's purely dependent on rent. Clearly the different ends of the spectrum. There's nothing inherently wrong with sales book, but I think it does make you a bit riskier if, if I'm completely honest,

[00:44:03] Christopher Wandel: is it this?

[00:44:04] What about shared ownership? Is that, do you put them all in the same category? It's all assailants all

[00:44:09] Jonathan Walters: risks. No, no, no, no, no. So I think that the continuum, so, you know, in terms of quality of cash flows, The very safest case for the handling benefit back rent on social rent, where you've got a retired person in there and a healthy benefits going direct to the landlord.

[00:44:22] That is a copper bottom. Isn't it. So you go through that, then you've got various iterations. As the rented product is people are more and more responsible for paying the rent themselves, different quality of caseloads. As you go through there, then I think you enter into your markets market rent products, and you're kind of into your shared ownership type sale products, which are.

[00:44:42] Yeah, which are not as risky, like could market sale. And probably first time sit somewhere between shared ownership and an outright speculative bill for sale. Okay development, but I'm one of the men from the moment we don't quite know what that market is for first homes. You know, there's, there's lots of talk about it and you kind of, if you're a regulator, are we thinking more?

[00:45:02] What's the problem going to be? And it's going to be a problem five years down the line with resales. And is there gonna be a resale issue a bit like we've had with some of the help to buy. Loans approved problematic. Um, when people have come to come to resale or they've had to start paying the full interest cost and not the, not just the subsidized bit.

[00:45:22] So, so you can, it's taking them, perhaps some of those risks further down the track, and that's just something to keep an eye on. But in terms of going out and building a flight with that planning commission, getting planning and building a home, it's not at that end of the spectrum. I don't think.

[00:45:35] Christopher Wandel: Okay, thank you very much.

[00:45:36] keep the questions coming. We'll you seem to have run drive questions for the moment. if anyone has any, uh, please do sort of here we go. Ones in regarding, this is my colleague. Ricky burns regarding net to zero. Again, do you think this has shifted the focus away from the main priority, which is to solve the housing crisis and address crisis and address homelessness?

[00:46:02] Jonathan Walters: So I think a combination of the green paper, white paper and zero carbon has definitely shifted back the focus of a lot of boards away from, from new supply. And, you know, the, the, the, the, the, and there is a debate going on in the sector about how we primarily about our existing stock, or are we primarily.

[00:46:22] Building new homes or, or what, what's the mix cause for no one for no one, it will be Walden, all the other. It'll always be a combination of both, but where does the center of gravity of this organization lie? And I think for the past 10 years, most large organizations and most developing organizations that has been on the new supply piece.

[00:46:40] And I think some of that lack of focus on the existing stock is now coming back. to impact organization. So even putting aside zero carbon, I think at the end of the last period. So in 2010, when everyone was constantly with decent homes, I think a lot of organizations took their eye off the ball about their existing stock.

[00:46:59] If I'm completely honest and probably the regulators as well, if I'm being. Being honest as well. And the focus was about new supply. And how do you build more homes with less grant? And, and that's been the problem everyone's been trying to solve. I think that now means we have got a challenge about the quality of existing stop, the call here, information about existing stock and a kind of related point about the quality of services to tenants, which is bringing board focus back more to, to that piece.

[00:47:23] I think that is a more balanced place. But I think politically the risk is for organizations is, is government is really interested in supply. and at some point, you know that, that will come back as a big issue for the sector and where government generally tends to go with this is, um, about value for money.

[00:47:44] So it was often play that actually, as government saying to the sector, you should be more efficient. you should be more lean. You should be building more homes. You should be taking costs out of your business, or it goes to where it is a moment, I think, which is, are there new entrance? We can come in and fill the supply piece that traditional housing association sector is not filling.

[00:48:02] Do we need to go elsewhere for our new homes is a kind of government question at the moment, which I think is a new threat. That's not really been there before for, for housing associations. so you're going to put you in a command

[00:48:16] Christopher Wandel: on the topic of new. We've seen local authorities take housing programs back in house again.

