Forbes' CIH Round Up

News

27 June, 2014

As the CIH conference draws to an end for another year, we highlight some of the main talking points from the conference.

DAY 1

CEO Welcome and Address

CIH Chief Executive Grainia Long outlined her vision for housing in the lead-up to the election in 2015 including

  • The emphasis is on 'Get Britain Building!'
  • All of the main political parties have brought forward ideas and solutions for making housing more accessible, reducing volatility in the housing market, or making housing more affordable.
  • The Conservative party - its focus is on demand side levers, such as Funding for Lending and Help to Buy.
  • The Labour party - with its pledge to build 200,000 homes per year and the creation of the Lyons Commission.

The Economy: Post Crisis

  • Nigel Wilson - Group Chief Executive - Legal & General Group Plc:
    • Again an emphasis on 'Get Britain Building!'
    • The shrinkage of bank balance sheets is down to regulatory caution and therefore the issue is the shorting in housing not the availability of lending. A lack of capital is also not the issue
    • There is a need for planning reforms to introduce more residential developments into city centre. City centres are not over-built but under-demolished and local authorities need to use the powers under CPO to deal with this issue.
    • Need to address affordability and increase the use of shared equity.
    • Improve infrastructure.
    • He believes there should be tax incentives for retirees to downsize and also need to prepare for an interest rate increase.
    • There is also a need to industrialise and institutionalise the Private Rented Sector ("PRS").
  • Andrew Sentence - Senior Economic Advisor to PWC:
    • The world's economy continues to grow despite media coverage to the contrary with Asia/Pacific region playing a large part in the rise of the global gdp. Growth is just now more subdued that in the period between 1982 to 2007
    • We need to invest in technology to create more jobs and revenues.
    • The service industry is the main input into the UK economy (professional services, business and support).
    • Unemployment is now lower that the 1980s and 1990s.
  • Steve Wilcox:
    • Housing supply is key to the UK's elongated recovery. The UK national debt is lower that the current EU average.
    • There is a lot of misleading house price data.
    • The measure of affordability needs to be based on household incomes and not individual incomes. He feels that the media does exaggerate the problems.
    • The recover of the housing market has been limited outside of London and the impact of the Help to Buy scheme has been exaggerated. The availability of low deposit mortgages is still limited which will only limit the restoration of the market.
    • The cost of renting is significantly lower than the average repayment mortgage and therefore making renting more attractive. Interest only mortgage payments provide an attractive return to PRS landlords.
    • Concentration needs to be placed on building affordable houses.

Is the private rented sector edging out social housing?

  • The PRS has been steadily growing since the 1990s and is now the second largest tenure in the UK. Attractive to under 35s, families with children and lower income households. This is true across all regions.
  • Concerns as to whether the PRS is fit for purpose. Old stock that is unlikely to meet decent homes standards. There is a lack of supply, notorious rogue landlords or accidental landlords causing inconsistent management. Also generally on 6-12 month AST's are provided giving little security of tenure to tenants. There is also a lack of regulation relating the term of a tenancy and rent increases with enforcement unlikely due to lack of funding.
  • The way forward….. simplify existing regulations and regulate letting agents. Also implement a single voluntary accreditation standard with linked incentives to landlords (e.g. training and payment of HB direct to landlords).
  • Local authorities do have enforcement powers however they are difficult to implement as tenants appear to be too afraid to come forward for fear of losing their home.

DAY 2

Day 2 saw the Housing Minister Kris Hopkins MP address the conference in his key note speech where he he praised the work of housing associations and said the government was determined to do more to increase housing supply.
Mr Hopkins had already announced that from 1 July housing associations building affordable homes using grant will receive 75 per cent of the grant up front and 25 per cent at completion. This is instead of 50 per cent up front and 50 per cent at completion. After 31 March 2015, it will go back to the 50/50 split. The funding is designed to speed up the delivery and construction of affordable homes, in the final months of the 2011 to 2015 affordable homes programme.
Mr Hopkins main focus on day 2 was on the housing supply, in particular for the vulnerable and homeless. He stated that new housing construction is at it's highest since 2008 but a lot more still needs to be done. Twice as many council houses have been built in the last 4 years, than in the previous 13.

He continued stating that he wanted social landlords to be more innovative in delivering more homes, and he explained that he wanted to challenge the industry to think differently on how to supply more high quality housing - with an emphasis on "high quality". Of course the word innovative was interesting bearing in mind the session of learning the lessons of Cosmopolitan that was to follow on Day 3 and against the current high profile of regulation which copped up in many of our conversations with clients and contacts over the 3 day event.

Homelessness was another key point of the Housing Minister's address although there has been a reduction in the number of families regarded as homeless compared to this time last year, there is still over 30,000 people living in hostels and it is still a big problem.

Homelessness is costly to the NHS and criminal justice system, and Mr Hopkins wants to make a bold effort to help the homeless. However providing purely "bricks and mortar" is not enough and wider services need to be provided to the homeless to help them in the long run and avoid them going back to living on the streets. This is why the government is increasing spending to prevent homelessness, including:

  • Offering £65m funding to councils and other organisations to help tackle homelessness.
  • £8m to the single homelessness fund - assistance for single people facing the prospect of homelessness.
  • £15m to the Fair Chance Fund - provide accommodation, education, training and employment opportunities to the most vulnerable young homeless people.
  • Approximately £41.5m will be shared between Homelessness Change and a new Platform for Life Programme. Homelessness Change - provides tailored temporary hostel accommodation for rough sleepers and also provides training and education. Platform for Life Programme - provides shared accommodation for young people at risk of being made homeless.
  • No Second Night Scheme was launched in 2011 - has already helped thousands of people off the streets.

DAY 3

Have we learned the lessons from Cosmopolitan?

A heated debate was expected from this highly anticipated session. The headlines included:-

  • A warning against having complex governance structures that are not communicated
  • How non regulated subsidiaries can cause cross defaults which can lead to a breach of banking covenants for the parent company
  • Governance and diversification - a RP's board should identify the risks at an early stage, rather than the HCA
  • The HCA's objective is to protect the assets of the RP for the benefit of the tax payers and tenants
  • The HCA is to prioritise high risk organisations based not only on their size but on how they manage their debt
  • The HCA wants RPs to look at stress testing and how they manage risk rather than just putting management plans in place and the HCA will not hesitate to downgrade where the RP is not managing risk appropriately

Eric Pickles' key note address

'We've come from the bottom… We've moved from a housing crash to a housing bubble without a dignified middle period,' Mr Pickles said.
Other key points included

  • Key focus on ground-up strategies.
  • Encouraging local authorities to build and offering bonuses for them doing so.
  • Permissions on building on major sites is up 23%.
  • Unlocking of underdeveloped sites has freed up space for 80,000 homes already, there will be a continued emphasis on this.
  • Supporting small builders as well as the larger ones with a £525m fund.
  • Right to buy and right to build to be encouraged.
  • Help to buy extended to 2020.
  • Interested to see more custom build, self-build and off-site development.

If you would like further information in relation to CIH and the topics discussed in this article please contact Lucy Worrall, Lucy Worrall or 01254 222399

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