Senior local government finance and housing officers joined public and private sector partners at Room151’s Housing151 conference to discuss the UK’s deepening housing crisis and attempt to find solutions.
The event was held in London yesterday (6 March) and, as reported, featured a powerful keynote given by Jackie Sadek, chair, UK Innovation Corridor and author of Broken Homes. The morning session also included a panel discussion on all things Housing Revenue Account (HRA), and an insightful sponsor keynote from SimplyPhi’s CEO Omar Al-Hasso. You can read more about all these here.
Housing companies
Following the conclusion of the first session of the Housing151 conference, the focus turned to housing companies. Pat Hayes, executive director of regeneration, housing & environment at Slough Borough Council, recounted his experiences with housing companies, stating that his job role had largely gone from being “midwife to undertaker”.
“A few years ago everyone was setting up a housing company, but it only works well if done in the right circumstances,” he said.
There must be a commitment to the housing company being genuinely independent, while the local authority must have the “financial resources and the nerve to borrow”. It must also have the available land, and the ability to implement housing projects at scale.
Jacqui Fieldhouse, head of finance at Kirklees Council and Pat Hayes, executive director of regeneration, housing & environment at Slough Borough Council.
The biggest advantage of setting up a housing company, he said, is the fact that it has a single focus. This means, for example, that an authority can recruit specialists from the private sector.
But a housing company must “deliver units quickly enough” and have a build pipeline in place. There may well come a point when the company should move into a housing management phase, when as much housing has been built as is possible.
Today’s environment is not necessarily a good one to set up a housing company, though, Hayes said, as financing is more expensive and build costs are higher. With an “ongoing fiscal battening down of the hatches” across local authorities, he questioned whether a housing company was good value or even needed.
The session also featured Jacqui Fieldhouse, head of finance at Kirklees Council, who offered her experience of an arms-length management organisation (ALMO) going back into the council.
Backing up Hayes’ points, Fieldhouse said the main reason for the transfer back in 2021 was the “efficiencies and savings” that could be achieved.
Private equity
Next up was Andy Smith, head of housing impact services at The Good Economy, who discussed how local authorities can navigate the risks and returns of ‘private equity’ type investment to improve housing supply.
Andy Smith, head of housing impact services at The Good Economy.
He noted a project his company has undertaken with Big Society Capital – the Equity Impact Project – which seeks to provide “transparent, consistent and comparable” impact data.
Smith also covered what the various stakeholders gain from investing in affordable housing, and set out the four “styles” of equity investment fund strategies.
These are: funding section 106 affordable homes; using grant funding to increase the affordability of homes; a cross-subsidy model, providing homes at a range of price points; and specialist housing.
Smith also elaborated on a ‘risk sharing spectrum’, which had been created to determine how to share risk between investment funds and their partners.
Finally, he offered advice on what to look out for in an impact investor. A key detail is whether they have a ‘theory of change’ – and whether they start with the problem, or with the solution. Also important are whether impact objectives have been set, how success is measured, whether external standards have been signed up to, and what reporting on impact occurs.
‘All roads lead to the Treasury’
The next panel focused on temporary accommodation, where speakers discussed the best ways to finance and tackle homelessness.
Dan Hawthorn, executive director of housing and social investment at the Royal Borough of Kensington and Chelsea, highlighted to delegates that you can’t always “build your way out of problems”.
He stated that due to capacity issues of councils in London there may be a growing case for “homelessness to stop being a local authority issue and start being a Greater London Authority issue or a combined authority issue”.
David Ashmore, director of housing services at Manchester City Council, was next to remark that in terms of financing temporary accommodation, “all roads lead to the Treasury”.
Building on Ashmore’s point was Suzanne Jones, strategic director, customer, business and corporate support at St Albans City and District council, who highlighted that currently there is a “lack of trust” between central government and local authorities.
Therefore, in order to gain more capital from the Treasury for homelessness, the local government sector needs to think about how it can “rebuild” that trust.
However, offering a slightly different opinion was Marie-Alix Prat, investment manager at Big Society Capital, who highlighted that the “government cannot finance everything themselves” and councils must find other sources of capital to bring in investment into housing.
Omar Al-Hasso, CEO at SimplyPhi, outlined that councils should take a “more structured and collaborated” approach to financing temporary accommodation. By taking a more collective approach, housing can be financed and built much more quickly, he explained.
Solutions to the temporary accommodation crisis were discussed during a lively panel debate.
LGPS panel: Making the case for local impact
The first session for the afternoon focused on the role of the LGPS as potential providers of patient capital for local housing projects. LGPS investors have so far been cautious to take on too much investment risk but the Department of Levelling up Housing and Communities is now proposing a 5% local impact investment allocation for the LGPS which could trigger increased investment.