[00:48:25] So they usually, they would ship them off to an Elmo or have a company owned by a local authority, or just use a housing association in a partnership. But now, because the spending. Has been, well, it was lifted. Now you can basically, we are seeing a shift in a trend of, uh, the housing associations being saddled with their stock and having these sort of challenges.

[00:48:48] Whereas if you just start developing again, you can do it completely fresh. Is that something that you're also thinking.

[00:48:56] Jonathan Walters: I think we are the one caveat or one, but then some level authorities are struggling with delivery. So they've got a lot of the same challenges. So what we have seen in a few places that actually slowed down the delivery of homes, because as a local authority kind of skills up and develops the other conversation we've been having a lot with local authorities recently is.

[00:49:17] Although the Dorian cap was lifted given zero carbon, the pressures on the HRA or massive. and actually a lot of organizations are now saying we're not, we're not sure we can both develop and meet the kind of Vero carbon agenda within, within our HRA. So we either stop developing and all we need to figure out.

[00:49:37] Yeah, you money from government to help us meet the zero carbon spent. So I think the impression I've gotten the last few weeks, even if the local authorities are now kind of going, ah, this isn't going to be easy as we thought it was going to. Okay, thank you.

[00:49:51] Christopher Wandel: Thank you. That's very, very helpful. I've got another question here from Helen Reddington.

[00:49:56] What are your views on the new model of shared ownership, specifically unsecured lending to buy lower shares and take up of rights to share ownership and potential. Lots of affordable renters.

[00:50:08] Jonathan Walters: Yes. I mean, I mean, obviously, you know, it's a government policy, so that's, you know, the government thought about that and, you know they think it's the right thing to do.

[00:50:16] I mean, clearly what we've been flagging to landlords is even their roles and responsibilities here. there is definitely, I think a danger of tenants, as you say, raising money on secure. So a lot of the retail banks on interested in providing mortgages on a 10% share and even less kind of constantly advancing new money if it's 1% increment or whatever.

[00:50:41] So. Since, I guess the unsecured, it might be friends and family, but it might not be, it might be slightly more alternative lending. Should we put it like that? you know, and then you put the first 10 years you might get away with, but longer term, I think that is potentially creating unsustainable tendencies.

[00:50:59] So I think that access piece about who you get to do, who's eligible for it, I think is really, really important and really difficult. So you can definitely see a risk. Down the track for landlords here where you've sold 10% or 11%, 15% step seven in 10 years time, the occupant is really struggling to maintain the property and is beginning to feel that they will miss sold.

[00:51:24] So that's why I think being really clear. With people as they buy these properties, the remits and the risks they're taking on, even if those risks are 10 years off away, I think doing that is really important because yeah, I think we can all see how this might play out in a not very good way.

[00:51:41] Christopher Wandel: So high risk, I think so.

[00:51:45] I know people have taken credit cards to pay for their shared ownership loans. It's that's never going to be good with. Well does it right? My Kirk, again, my Jonathan, I echo your comments on the weight of focus generally within the sector. One of the issues that the sector has to address is how do we truly offer customers / residents?

[00:52:09] The same experience in a home that is. 60 year old, 60 years old versus one that is six months old. So both parts are important, but the weight of existing versus new supply C 2000 PA needs to clearly understand what needs to be clearly understood by the board and importantly, by our customers and residents.

[00:52:33] Jonathan Walters: Yeah. And again, sticking with the customers and residents that often involves thinking about how you talk to those, all those people. So we've been talking a lot of, a lot of discussion with, with residents, really going to think about being a proactive consumer regulator and one of the points I'm always very keen to stress tt's a false dichotomy between existing residents and future residents. And when you talk to tenants and residents, a lot of them will get, they want more, they want more affordable hands and they want more social housing. If not that they're against new development. I think it's when they feel that that new development is at the expense of a good quality service to them.

[00:53:12] So I think that really does speak to how. The open and frank dialogue with them. And sometimes you'll be given the message if they don't want to hear, but, but the impression I get is most people would rather be treated as adults and being told, you know, the truth. If you'd like a little more about the ongoing is treats rather than trying to pretend that everything is rosy in the garden.

