Rental Housing: Public-Private

Partnerships as Key Delivery Vehicles A role for non profit organisations

Olu Olanrewaju

Housing associations- The most successful public private partnership in Europe.

1. What is the role of non-for-profit housing associations in delivering much needed affordable accommodation?

2. What is their Relationship with Government / public sector agencies?

3. Why have they have continued to be successful despite increasing challenges to their viability?

Olu Olanrewaju

What is the role of non-for-profit housing associations?

Private, non-profit making organisations Philanthropic roots Post war - ‘New’ Housing Associations 1988 Housing Act

Private finance to create ‘mixed funding’ schemes

The Restructuring of Housing Provision - Dwelling Stock, by Tenure,

Great Britain, 1951-2006 (Source: CLG, Housing Statistics)

1951

1961

1971

1981

1991

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Owner Occupied Rented Privately RSL Local AuthoritiesPerc

enta

ge o

f all d

wellin

gs

Olu Olanrewaju

What is the role of non-for-profit housing associations?

1,500 housing associations (relatively constant) Providers own or manage 2.7m homes (9% of the total housing

stock) 85% of turnover comes from renting general needs housing at

sub-market rents. 70% of rents are paid directly to Landlords from Housing Benefit.

Currently build 45,000 affordable homes (including shared ownership) and 5,000 private homes every year.

Private finance Falling grant levels have led to private finance becoming the

main source of investment. By 2011-12 accumulated grant totalled £43.8 billion while

drawn-down private finance totalled£ 47.9 billion.

The trends - In 2014 turnover increased by 5% to £15.6 billion Surpluses for the sector have continued to rise and total £2.4

billion for 2014, an increase of 22% compared to 2013. The gross book value of the sector’s assets has increased by

£6.8 billion to £132.7 billion as providers build new homes and invest in their existing stock

Source: HCA 2014 Global Accounts

Olu Olanrewaju

What is HAs relationship with Government / public sector agencies?

Grant funding £2.9bn capital grant funding has been made available nationally to fund

affordable housing over the three year programme period, 2015–18. Government is moving towards providing guarantees rather than direct

grant Housing benefit to support tenants that are unemployed or part

employed

Regulation of regime to protect social housing assets Housing associations are pro-actively regulated by the Homes and

Communities Agency (HCA)

Planning gain –S106 Planning obligations under Section 106 of the Town and Country

Planning Act 1990 (as amended) make a development proposal acceptable in planning terms, that would not otherwise be acceptable.

Common uses of S106 agreement are to secure affordable housing

Land Partnership arrangements between associations and local authorities

deal with land transactions and the development process. Associations invest on council estates within a formal partnership

framework where local authorities influence schemes. In return for land sold at nil or discounted values, local authorities

receive nomination rights to new lettings. Olu Olanrewaju

What is the role of non-for-profit housing associations?

Typical HA governance model Board

Non Executive Directors with specific skills and expertise sometimes include tenants

Reducing in size Usually 8-10 members Committees – at a minimum include Audit and Assurance and

Remuneration

Executives Sometimes sit on the Board Normally 5 members, including Chief Executive

Departments Development Property (Asset Management and Maintenance) Housing services (often includes other customer facing services

like contact centres, lettings etc. ) Finance

Olu Olanrewaju

What is the role of non-for-profit housing associations?

Typical scheme for social rent Grant per unit 15-20% Land & Build cost per property £160k On-costs 10% Weekly Rent – per unit £150.00 comes to about 65% of market rent Voids 1.0% Bad Debts 2.0% Management Costs £450 Reactive Maintenance £450 Planned Maintenance £550 Depreciation 1.50%

Mixed tenure (cross-subsidy) often including a combination of: Social Rent Intermediate Rent Market Rent Low cost homeownership Outright sale

Olu Olanrewaju

Why have they have continued to be successful despite increasing challenges to their viability?

The sector remains attractive for both the banks and capital markets :

Strong asset base Predictable income streams

Government support through housing benefit Regulation produces favourable pricing. 

Banks like a regulated sector – 200 bases points better borrowing rates

Ratings agencies like a regulated sector “Aa2-Aa3”

Commerciality Cross-subsidy model Made challenging development schemes stack up

through shared ownership and private sale

Developing partnerships beyond Government Other housing associations, builders, developers and

private enterprise.Olu Olanrewaju