Gemma Bourne, managing director, property at Big Society Capital and chair of the panel kicked off the debate by highlighting the impact of overcrowding particularly on children and families. Eamonn Hughes, chief financial officer at Peabody then outlined the similarities between the challenges local authorities and housing associations face. Peabody is a not-for profit housing association which focusses among others in improving existing housing stock through building safety improvements as well as the construction of new homes.
Speaking as a long-term investor in local housing, Paddy Dowdall, assistant director at Greater Manchester Pension fund argued that when it comes to offering sustainable income streams, real estate can be more reliable than inflation linked debt.
“If we look at what we tend to get from investing in the residential property sector its well-tailored to a pension fund and very similar to the cashflows from UK index linked gilts. However, if we invested our pension fund in Linkers, the employer contributions would be North of 40% and that would cause tremendous problems for local authorities” he argued.
Aoifinn Devitt, recently appointed CIO at London CIV, stressed that the housing crisis has been very tangible in London and that her client funds are taking active steps to address this, for example by investing in the LGPS Pool’s London Fund.
Matthew Trebilcock head of pensions Gloucestershire Pension Fund added to the conversation that from an LGPS perspective outside of the UK’s property investment hot spots, it could sometimes take quite a bit of effort to make the case for local impact projects. “One of the biggest challenges we had is that conflict of interest with the manager around the localism aspect, it wasn’t in the eyes of many managers that Gloucestershire exists. Once we put the spotlight on that, a lot of very positive noises were coming out” he stressed.
Joint ventures
One of the afternoon’s panel discussions centred around how local authorities can produce housing through joint ventures and partnerships.
Kicking off the panel discussion was Tina Barnard, chief executive of Watford Community Housing, who explained to delegates that the housing association has created 50/50 partnerships with several councils, including Watford and Three Rivers, to deliver housing.
She explained that the benefits for local authorities of using joint ventures is that it enables them to “utilise” the expertise of housing associations to create more housing.
Next on the panel was John Lipper, group managing director at Madison Brook, who stated that in terms of increasing the supply of housing we need a “multi-tier approach as no one sort of silver bullet exists”.
Lipper added that where Madison Brook fits in is to initially help local authorities meet supply needs and then once that is done helping them to build their own capacity and move forward.
Offering another solution was Andrew Davey, fund manager, affordable housing fund, at CBRE Investment Management, who highlighted the increased prevalence over the past five years of unlocking Local Government Pension Scheme fund investment into housing.
Davey said: “There is a lot of capital in that area that will be more successful, but there is more space now where there’s interest aligned models where we can cooperate with local authorities.
“What I would say to local authorities in the room is that: we don’t need you balance sheets. What we need is your contact books. If you can set up relationships with your planning departments, we can facilitate the rest.”
Providing a different perspective was Martin Chastney, head of development at Cheltenham Borough Council, who highlighted that the authority has a JCS affordable housing partnership. He explained that this has enabled Cheltenham to overcome scale, quality and supply barriers when it comes to the delivery affordable homes.
Regulatory environment
The Housing151 conference continued with an analysis of the financial implications of the latest regulatory changes in the housing sector, with Richard St John Williams, partner at Trowers & Hamlins, providing an expert guide.
Williams said there had been a politicisation of housing over the past few years contributing to regulatory changes, which was not just attributable to Grenfell but the impact of the Covid crisis.
Campaign groups are focusing on the performance of housing associations, and the Housing Ombudsman also has a keen eye on what is happening.
This is “creating a climate and a focus on social housing and the behaviour of landlords”, Williams said.
He encouraged greater collaboration between local authorities and housing partners as he described the “real shift” in regulations that had occurred recently.
Williams ended by urging those in the room to “know your stock, know your customers, know your responsibilities, and know your contract(s)”.
Jonathan Bunt, co-founder and director at Beehive Affordable Homes chaired the morning session.
Achieving net zero
The final panel of the day assessed the current net zero ambitions for housing. Darren Welsh, strategic director, housing and property services at Dacorum Borough Council, provided an overview of the authority’s progress in meeting the Decent Homes Standard, on decarbonisation, and achieving an Energy Performance Certificate (EPC) of C across its stock.
On the EPC rating, Welsh estimated that 7,000 homes needed upgrades at a cost of £22m.
Welsh concluded that while there is strong leadership at local level in achieving net zero ambitions, asset management is becoming increasingly difficult and funding is insufficient.
Anees Mank, programme and policy lead – retrofit at Greater Manchester Combined Authority, argued for funding retrofit as presenting an attractive proposition for investors.
Much progress has been made in Manchester in the authority’s approach to retrofit, but delivery challenges remain. These include property data, project management, supply chain, resident engagement, and Estate Regeneration impact.
Finally, Steve Turner, director at 3Ci, analysed innovative, new approaches for investing in net zero. In outlining the work 3Ci does, he said a key aim was to accelerate collaboration between local government partners.
He outlined its five major work programmes: net zero neighbourhoods, net zero budget pipelines, investible cities, regional investor events, and local and regional finance innovation models.
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