Bekah Ryder reflects on the challenges and opportunities ahead for housing associations and local authorities.
Despite the backdrop of recession, high inflation, interest rates, increases in public sector net debt, and the biggest drop in living standards on record, Welsh Government’s Draft Budget on 13 December saw it honour its commitment made in March 2022 to the highest investment programme ever set of almost £2 billion capital investment for housing.
However, the bigger news was that it has frozen Housing Support Grant at the same base line as this year of £166 million with no inflationary rise. Welsh Government also announced a social rent settlement set at a maximum of 6.5 per cent which is below inflation from April 2023 along with a package of support for social housing tenants who are struggling financially.
The UK Government’s Autumn Statement also included a number of announcements aimed to bolster income and support for the most vulnerable, including benefits being raised in line with inflation to increase 10.1 per cent in April, further cost of living payments of up to £900 in 2023-24 for households on eligible low-income benefits, disability benefits and pensioners (on top of £650 in 2022-23) and rises in the National Living Wage (NLW) and National Minimum Wage (NMW) for those aged over 23 years.
Meanwhile the commitment to implement the Real Living Wage for those working in social care has seen Welsh Government commit £70 million to local authorities and health boards to implement these increases to £10.90 per hour by June 2023.
With these announcements in mind, and the challenges and opportunities that are presented, Altair has considered what the top five things executives will want to talk to their board about, and boards will want to hear from their executives:
- How are you prioritising tenants?
- It may be easy with financial pressures to cut community investment expenditure or delay investment in asset management, but with rising costs and falling living standards, now is the time to focus on tenants. Your executive team and board should ensure that tenants are getting the services and support they need in well-maintained homes and are aware of which of your tenants might be struggling and which homes need investment.
- Analysing tenant contact, monitoring repairs data, more regular contact with tenants who have changed payment behaviour, and welfare calls will be more important in the next few months.
- Revisiting your financial plan, including:
- Modelling the impact on key metrics, such as lending covenants, borrowing levels, credit ratings, asset management and development, and revisiting strategies accordingly.
- Stress testing, mitigation and recovery plans.
- Keeping track of formula rents and actual rents for all properties, including board reporting and assurance on compliance.
- Revisit procurement, but don’t just focus on the low hanging fruit:
- While it is tempting to look at smaller contracts or ‘nice to haves’, the bigger savings are often to be made from reviewing larger procurement contracts, such as repairs and maintenance, focusing on value for money.
- Boards and executives may like to contact new and existing stakeholders to open discussions about new partnerships or cost sharing vehicles. This might include sharing services for greater efficiency or joint ventures to diversify income streams.
- Collaborate:
- Share your experiences with other organisations so that you learn from each other.
- Identify opportunities to work in partnership to deliver services
- Prioritise:
- Review your risk management strategy, business plan, 30-year financial plan and corporate objectives to ensure you are clear on how you will manage restricted income over the coming period and any anticipated efficiency savings.
- Be clear on what your organisation can revisit, push back or reduce.
- It’s certainly not going to be an easy few months, but discussions and planning around the above should put your organisation on a firmer footing for the future.
Joint Altair and Devonshires Annual Event 2023
If you would like to discuss these issues in greater detail, please join us at our free to attend Annual Leadership and Strategic Event taking place on Thursday 2 February 2023 at the Parkgate Hotel in Cardiff where we will be discussing how you can make informed decisions during these turbulent times.
During this half-day event, we will consider the challenge set by the minister and Welsh Government for the sector; look at how the model and compact with society has changed and the challenges and opportunities this presents the sector. The programme will include interactive sessions and shared experiences from sector leaders. Full details are available on the Devonshires website.
Bekah Ryder is research & insights manager at Altair