A World of Changes Ahead for Housing Associations

The pressures on Housing Associations are palpable. There is a need for dramatic and urgent change in order to tackle the increasing strains in the sector.

The legacy of the Grenfell Tower tragedy brought about the government’s £1.6bn Building Safety Programme to deal with unsafe cladding which poses a serious risk, but there are concerns this fund will not be enough[1]. In addition to this, the coronavirus pandemic has delivered a sharp shock, presenting logistical issues for welfare and repairs as well as new legislation being introduced for rent in arrears. Added to this there is also the new ‘Green Industrial Revolution’[2], a need for digital transformation, government cuts to local authority housing provision, the need to build more houses and supporting tenants’ welfare needs. These all continue as long-term pressures.

We consider how these various stresses and influences stack up for the sector and consider strategies for dealing with them in the immediate and near-term.

Grenfell Tragedy Legacy 

Ensuring properties are safe

The tragedy of Grenfell Tower has rightly created an intense focus on the safety of Housing Association properties. To support this, Housing Associations (HAs) need to improve their processes for property data gathering and management. Only with reliable data can HAs make sound decisions on how to make their housing stock safe.

Accurate property information is essential for Housing Associations to make decisions on whether or not a property is safe for its tenants to live in – and if it isn’t, decide what to do about it: repair and upgrade or sell on.

This is likely to be a level of detail that HAs haven’t managed before; upgrades and changes to existing Housing Management Systems may be needed to capture detailed housing construction and materials information. Gathering the data, by undertaking detailed surveys of HA properties is an urgent task – which has both social and political pressure behind it. Nevertheless, these efforts have been hampered by Covid-19 social distancing requirements, so teams have recently been faced with significant logistical challenges in gathering the data.

Governance

Repairs are one way in which tenants require greater transparency from their Housing Associations, but there are also ramifications for governance. As trust is slowly built back up following the Grenfell tragedy, focus on Board accountability will become sharper and residents will become more involved in the decision making. Tactically, HAs will need to be clearer on their responsibilities as landlords; both within their organisation and how this is communicated to their customers. Tenants will demand more rights to redress perceived wrongs and HAs will need robust processes and strong compliance to prevent mistakes happening and provide evidence of best endeavours when things do go wrong.

COVID-19 Crisis

The Covid-19 crisis has hit Housing Associations internally in three key ways:

  1. Face-to-Face meetings, for welfare or repairs, are no longer possible
  2. Office staff must be able to work from home
  3. Changes in legislation[3] for rent in arrears has meant HAs have needed to urgently adapt their processes for rent collection.

Digital transformation programmes are being accelerated to meet demands in all these areas.

Online services replacing Face-to-Face interactions

With Tenancy Services and Service Delivery officers off the road, HAs are accelerating their digital transformation programmes; replacing what would usually happen face to face with self-serve apps. Reducing the risk around ‘hand offs’ between a central call desk and specialist teams has become a priority – and requires significant investment in business analysis and systems integration to make this work well. These programmes are being accelerated through lockdown.

The same is true for connecting repairs tradespeople to tenants. During the pandemic gaining access to tenants’ homes poses a contamination risk for all involved – so developing ways to reduce physical interactions have become priorities. Projects which enable tenants to send diagnostic photographs directly to tradespeople, and online services to coordinate and manage repairs visits have been accelerated. Connecting contractor and Housing Association systems is complex and often difficult, but critical to ensure these services are managed effectively.

Data protection concerns in a more connected world

Whilst such services aim to provide better customer service to tenants, Housing Associations must also be aware of, and manage, potential data privacy and security issues. Sending a picture via WhatsApp of a repair that needs to be done, exposes the tenant to data privacy issues: the tradesperson now has their personal phone number and address. How is that data managed? And what’s the situation when the tradesperson doesn’t work directly for the Housing Association? Data protection measures, such as masking the personal data sent on a WhatsApp message, creating transparent and easily applicable DP policies and ensuring compliance, all need to be in place. Business analysis needs to be carried out on the processes involved, with a view to implementing new ways of working to ensure data protection regulations are enforced. These are likely to be cross-functional and will require dedicated ‘task force’ teams. But the direction of travel is clear: the need to support GDPR legislation is only going to become more critical. Take time now to establish a firm Data Protection approach, which can be built on as systems become more of an everyday part of how tenants interact with the Housing Association.

