Rebalancing Northern Places

|, |by

The Levelling Up White Paper set out twelve missions in support of key levelling up objectives. These outline the medium-term ambition for the Government. For the housing sector the role that housing plays in contributing positively to Levelling Up has been recognised, not just in new supply linked to job creation and growth, but also as a key part of regeneration and targeted levels of decency in rented housing.

Beyond the missions around home ownership, and decent standards, the housing sector connects to important economic and social impacts for its residents, communities. These impacts are multi-dimensional, measurable and can contribute to the wider Levelling Up ambitions.

A ‘left-behind’ area, in need of ‘levelling up’, is characterised by broad economic underperformance, which manifests itself in low pay and employment, leading to lower living standards in that area. The health of the local residents may also be relatively poor.  These characteristics are frequently the places that social housing providers are working in with over half of the most deprived 10% of local authorities located in the North.

Social housing providers are already providing services which rebalance communities in these key areas of inequity.  We have mapped member organisation activity against the levelling-up missions ensuring our member contributions are recognised, particularly in the area of employment and health.

Our report sets out detail on each levelling up mission explaining current activity in support of levelling up. Case studies offer an important insight into the activities of housing providers and demonstrate the variety of activities and the added value this provides for local communities.

Our aim is to build an understanding of the contribution social housing providers can make to the rebalancing agenda and making sure that the great work of our members is recognised.

We also discussed the relevance of the levelling up missions at our Levelling Up Conference: Housing at the Heart of a Rebalanced Country which took place on 14th July in Leeds where we brought together key stakeholders to define the debate on how best to achieve place-based regeneration.

Housing associations work across communities, including the most deprived neighbourhoods.  As organisations with a strong social purpose they do this because it is the right thing to do as well as making solid business sense to do it. As our report and the case studies show, the housing sector is already delivering positive work. By progressing this work across the Levelling Up missions social housing providers can maximise their impact in places.

Read the full policy brief here.

A new report demands urgent action on homes hit hardest by fuel poverty during the worsening cost of living crisis.

| |by

The North has a home energy efficiency mountain to climb, with poorly insulated homes costing tenants at least £680 more this year than they would if properly insulated. That’s the finding from The Northern Housing Consortium’s (NHC) annual Northern Housing Monitor report, which reveals that 3.8m homes across the North fall beneath the key energy efficiency standard of EPC C.

The NHC is calling on the Government to use next week’s Autumn Statement to boost investment in existing homes. The organisation is urging Jeremy Hunt to commit the balance of energy efficiency investment pledged in the Conservative Manifesto, investing a further £4bn to create a long-term programme of investment for homes across the North of England that are hit hardest by fuel poverty. This investment amounts to less than 5% of the estimated cost of the Energy Price Guarantee this year[1].

The NHC report indicates a continued need to prioritise retrofitting existing homes with effective insulation measures so that they use less energy: controlling bills for the long term and contributing to the UK’s energy security.

According to the findings of the report, achieving energy efficiency now presents a critical Northern housing challenge, with the NHC report revealing:

  • One in six Northern households were in fuel poverty before the latest energy price rises, with the region home to a third of England’s fuel-poor households.
  • Reaching Band C by 2035 requires retrofitting one home every 2 minutes.
  • Going into this winter the average Band D household will pay £680 more for energy, compared to an EPC Band C home, this cost rises to £1,249 for Band E and a staggering £1,765 for Band F.

Fuel poverty is an extensive problem across the North, especially in rural areas. The government’s statutory fuel poverty target for England is to ensure that as many fuel-poor households as reasonably practicable achieve a minimum energy efficiency rating of Band C by 2030, with a D target by 2025.

The statistic of one in six  Northern households estimated to be in fuel poverty in 2020 is likely to have increased sharply in the past 12 months, with the Committee for Climate Change suggesting that an additional 2 to 4 million households may be pushed into fuel poverty.

The NHC report found a high level of variation in the rates of fuel poverty between regions. By government calculations, the percentage of households in the North experiencing fuel poverty in each local authority ranges between 10% to 20%. This is higher than most local authorities in southern England.

One of the highest regional rates is in Yorkshire and the Humber (17.5 per cent), a region with a median income under £23,500. It also has the lowest share of overall homes reaching fuel energy efficiency bands A-C, supporting the suggestion that fuel poverty may have increased across the region.

