by Mike Wilkins

With the sudden chill in the weather, this article* by Mike Wilkins, Chief Executive of Ducane Housing Association, from the Christmas season could be just the winter warmer we need…

The season for Christmas vintage comedy on the box has been in full swing, so it may be that I had misheard but I’m sure Hardy said to Laurel, this is another fine Pickles you have got us into, although that might have been the sherry!

If Mr Pickles is in the Maoist wing of the Coalition, and there may some evidence to that effect. He certainly seems to be putting the sector on the equivalent of a Long March in 2011.There may be some echoes of the Long March in the Coalition’s determination to move quickly and avoid the mistakes of previous administrations by making the most of their electoral ‘credit’. However we now know that history has not been kind to 20th century Communist dictatorships!

So what are the landmark issues for 2011?

The Decentralisation and Localism Bill of course, the finalising of the HCA guidance on the new grant regime, the finalising of Universal Credit- these are the obvious ones.

What might the implications of Mr Pickles’ Little Blue Book be for the work of housing professionals? What might we have to do differently to make best of the Great Leap Forward?

Local market knowledge – problem?

With the introduction of new affordable rents and re lets up to 80% of market rents it is important that development teams start with an excellent understanding of local housing markets.

What are the local factors that make any new homes attractive?

Excellent market awareness is important if new funding contracts with the HCA are heavily depend on matching homes to customers who are within striking distance of a market rent i.e. the private sector. Are our new homes going to be sufficiently attractive at this discount?

How robust is the market understanding in the varied local authority areas that larger associations work in? We have come a little unstuck on this in the past with low cost homeownership homes that we have not been able to shift as a result of falling demand. It may be the case that the market place for renters at higher rents is not the same as those we have dealt with on LCHO front.

Local authorities – opportunity?

It will become more and more important to get good ‘inside’ knowledge of how local authorities are making their decisions. With big cuts in the pipeline in local authority services, it would pay associations to have excellent formal and informal links with key local authority colleagues. The potential for helping share some of the ‘pain’ by offering for example, a service or a small amount of cash, might pay dividends, particularly if this generates opportunities for further partnership working or just a ‘feel good’ factor about ‘association X’. Important too, if nominations agreements need to be renegotiated.

Unfortunately this is time consuming and should probably extend beyond sitting on the formal liaison boards. This is a challenge to associations with a large number of local authorities to talk to.

Financial covenants – problem?

As the graph of the of capital grant over time begins to dwindle, some association’s gearing covenants may start to look a bit shaky. Gearing limits are usually set into loan documentation and have an upper limit.

A standard calculation is,

Loans divided by (Reserves and grant).

But with less grant in the equation, the gearing figure increases and may not be off- set by a bigger cashflow from higher rents.

So closer monitoring of gearing covenants is essential and some forward thinking about when any covenants start might prompt a discussion with lenders, which these days often means a re-pricing upwards by our banking friends, and so is to be avoided if possible.

Managing homes for others – opportunity?

As localism gets some traction with local authorities, the sheer scale of making this work effectively over a large number of local areas, might mean that larger associations will want to consider devolving housing management to more local, smaller associations. This is an opportunity for those who have argued that smaller associations are more linked in to the ‘community’ (I think they are right), and is therefore an opportunity not to be missed.

So smaller HA’s might want to consider talking to larger neighbours and vice versa about managing homes contracts.

Perhaps consider setting up a wholly owned commercial subsidiary to manage non charitable housing schemes where the income is remitted back to the charity via Gift Aid.

Direct labour organisations – opportunity?

With VAT increased to 20% in January, this might be is a good time to start thinking about what advantages an in house, direct labour organisation might make.

The headline advantages are:

• no VAT and
• better control over the quality of work

But setting up a DLO will require some planning and building up skills in house to manage the DLO effectively. Depending on size of your organisation, perhaps start small and build up the team. What about starting with re lets with an in house team dedicated to do re let repairs and decorations for example?

Ok so it’s not 1949 (or even 1994), but it is panto season; will it be the ‘mediocre middle’ who will find themselves at the back end of the housing pantomime horse as others start climbing up the Beanstalk? [that’s enough mangled metaphors;Ed.].

*An edited version of this article was first published in Inside Housing
Photo: from the author

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