[00:53:31] And when you get things wrong, holding your hand up and saying, you've got things wrong, there are things that are making this more difficult. I think so. One of the things we've seen around some of the, the ITV news coverage and, and a bit before that actually is, is the role of no win, no fee lawyers, hearing disrepair claims.

[00:53:49] I think we have seen When tenants have felt more remote from their landlord, a greater willingness to go down those sorts of routes and that, and that leads to some really perverse consequences. You know, the lawyers saying, don't give you landlord access to the property so that they can sort the issue out so that you can then Susan subsequently.

[00:54:09] And they're looking for big claims and taking money into the system. So that's why I think if you're not, if you're not owning that narrative, others will come in and fill it for you. Um, and, um, I think for some organizations talking to existing customers is kind of seen in a bit of a bit of an add-on.

[00:54:25] You know, there's a bit of a sort of, it's all about face painting and drafty church halls, types of products, rather than a kind of more modern customer engagement piece. And I think the better organizations are more in that space.

[00:54:37] Christopher Wandel: Thank you very much. Get really great answers here. And thank you, Mike, for your questions.

[00:54:42] Let's go to another one here where we're coming to the, to 11 o'clock, but I'll just finish with David Brown. what are the regulator's thoughts on set? Differing right. Levels based on actual costs in use of a different property performance. I E if it's cheaper to run, should the rent

[00:55:01] Jonathan Walters: be higher? Okay. so I suppose there's two sides to that.

[00:55:06] One is the fact something you want to do within your existing. Um, rent constraints. I think that obviously you're entitled to do that and you'll need to make decisions locally on the ground as to whether you want to do that. If what you mean is should the government change the rent settlement so that you were allowed to charge higher rents or more energy efficient homes, which I know is something that's come up in a number of places.

[00:55:29] I mean, that's definitely an idea that government have been thinking about. I think the general view is. There were a number of reasons why governments not very keen to go there. some of that's about simplicity. so some of that is about you know, it's just easier to explain to tenants and the landlord will, what a simple rent settlement looks like.

[00:55:53] Some of it is sometimes fair. in theory, how, you know, maybe, maybe a better insulation and so on, but, but residents, but unless residents are brought into believe in using the technology in the home that allows them to run it more cheaply, then you can end up penalizing residents by putting in technology.

[00:56:12] They didn't want the home in a way they didn't want, and then charging them a higher rent for it when they never asked for it in the first place can feel like quite a difficult narrative to type. So I don't think it's simply about the rent level. I think it's about the package of. you know, engaging with residents and talking to them and how the whole thing fits together.

[00:56:31] So I would be surprised if government went down for, for me that, that, that sort of route, just as in the past, it has looked at, should you be allowed to charge higher rents? If you develop more homes than should rent, they will be linked to the amount of development carried out by an organization. And again, those have always got knocked out in the end, those proposals.

[00:56:49] Fears around equity and simplicity. I spent this will end up in the same space. If it's something you want to do locally, then I think that's a slightly different question, but you still have to say within the overall rent remit for the property. So if it's not easy to do on the ground without the government changing regularly.

[00:57:07] Christopher Wandel: Well I mean, I think it's time to wrap up there. Thank you everyone for staying. And certainly thank you, Jonathan. it was, it was really great to have you on, we had such a great session with boss champ when you attended, and we really do hope that you keep attending our sessions and, you know, hopefully when the next, uh, press release or sector profile or whatever happens next, what we really hope you join us.

Jonathan Walters: Yeah, very happy. Thank you very much for these really interesting questions.

[00:57:34] Christopher Wandel: Absolutely. Everyone here, we are doing a modern methods of construction webinar in 3rd of November. So please look out for that on our website. We're going to send you the email as soon as we get all the speakers confirmed as well.

So look out for that. I'm going to wish everyone a really great productive week and yes, thank you once again and

[00:57:54]Jonathan Walters: goodbye. Thank you. Bye.

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