Housing sector

The social housing sector – better together? – Real Estate and Construction

The last 18 months have seen the world change dramatically. For the social housing sector in the UK, this has presented various challenges and caused organizations to operate in unplanned ways.

Overall, the sector has risen to the challenge and organizations have shared their learning more openly and transparently with a common purpose. The common goal of providing safe and affordable housing for the most vulnerable people in society and solving the housing crisis has not changed dramatically, but the coronavirus crisis has crystallized the importance of working together and shared responsibility. protect tenants and maintain services.

The economic impact of the pandemic is expected to be long-lasting, changing the way social housing providers can and should operate. As social and economic anchors, housing associations have an important opportunity to consider how they can work together, and with local and national government and other sectors, such as the health and services sectors. social services, to help communities and the economy recover.

We have already seen a move towards greater collaboration in the sector over the past five years, in the wake of rent reductions and a greater focus on value for money. We expect this to only increase over the next five years and beyond.

NHF Code 2020

The release of the new 2020 NHF Code, which remains the most widely adopted governance code in the industry, coincided with the move towards greater collaboration. The code introduced a new obligation for social housing providers to consider, as part of their overall business strategy, whether and how active cooperation, collaboration, joint working or partnership could enable them to achieve their social purpose and strategies more efficiently and economically.

Conversely, the code includes a specific requirement to ensure that any joint venture or partnership vehicle supports the organization’s mission and goals. The arrangements in place must be reviewed annually and formally documented to cover “responsibility, performance, compliance, risk management and governance”. The new code will crystallize current industry best practices. Several housing associations already operate in this way and are aware of the problems associated with partnering with external counterparts.

The benefits of collaboration

Collaboration can have a variety of far-reaching benefits, both direct and indirect, such as:

  • risk sharing;
  • cost sharing;
  • cost savings through economies of scale;
  • access to finance and/or land;
  • access to skills and expertise;
  • staff development;
  • connect the different areas of the communities; and
  • increased strategic impact.

Collaboration can also build the resilience of housing association groups, expanding the range of resources available to enable them to adapt more easily to changing circumstances.

However, there is no “one size fits all” for collaboration. Much will depend on the parties’ objectives and desired outcomes, as well as their own constraints and risk appetites. Collaboration models can range from an informal partnership agreement to full legal mergers, with a variety of models in between.

Within the sector, development joint ventures continue to be popular, although we are seeing growing interest in longer-term partnership models. We anticipate that the impact of the coronavirus crisis on small and medium charities could also offer medium and large housing associations the opportunity to consider partnership with the third sector, including the possibility of establishing group or share the provision of business or other services.

Some housing associations are also working together to achieve efficiencies through shared repair and maintenance services, including the use of cost-shared vehicles, and this may grow in light of increasing security requirements. health and safety (related to both Covid-19 and post-Grenfell) and their associated costs. Other recent initiatives, such as the launch of the Greener Futures Partnership, show how, by working together, housing associations can seek to address important sector issues.

A note of caution

The social housing regulator has been keen to stress that the boards of registered social housing providers need to understand the potential risks of the businesses they engage in, particularly with regard to the risks of depreciation, the risk of loss of capital and reputational risk.

There will be a variety of issues to consider when considering a potential collaboration. Of these, an understanding of the potential risks and impact on the organization’s core social housing business and its ability to meet regulatory requirements will be essential. This will include an understanding of all potential default triggers under the financing agreements.

However, it seems clear that further collaboration, both with other industry players and more broadly, can bring significant benefits to housing associations, their clients and wider stakeholders. If there’s one lesson we can learn from the past few months, it’s surely that we can work better together to achieve a common goal.

Gemma Bell, Partner, leads the company’s Corporate and Housing Governance team and will lead a session on how collaboration can be used to engage and anchor communities at the 2021 Housing Governance Conference from the National Housing Federation on June 17 – more details can be found here.

Originally published 06/11/2021.

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