Even before recent price rises, all three regions of Yorkshire and the Humber, the North West and the North East, had an incidence of fuel poverty above the England average, with Yorkshire and the Humber having the second highest proportion of fuel poverty after the West Midlands.

The NHC’s chief executive, Tracy Harrison, said: “It’s very clear that energy efficiency is now as much a social challenge as a climate challenge. Whilst the introduction of the Energy Price Guarantee offers some relief and short-term support, it is also expensive for Government and will now be reduced in April. A long-term solution is required, not a temporary sticking plaster  – ramping up existing programmes will build on the North’s emerging retrofit success stories, cutting energy use and waste for good.”

Bringing homes in the North up to Band C energy efficiency standard requires retrofitting at least 270,000 homes annually to 2035. This is over 700 homes a day or one home every 2 minutes. According to the NHC, achieving the target of decarbonising the North’s homes by 2035 could generate 77,000 direct jobs in the North and 111,000 indirect jobs across the UK.

Tracy Harrison added: “The only way to get to the root of the problem is to tackle it head-on, and our recommendation is that at next week’s Autumn Statement, the Government should accelerate the remaining £4.3bn of manifesto energy efficiency commitments to create a long-term programme of investment in the North’s homes. The cost of the energy price guarantee this year is estimated at £100bn. So, if firming up a commitment of £4.3bn towards maximising energy efficiency in homes that need it the most represents less than 5% of that, it has to make sound economic and environmental sense to do so?”

[1] Source: IFS: https://ifs.org.uk/articles/response-energy-price-guarantee

To download a copy of the NHC’s Northern Housing Monitor click here.

For more information, contact Nathan Lane on 07447 921654 or nathan@campfirepr.com

 

One year on: assessing the value of the new shared ownership model

| |by

Richard Houghton Director JLL Affordable Housing Valuation – North

A year is an awfully long time in politics.

It was back in September 2021 that the UK government sent shockwaves through the affordable housing sector by revealing a new shared ownership model.

Fast-forward 12 months – and three housing secretaries – and housing associations are dealing with myriad pressures. But what’s been the impact of the shared ownership changes? And how can we value properties under this model?

What’s changed

Many of the changes sought to increase accessibility and flexibility for customers, but have also raised questions about the long-term viability of the model.

To recap, the key changes of note are:

  • the minimum initial equity share is reduced from 25% to 10%
  • there is a 10-year repair warranty during which the shared owner will receive support from their housing provider/landlord to pay for essential repairs
  • a new 1% gradual staircasing model will enable shared owners to buy more shares in smaller instalments over the first 15 years
  • a reduction in minimum larger share purchase from 10% to 5%
  • shared owners will be able to take control of the resales process at an earlier point
  • and, finally, a lease must now be granted with a term of 990 years.

What’s the value impact

So how does this new model impact valuations?

First, we need to consider how we value Shared Ownership as a tenure. Typically, we apply a discounted cashflow approach, with the value derived from two sources: the rental income received from lessees on the RP’s retained element; and capital receipts from lessees when staircasing.

The year one rent is taken as the starting point, with real growth applied, less any non-recoverable costs (there are usually some in practice, despite the wording of leases).

The capital receipts are normally modelled to reflect a cautious profile over the cashflow, currently at 25% initial tranche sales to reflect a sensible average and typical transaction. Separate discount rates are applied for rental income and receipts, whilst benchmarking and sense-checking is undertaken against similar valuations and transactional evidence.

The main risks arising from the changes are as follows:

  • Minimum initial equity sale decrease from 25% to 10% – Reduced first tranche receipt however higher rents (3% of RP retained equity) Potentially reduced covenant strength, with possible increased arrears/bad debts
  • Minimum staircasing tranches reduced from 10% to 1% – Reduced capital receipts and increased admin/ management costs. Potential for a stronger rental profile
  • 10 year landlord repair contributions – New added cost with increased admin/management, additional repairing liability

The changes that have been implemented are clearly weighted towards the lessee, which in itself is no bad thing, given that providing quality housing opportunities across a wide range of tenures is a fundamental objective within the sector.

That said, the newly presented risks and the increased administrative and operational costs will create additional pressures for housing providers delivering new shared ownership homes. As a result of the additional repair cost liability, and the potential to reduce the net rental income position, there will be a need to remodel.

