Annus horribilis

As 2015 draws to an end it’s worth reflecting on what a horrid year this has been for housing associations. Attacked by Downing Street for waste and tardiness, lured into a premature and unnecessary right to buy deal that split the sector, re-classified as public bodies, hit by grant and rent cuts, the replacement of affordable homes by starter homes on section 106 sites – the list is long. Could it have been much worse?

Having said that, I am sure there will be a few, a tiny few, in the sector who will see the latest announcement on de-regulation as a victory. For them, perhaps, this year has ended up being an annus mirabilis. My “conspiracy theory” on that subject is here!

But this blog is about one aspect of the onslaught on housing associations: efficiency. What follows might upset some people so, as they say on TV, “If you are easily offended look away now.”

When George Osborne appeared before the Lords’ Economic Affairs Committee on the 8th September he said:

“The income of housing associations over the last six years has gone up pretty substantially…There hasn’t been much pressure on the sector to be particularly efficient…even though that pressure has been brought to bear on many public bodies, government departments and indeed private companies.”

I defy those working in social housing to disagree with his comments. Can anyone seriously argue that the housing association sector has taken efficiency seriously since 1988 when it was created “in its present form” in Osborne’s words?

This complacent attitude was highlighted when 70 percent of associations “failed” the value for money standard to some degree in 2013, a year after its introduction, and in 2014 fourteen landlords were downgraded and 160 threatened with a downgrade. Many associations simply did not understand what efficiency was all about. Protected by above-inflation income streams and direct payments you could argue that they have been featherbedded for years.

When I worked for Camden in the eighties, there was a map on the wall of the borough split into three zones, North, Middle and South or A, B, C. Each zone was allocated to a single housing association, so any scheme arising in Zone A would be given to association A and so on. It was simple, but effective. Some might argue it was inefficient and anti-competitive, but I would suggest that it produced greater certainty and a more sensible pattern of stock ownership than the free-for-all that has been in place since the 1988 Housing Act. Since then, I have been to numerous local authority meetings where twenty or more housing associations sat around the table (for a single local authority!) all saying very little and hoping for a few crumbs from council officers. It was highly inefficient and wasteful.

Neither the NHF nor the HCA (and its predecessors) have made any attempt to control the geographical growth of associations.

Since 1988 many have spread far beyond their birthplace without any thought about efficiency or a sensible pattern of stock ownership. Empire building was all that counted. Some of the largest associations operate across a hundred or more local authority areas. All over the country contractors and staff working for disparate landlords speed past each other to visit their far-flung stock. Executive salaries have mushroomed on the back of this growth, and empires and egos rule the day.

Boards argue that they have to pay their executives the market rate, but I would challenge anyone to produce genuine “market data” to justify an annual salary of almost £500,000 for the chief executive of one of our largest associations. I would be willing to bet that if every chief executive had their pay cut by 10 percent and frozen for five years there would be little or no impact on recruitment or performance. Yet executive pay is one of the key issues that has brought the sector into disrepute.

Which brings me to this paradoxical thought. In a week when Brandon Lewis has announced an easing of regulation I would argue that the sector’s present problems have been caused by too little regulation, not too much. The problem is the wrong things have been regulated almost to death, yet those things that ought to have been done have been left undone. For decades the regulator has obsessed about governance, structures, development, management standards, property sales and finance, but has completely failed to regulate the growth of associations, the egos of out-of-control CEO and their salaries or, until recently, the efficiency of housing associations.

The NHF has similarly failed, or refused, to show any interest in these key issues. Their line has been that associations are independent and boards can do as they please.

The result is that senior politicians and parts of the media now hold the sector in low esteem. The key complaints focus on hubris, waste, a growing commercialism, a lack of local engagement and openness, and salaries. Some associations have simply become too big for their boots.

Imagine what a different world we would live in if the regulator, back in 1988 had decreed that housing association salaries should be no higher than comparable salaries in local authorities, or pinned to a fixed ratio of low-paid staff. What if associations were required to comply with the Freedom of Information Act? What if the regulator had also ruled, in 1988, that 90 percent of any housing association’s stock had to be located within a maximum of three adjacent local authority areas in order to promote a sensible geographical spread? These measures would have created a more efficient and open sector and dampened the hubris of some housing association leaders. Ergo, we would be in a better place than we are now. Discuss.

Perhaps it is too late for redemption. Social housing rents have been rising above inflation for the past fifteen years, so the decision to cut rents, whilst being marginally beneficial to some tenants, might make many more associations take efficiency seriously. It will no doubt prompt a few mergers but whether it will lead to any serious rationalisation of stock I doubt. We are where we are. But whether the housing association sector will emerge from the onslaught “in its present form” only time will tell.

(First published at Inside Housing 21st December 2015)

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