COVID-19 will ‘stress test’ back office digital transformations

Transformation through ‘back office’ digital change projects has been underway across the last five to six years, and most HAs are either in the middle, or coming to the end of these changes.

However, as COVID-19 closed offices, the fruits of these labours are being realised and their resilience stress-tested. It is likely that gaps will appear in what is possible to be done remotely and the resilience of end to end digital processes. Proactive teams should capture these instances and build up a ‘backlog’ of fixes or projects as it is unlikely office life will resume as it was before, and these fixes will be sorely needed.

Office space

Few staff expect to return to the office five days a week, and some were already working remotely, even before COVID-19 hit.

Boards will need to decide what to do with their real estate and managers (and indeed, employees will wish to input) will decide where and how they want their teams to work. It seems clear that office space will be emphasised as being communal space, naturally suited to collaborative tasks, and with potential for greater community usage. Day-to-day operational work may cease to have a place in the office and be done at home instead. This assumes systems and policies are in place and appropriate.

Installing collaboration tools, learning to ‘over-communicate’ and finding ways to support corporate culture will be priorities as we shift from short-term crisis-planning into long term remote working. Managers will need to listen closely to their teams to understand how to translate their values and culture online.

Rent in Arrears

The Coronavirus Act 2020 brought in new legislation to ensure that tenants could not be immediately evicted if their rental payments were in arrears. This is to protect the rights of those whose income has been affected by the pandemic. “From 29 August 2020, with the exception of the most serious cases, landlords are not able to start possession proceedings unless they have given their tenants 6 months’ notice”[4]. A Shelter poll of 1,058 private renters in England conducted by YouGov estimated 442,403 of the country’s 8.7m renters – roughly 5% – were in arrears in early June[5]. This has created an increased administration workload and urgent changes to processes need to be brought into rent collection terms to be compliant with the new law. The legislation was extended for the third lockdown and will be reviewed again by the end of February 2021.

Green Industrial Revolution

The Government’s new ‘Green Industrial Revolution’ targets housing to become greener, with 600,000 heat pumps to be introduced by 2028[6]. These heat pumps are reliant on new housing being effectively insulated, allowing air to be pulled in, heated and trapped efficiently. In order to deliver against this sustainability criteria on top of all the other mandatory requirements Housing Associations will need effective portfolio management and rigorous quality assurance measures. This will in many cases mean developing new capabilities and skillsets to adapt to new needs.

Fleets for maintenance works will be impacted by the measures in place for reducing the carbon footprint of vehicles. From 2040 car and van manufacturers will not be able to produce petrol nor diesel vehicles, allowing electric vehicles to dominate the marketplace.

The big question is how to knit together a range of green initiatives to achieve Net-Zero by 2050? This is a much bigger programme of sustained change. The success of heat policy will depend on consumer preferences, technological constraints, and energy efficiency. These make the widespread de-carbonisation of heating a major challenge for Housing Associations and they will need to look for innovative ways to deliver against these targets in a cost-effective way. The National Housing Federation[7] is calling on the government to deliver a Social Housing De-carbonisation Fund to be made directly available to housing associations.

Strategies for the Future

Future Operating Model

All of this: connected services, data protection, office space, moving culture online adds up to new Future Operating Models. HA boards, typically concerned with raising finance, addressing government policy changes, responding to changing customer needs – need to review their operating models considering the Grenfell tragedy and COVID-19.

These are sudden changes, but the sector has faced this kind of sudden change before… The shift in the 1980s from Local Authorities to Housing Associations being ‘responsible’ for providing social housing, to PFI in the 1990s, and responding to the impact of the Financial Crash in 2008 through decreased grants and cuts to welfare services via ‘austerity’ measures.