Conversely, where first tranche sales are completed on lower equity shares, the income over the length of a lease could be more valuable, certainly in a market where investment appetite for long-dated, index-linked income remains strong. Despite the negative impacts on value, there are some balancing factors which potentially soften reductions.

Getting the message across

From the Registered Providers themselves, the message has been clear – that the potential for reduced capital receipts on initial and ongoing tranches is perceived negatively, as are the additional repair liabilities. This will require an adjustment to delivery models which may impact land appraisals and, ultimately, business plans. The level of downward pressure on viability and values will however be dependent upon the average position adopted for first tranche sales as well as the staircasing assumptions.

And what about investors? Essentially, the shared ownership tenure offers investors income hedged against inflation, albeit the same risks do present themselves under the new model, with the potential for increased arrears and bad debts, capital receipts from tranche sales reduced, and the increase in management and repair costs.

Despite all these factors, the fundamentals for those interested in the tenure remain intact – an alternative asset class with strong ESG credentials, as well as the possibility of inflation-linked returns and exposure to house price growth. Whilst questions have been raised over the changes, these can all be explicitly modelled and, as a result, market sentiment remains strong with investors undeterred.

JLL has been involved in some of the largest portfolio transactions of shared ownership homes over the last 24 months; what has been clear is that pricing remains strong, and, from conversations across our client base and wider residential market, there is currently no evidence of pricing change in the s.106 market as yet. It is this latter area which is likely to see some price adjustment.

Admittedly, tangible evidence of pricing under the new model is a little way off at present, as stock numbers to date are limited. In the immediate term however, a lack of supply will likely continue to drive demand.

Finally, the lenders within the sector will be discussing the same considerations dominating every other boardroom table; changes to facility cover ratios, and reduced shared ownership proportions permitted within security pools, will be something to keep an eye on.

What impact these changes will have upon those considering home ownership remains an unknown quantity. Will we see lower equity sales and smaller staircasing activity?

Based on recent discussions within the sector, consensus certainly pointed towards the potential for that, depending on the market dynamics in any given location; but in a lot of instances, it is felt that activity from both new and existing lessees, will continue a similar pattern as it always has.

There are many different tangents that can be explored whilst discussing Shared Ownership, with affordability and regional variances just two things that spring to mind. But, whilst it forms part of the government’s delivery strategy, it is important to understand fully how the model can be applied to meet some of our housing needs.

There are no end of headwinds facing the sector at present, and to be perfectly honest, this article was written before the latest maelstrom, but from both a valuation and viability perspective, hopefully the new model in isolation can be considered more of a stiff breeze as opposed to a force 8 gale that has development programmes struggling to stay upright.

Help and advice delivered simply and clearly

| |by

My Advice Gateway is a free resource that helps people quickly find information on claiming benefits, accessing help and support and looking for a job or training opportunities.

Many of our partner schemes have links to the website allowing their customers to access key financial information at a time of rising costs and economic uncertainty.

The website is supported by Locata. It has many links to authoritative advice or the precise application form a customer needs.

One key section sets out the way benefits are currently claimed and paid and explains how universal credit works and all the Government help available under the Cost of Living Support 2022.

Each section has multiple sub-sections to make it easy for the reader to find exactly what they require.

For instance, the Money & Debt section has sub-sections on Banking, Borrowing, Legal Help, Managing Debt, Money & Debt Advice, Mortgages, and Savings.

Each sub-section then has a series of articles providing all the key information in a straightforward manner with links to relevant additional material.

My Advice Gateway also provides a quick way to see what help is available from the charity sector.

Charities play a significant role in many of our essential services such as the health service, community and education, but they also provide free authoritative advice on a wide range of issues, such as providing help and support for the elderly, the disabled, those that are ill and people in need of housing help.

However, the best way to appreciate the free advice on offer is to have a play within the website yourself. Why not check it out by clicking on this link <link to https://myadvicegateway.org/>

If you would like to know more about My Advice Gateway, please email us at enquiries@locata.org.uk

Wave 2 of Social Housing Decarbonisation Fund opened

| |by

On 29th September, Wave 2.1 of the Social Housing Decarbonisation Fund (£800m) was launched by BEIS to support energy efficiency improvements in the social rented sector. Phase 2 of Home Upgrade Grants (£700m) was also launched, aiming to support low-income households off the gas grid. 

