by Andrew Heywood

In the following blog post, Andrew Heywood discusses his in-depth article Investing in Social Housing that has just been placed on the THFC website and which you can also download by clicking on the title here: “Investing in Social Housing – A Guide to the Development of the Affordable Housing Sector”.

At a point where housing associations, local authorities and their funders are all watching anxiously to see where Eric Pickles will take the affordable housing sector over the next five years it may seem odd to post an article for investors and others that takes a retrospective look at the development of mix-funded social housing over the past quarter century.

In fact THFC have understood that while history does not repeat itself, planning successfully for the future requires an informed perspective on the past and that a cogent long view going forwards involves coming to grips with the influences that have, over a significant period shaped our present.

With institutional change to regulation on the policy agenda it is not enough simply to assert that regulation matters and that it should not be tampered with. It is necessary to demonstrate, as Investing in Social Housing aims to do, that regulation has been key to maintaining the credit quality of the housing association sector since the Housing Act 1988 gave the Housing Corporation new powers. My article argues that the transition from the Corporation to the TSA in 2008 was successful because the key focus of regulation remained that of ensuring sound governance and financial viability, as well as promoting positive outcomes for tenants. Thus we can go on to argue that institutional change (if really justified) can be pursued successfully so long as the key priorities of regulation and the resources to enforce them are maintained.

Possible reform of housing benefit provides another crucial example of the importance of understanding the past. Coming in at a cost of £17.4 billion a year it is almost inconceivable that the housing benefit bill will not be scrutinised carefully by a coalition government committed to serious cutbacks in expenditure. What is needed by the affordable housing sector is a clear understanding of how for over 20 years housing benefit has provided a secure income stream that has underpinned over £60 billion of investment from banks and crucially, the bond markets, who have taken particular comfort from current arrangements. Understanding our financial history enables us to argue convincingly that any reform proposals must maintain some key characteristics of housing benefit if new investment is not to be prejudiced or even existing lending re-priced:

• It is paid directly to the landlord thus minimising arrears and collection costs.
• It covers the whole rent payable where the tenant is eligible and is thus effectively inflation linked.

In writing Investing in Social Housing I have tried to provide the analytical overview that enables such judgements to be made in a convincing way. Through reading it you will be able to decide whether I have been successful; comments would be most welcome.

If we are to convince politicians to stretch their time horizons and to build on our achievements rather than undermine them then we must understand and value our own history. I hope that Investing in Social Housing provides the opportunity to start doing just that.

Andrew Heywood is an independent consultant specialising in Housing finance, mortgage markets, regulation, governance and Europe. He is editor of Housing Finance International and a board member of Chelmer Housing Partnership, a developing housing association.
Andrew Heywood Consulting: 01440 730218/07929512057, a.heywood53@btinternet.com

Photo: thanks to o palsoon on flickr.com (CCL)

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