Transcript Slide 1

Delivering the Affordable
Housing Programme
Brian Johnson
Chief Executive, Moat
Moat
• South East focus
• Mixed tenure
• Service quality
• Innovation
• Local authority relationships (60 local
authorities in 2008/9, 40 today)
• Local HomeBuy Agent for Essex,
Kent and Sussex
• Develop 600 new homes each year
• Number of properties:
Rented and other
Shared Ownership
Equity Loans
Total
13,333
4,478
2,889
20,700
Social and affordable rent
120
£000 per home
100
extra income from
affordable rent
80
conversion of existing
property to affordable
rent
capital subsidy
60
40
20
0
social rent
affordable rent
Or…
160
£000 per home
140
120
100
Revenue subsidy
Capital subsidy
80
60
40
20
0
social rent
affordable rent
Is affordable rent working?
Moat
• 168 conversions to affordable rent
• £36,000 extra ‘subsidy’ created per new home
– (£40,000 in HCA offer)
• 67% residents on benefits
• No impact on void turnaround
• Arrears no different to social rent
But
• Not doing 4 bed properties
• Capping rents at £180pw
Shared ownership
•
•
•
•
Trends – profitability, staircasing
Good product for South East
Needs tweaking to promote staircasing
We believe delivers £50,000 per home of
social value
185000
120%
180000
100%
Sales Value
175000
80%
170000
60%
165000
40%
160000
155000
20%
150000
0%
2009/10
2010/11
Sales price
2011/12
2012/13
Sales price/value appraised
Sales value/value at approval
Shared Ownership
Shared Ownership
250
140
120
100
150
80
100
60
40
50
20
0
0
2008/9
2009/10
2010/11
redemption
2011/12
staircasing
2012/13
Staircasing
Redemptions
200
This programme to 2015
• Bond funding remains buoyant
• S106 still in good supply
• Increased Moat programme size on back
of rent increase
2015 and beyond
There are two issues on financing:
Borrowing
• Most housing associations will hit one of the three borrowing constraints
in the next ten years:
1. Ability to meet interest costs (interest cover)
2. Ratio of borrowing to assets (gearing)
3. Ability to secure borrowing with assets
• The first is controllable by reducing costs
• The second and third might be relaxed to some extent by the government
guarantees but this is by no means certain
Subsidy
• Subsidised housing requires subsidy! This can be capital subsidy or
revenue subsidy (housing benefit)
• The move towards revenue subsidy makes constraints 1 and 2 above
more severe
Institutional investment?
The only attraction to institutional investors of subsidised or low end
private rented sector housing is inflation linked income
We want more
rented homes
Let’s attract
institutional
investors
CLG
It’s a “no brainer”
that housing
benefit should not
increase with
inflation
Treasury
DWP and many government MPs
Institutional investment?
160
140
120
100
Revenue subsidy
Capital subsidy
80
60
40
20
0
social rent
•
•
•
•
affordable rent
It will only happen if housing associations take on the risk of rent inflation
Should housing associations take on that risk given that it is unpredictable?
Might the loan guarantees begin to answer that?
Do the different government departments understand the inter-dependencies?
What are the opportunities
Creating subsidy from existing homes
• Rent models
• Shared ownership staircasing
Local authorities
• Local vehicles utilising Housing Associations and Local Authorities (HRA)
surpluses', LA land, RTB receipts and HA access to funds
• Operational efficiencies
Cross subsidy from other activities
• Private rented or open market sale
• Be very careful that risk is understood and really tested against what is
appropriate
• Housing Associations run to very long business cases, developers to very
short ones. Their respective funding structures reflect this.
So, what should we do?
Deliver
Influence
Relentlessly reduce costs
Coherent housing and housing benefit policies
Sustain high credit ratings
End the destruction of £75k of value
in every RTB sale
Develop and deliver better integrated products
that can ‘pop out’ subsidy when not needed
Work with the spirit of the welfare reforms but
influence the implementation
Push our understanding of all of the potential
financing options
Be very careful that we understand what risks
are appropriate – avoid self-delusion
Work much more closely with others – especially
local authorities
Conclusion
Current programme is going well for Moat
•
•
•
•
Schemes available
Affordable rent working
Shared ownership good
Funding fine
Future more uncertain
• Some controllable elements
• Better performance and relationships essential
• Huge political uncertainty