This funding comes at a critical time as we face a cost-of-living, energy, and climate crisis. We know that upgrading our homes by reducing the amount of energy they use and how they are heated is central to addressing these crises in the long-term. Warm, insulated homes heated with low carbon technologies have significantly fewer emissions, reduced energy bills, and lead to better health and wellbeing outcomes.  

On the launch of the funding, the NHC’s Tracy Harrison said:  

“We welcome the opening of this important funding, which gives the North the opportunity to scale-up social housing retrofit programmes, creating good, skilled, green jobs and helping to tackle fuel poverty in our communities. 

The North is ambitious for this Wave – some significant collaborations are under way and councils and housing associations are looking forward to working with BEIS to build on the momentum we’ve already established together.” 

The Conservative Party manifesto committed to delivering a £3.8bn Social Housing Decarbonisation Fund (SHDF) over a ten-year period to upgrade the energy performance of social rented homes below EPC C. The aims of the Fund are to “deliver warm, energy-efficient homes, reduce carbon emissions and fuel bills, tackle fuel poverty, and support green jobs”. 

 An SHDF Demonstrator was launched in August 2021 with an initial investment of £62m from the overall fund. The NHC’s analysis showed that successful bids in the North represented only 14% of the funding allocated in England through the Demonstrator round: Sunderland City Council, Manchester City Council, and Leeds City Council were the successful Northern local authorities. 

Wave 1 of SHDF funding totalled nearly £179m granted to 69 lead local authorities across England. Our analysis of the allocation shows that 19 of these 69 local authorities are in the North with funding totalling around £63m coming to the region. This represents 35% of total funding allocated through Wave 1 which is a significant improvement on the 14% the North received through the Demonstrator round. 

Wave 2.1 will see up to £800m of grant funding allocated. We hope our ambitious members in the North will engage fully with the Fund to continue to create and regenerate sustainable homes, and build resilient, thriving communities in the region. 

NHC members discussed this new round of funding at a roundtable with Selvin Brown, Director of Net Zero Buildings at BEIS, this month. Selvin will be addressing the NHC’s flagship event, the Northern Housing Summit, in Manchester on 9th November – make sure your place is secured here. 

See SHDF Wave 2.1 guidance here and HUG Phase 2 guidance here. 

 

Giving officers on the ground control of their IT systems

| |by

A video showing how the “tasks and questions” procedure can help local authority officers design, build and deliver their own workflows is available by clicking the image.

More and more councils are taking control of their customer facing IT systems and configuring their own workflow processes using Locata’s unique intuitive software.

Local authority officers are encouraged to develop their own tasks within the system to suit the processes that work best in their local area.

This means that councils do not need to compromise on their software system as they cast around to find the approximate “best fit” for their local needs.

Instead, the Locata software can be easily adapted using its unique “task and question” procedure to deliver each local authority’s precise requirements.

Kirsty Farmer, Housing Manager at New Forest DC, has been overseeing the introduction of a new Locata module called Private Sector Housing (PSH) at her council.

“I am not from an IT background and have not configured a system before. However, the tasks and question functionality is very simple to use,” she told Locata’s National Users Group (NUG) earlier this month.

“I have been able to tailor the system to how I want the team to work, rather than the confines of the system dictating the way we work.”

The functionality giving control to users of the Locata system was first developed with a module called HPA2, developed for officers to reflect the new duties placed upon them by the Homelessness Reduction Act 2017.

Locata worked with a Development Group formed by practitioners from 27 councils. The officers on the group made it clear during the development of HPA2 that each would need the ability to configure the system slightly differently from each other, based on their own local need.

The resulting homelessness system with its unique “tasks and questions” functionality impressed local authorities across the country and is now used by more than 120 councils.

The platform that HPA2 was built on has now been re-purposed for a series of new modules, including Temporary Accommodation and Rents Accounting, Third Party and Housing Related Support, and Private Sector Housing – each giving officers unique control over their workflows.

“The implementation of the PSH module allowed me to review all of our processes”, Kirsty Farmer told the NUG meeting. “The beauty of the ability to amend the system so freely means I can change processes and fields at any time.

“Previously we would need to instruct our IT department and the software provider, wait a number of weeks and agree a cost to make even the most simple of changes, even if they were possible in the first place.