So whilst the sector has proved to be remarkably adept at changing its operating models over the decades, recent events are yet another example of how short and long term challenges come together to present a challenging picture to Housing Associations. Nine Feet Tall can help design and deliver operating model changes; whether the focus is on improved service delivery, efficiency or compliance with new legislation.

One aspect that addresses all these factors and which HAs should be keen to invest in, is innovation.

Innovation

Growth is an important success criteria for Housing Associations, as demand always outstrips supply. Historically, growth has been achieved through innovations in creating new revenue streams, and latterly, mergers and acquisitions.

Since the financial crash of 2008, government grants to build houses have been progressively cut. But pressure from government on Housing Associations, to meet housing demand, remains.

Housing Associations have had to change their role and funding opportunities, in response to market and policy changes, for decades. PWC research in 2019[8] outlines three main areas of Housing Association activity: house building, regeneration and landlord services – all of which have different funding opportunities.

House building is an expensive business. Hundreds of millions of pounds need to be available to any HA in order to build at scale. Government grants such as the Affordable Homes Programme will barely scratch the surface of the investment required – a fund of £7.39bn, to supply 130,000 homes across England, over 5 years (by 2026); against a need of 250,000 new homes a year (and a backlog of years where that need hasn’t been met). Not all of the 250,000 would need to be social or affordable housing supplied by Housing Associations, but it’s easy to see the scale of the funding gap.

Raising funds through corporate bonds has increased significantly since 2008. In the last decade there have been over 140 public issues, compared to an average of one or two per year before 2008.[9] Over this period, finance departments have become even more critical in managing this aspect of Housing Association operations. But post-Grenfell, post-Covid, boards are adding an awareness of Retail models into their operations. ‘Mapping the customer journey’ isn’t only about providing more efficient services, its about identifying new revenue streams too.

Housing Associations can ‘spin off’ their repairs teams to be semi-autonomous units available to other HAs to use their services. They can expand providing care homes to private paying customers, as well as existing social and ‘top-up’ customers. There are many ways to raise revenues from house-building, within the regulations on mixed-use, mixed tenure that are in place. Housing Associations will continue to explore innovative ways of serving the immediate needs of their customers, whilst also providing for future growth and future needs.

One aspect that might not increase revenues, but which is close to the ethics and heart of Housing Associations, is picking up a role to deliver welfare services to its tenants. As local authorities’ budgets continue to be cut, piecing together welfare support is in tenants and Housing Associations interests.

What next for Housing Associations?

In recent years the housing sector has been characterised through major changes driven by merger and acquisition activity, it would have been hard to foresee the new challenges which the sector faces now. The need to ensure safety for all and the social distancing requirements caused by the pandemic have stressed the need for both continued and new digital transformations. The urgent requirement for housing and the investments it demands mean that innovation will play a huge role in the future. We would like to help get you started with a free consultation. If you think now is the time to address your Future Operating Model to succeed in the green future then we have the right team to help. Highly experienced advising and delivering change in your sector and beyond, Nine Feet Tall have worked with many major UK organisations to help them drive changes needed to execute their strategy. Contact Huw Jones to schedule a meeting: HuwJ@NineFeetTall.com

[1] https://www.bbc.co.uk/news/business-55748746

[2] https://www.theguardian.com/money/2020/nov/18/uk-green-industrial-revolution-cars-homes-boris-johnson-boilers

[3] https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities/coronavirus-covid-19-guidance-for-landlords-and-tenants

[4] https://www.gov.uk/government/publications/covid-19-and-renting-guidance-for-landlords-tenants-and-local-authorities/coronavirus-covid-19-guidance-for-landlords-and-tenants

[5] https://www.bbc.co.uk/news/uk-politics-53300242

[6] https://www.bbc.co.uk/news/science-environment-54981425

[7] https://www.housing.org.uk/our-work/climate-and-sustainability/

[8] PWC, Growth, place or people The housing association of 2022. https://www.pwc.co.uk/government-public-sector/local-government/housing-association.pdf 2017

[9] Geoff Fuller, Socially useful finance: an overview of social housing bond issues, Butterworths Journal of International Banking and Financial Law, January 2019.

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