“With the Locata PSH system I have been able to create multiple case types and add workflows accordingly to manage cases that were often held outside of our previous system.”

Locata is also planning to move its much admired and widely used Choice Based Lettings software over to the new platform to give housing officers even greater control of the way they work as part of a “Complete Lettings Digital Solution”.

To find out how our unique software can benefit your council, please contact Locata at info@locata.org.uk

Introducing the Home Upgrade Grant Phase 2 (HUG 2)

| |by

The Home Upgrade Grant Phase 2 (HUG 2) is a £700m grant funding scheme that has been set up by the Department for Business, Energy and Industrial Strategy (BEIS) to help Local Authorities (LAs) provide energy efficiency upgrades and clean heating systems to low-income households. The scheme targets the worst performing (EPC band D-G), off-gas grid homes in England.

A key focus of the scheme is to phase out the use of fossil fuel heating and make progress towards the UK’s 2050 Net Zero commitment. It will also support improved household health and wellbeing by reducing the number of cold homes and play a key role in the government’s wider programme of green retrofit.  Additional guidance for HUG 2 is available at gov.uk.

What support is available?

The Home Upgrade Hub is a support service that provides a range of resources developed by housing retrofit and grant application experts to help LAs in England apply to HUG 2.

This technical support is being made available to LAs at key stages during the development of their applications. The Home Upgrade Hub website will continue to be populated with various resources and materials to provide relevant support to LAs. A series of webinars, masterclasses and podcasts have already gone live and more will be uploaded over the coming months.

What should I do next?

The first step for any LA interested in applying is to submit a self-assessment form. This is a quick tool to help LAs understand how prepared they are to engage in the HUG 2 application process, as well as help gain access to the free one-to one support offered from the Home Upgrade Hub. You can submit your form here.

To receive the latest news, top tips and invitations to events straight to your inbox, sign up to the Home Upgrade Hub newsletter for free here.

If you have any questions, please email info@homeupgradehub.org.uk

Making Every Contact Count (MECC)

| |by

Making Every Contact Count (MECC) is an approach to behaviour change that utilises the day to day interactions that people, organisations and communities have with others to encourage positive choices to improve our overall health. Many long-term diseases are closely linked to known behavioural risk factors that are attributable to tobacco, alcohol, being overweight or physical inactive that can ultimately lead to poor mental health.

MECC is a whole person approach considering an individual’s circumstances such as their finances, employment status, social support and housing. The smallest of changes can make the biggest difference when it comes to positive physical and mental wellbeing. MECC can take a matter of minutes, help people respond to opportunities to discuss health and relay brief messages.

It follows a simple process revolving around the 3A model including:

  • Ask – taking notice of others, listening and engaging during opportunistic chats
  • Assist – providing useful and motivational health information
  • Act – signposting to local support services

Across the country there are opportunities for organisations to get involved with MECC and more specifically in the North the following contacts can support you to implement MECC. If you are interested in MECC please visit each regional signposting website or contact the MECC lead for that region to support your next steps:

North East and North Cumbria

There will be some slight differences across the country, but for those within the North East and North Cumbria there is a free Train the Trainer model that exists that organisations can access to upskill their staff to deliver the Core MECC training in house providing their frontline staff with the knowledge, confidence and skills to support tenants, colleagues and other services with wider health issues.

“I was apprehensive before the training, but I feel I know more now as it links into other areas with my work. The link to people’s everyday life is brilliant!”

“The message is so consistent, and that even though the interventions are brief, they are meaningful”

“It was very thought provoking as it made me think about how often I actually have MECC conversations with tenants, colleagues, friends, family and even my neighbours”

MECC Gateway website: www.meccgateway.co.uk/nenc

Contact: craig.robson@northumbria-healthcare.nhs.uk

Lancashire and South Cumbria

MECC Link website: www.mecclink.co.uk/lancashire-and-south-cumbria/

Contact: athompson-spears@activelancashire.org.uk

Yorkshire and Humber

MECC Link website: www.mecclink.co.uk/yorkshire-humber/

Contact: Chris.Sharp@dhsc.gov.uk

Cheshire and Merseyside

MECC Link website: https://mecc-moments.co.uk/

Contact: stephenpeters@wirral.gov.uk

Rent Caps – What are the Potential Impacts?

| |by

Richard Houghton Director Valuation Advisory – Affordable Housing JLL (richard.houghton@eu.jll.com)

After a long period of guessing and surmising what may unfold, the government finally provided some insight on their directive for rental policy, outlining three options for a social housing rent cap next year. It is certainly not the most welcome news for those pulling together business plans, but at least there is some visibility on what 2023 may hold. The juggling act of meeting operational requirements, high levels of service dependency and the continual pressure to invest in existing stock whilst delivering new developments presents a significant challenge on all fronts.

Over the next few weeks, the government is consulting with the sector on capping social rent rises at either 3%, 5% or 7%. Whilst this intervention aims to protect residents from the current storm of soaring inflation, conversely it removes some of the limited protection available to Registered Providers to counteract the rising service delivery costs. The rent settlement agreed in 2017 reinstated a period of rental growth stability following a period of rent cuts, allowing annual rental increases at a maximum of the consumer price index plus 1%, but with inflation sitting at 10% plus, this could potentially result in 11% rises on current rents.

With the cost of living crisis arguably felt most acutely by our social housing tenants, a delicate balancing act is required to address affordability, but at what cost?

The initial cap suggested by the government would come into effect from 1 April 2023 to 31 March 2024, but the consultation also seeks views on whether to set a limit for 2024-25. The consultation will close on 12 October 2022. Following the consultation, we understand firm direction will be announced later in the year, hopefully providing some time for landlords to factor this into their business plans for April 2023.

Here at JLL (Jones Lang LaSalle), we have been modelling shadow appraisals for some of our existing RP clients to assist with financial planning and stress testing to help inform their boardroom discussions.

When modelling the different rent caps, the assumed level of inflation and its projected impact on net income is fundamental to the outcomes and, to this end, we have adopted Citibank’s recent prediction of 18% UK inflation in early 2023, which we would hope models a very worst-case scenario. Despite some variances depending upon the age of stock, investment programmes and rent levels, our initial projections across mixed tenure social housing stock have generally returned similar results regardless of location. These results are summarised as follows:

 

Indicative Projected EUV-SH Values 1 April 2023

Assumed management cost increase 10%

Assumed repair and maintenance cost inflation: 18%

 Impact on valuations compared with previous April 22 reporting.

 

3% Rent Cap 5% Rent Cap 7% Rent Cap
EUV-SH Apr 23 EUV-SH Apr 23 EUV-SH Apr 23
-6.5 – 7.5% -3.0 -3.5% 0.5 – 1.00%

Whilst we appreciate that such a high level of inflation combined with a rent cap would have a material impact on business plans, based on this analysis, we would suggest that on valuations at least, a rent settlement of between 6.5% and 7% may well mitigate the effect of a potentially high inflation figure of around 18%.

Although we at least have some details to start considering, as ever, there appear to be more questions than answers. However, the JLL team are keen to share views and provide assistance as the sector works through the impact of the rent caps and prepares its response to the consultation, so please do get in touch if you would like to discuss this further.

 

Bolton’s new system linking housing applicants to providers of support

| |by

Bolton Council is the latest local authority to put Locata’s Housing Related Support (HRS) module at the heart of its management of housing support applications.

The system will go live this Friday and will help officers manage a pathway of referrals into accommodation with support or floating support.

Bolton’s new HRS module assists the officer as they manage the applicant through to a provider who will give them the service they need.

It also monitors the applicant’s progress, recording the outcomes of all steps and stages, automatically providing full reporting and other management information direct to the officer.

HRS has an inbuilt “provider” database including details of the services each provide. There is also a custom login portal for third party providers of housing related support services, allowing local authority partners to accept new clients into their services and report on progress.

The system massively reduces the amount of manual information needed to be entered by officers as data is exported between modules with just one click of a button.

The information required by support providers is very similar to that already gathered as part of the homelessness service, so Locata has ensured that the workflows of the HRS module are aligned with that of our homelessness module, HPA2.

This not only makes the transition between products seamless, but officers already using HPA2 require little training on how to use HRS as it has been built on the same system platform.

Locata has also recently released a new feature which enables officers to export fields and questions between modules. This means that when clients are exported from one module to another the information matches in all the relevant fields.

To find out more about our HRS module and HPA2 please email us at enquiries@locata.org.uk