Back in October 2019, in those days we fondly remember as “before Covid” I joined RHP, a relatively small social housing provider based in South West London that provides around 6,500 rented homes to people in the area in which I’ve lived for the last 17 years.

I have learned a huge amount in that time. About building homes and about building teams. About how social housing operates in the 2020s. And some of the challenges and opportunities that might lay ahead. This post brings together some reflections as I head to pastures new in June…

What is a housing association?

First things first. Housing associations are mostly charitable (although not charity) organisations that have been established to own, manage and maintain homes for people who are generally on lower incomes. There are a whole slew of different types of tenancy agreements – social rent, affordable rent, London affordable rent to name but three. These rents are at significantly below market rates.

There are also shared ownership models when someone raised a mortgage to buy a part share in a house and pay rent on the other part.

Housing associations are also likely to run care homes, retirement homes and other forms of assisted living homes. They probably also have people who are leaseholders – the UK’s idiosyncratic system where people who live in apartments, in particular, don’t actually own the property or land on which it sits, but merely a long entitlement over many decades to use the property.

In general terms, housing associations come from two backgrounds – philanthropic organisations that were set up to build homes, and those more recently that were set up to manage homes that were transferred from a local council. The latter it seems were part of the drive in the late 1990s/early 2000s to shift public assets off the public balance sheet, so that investment loans could be raised without them hitting the Public Sector Borrowing Requirement.

There has been significant consolidation of both of these types of housing association in recent years through merger and acquisition – the larger of which now own and manage many tens of thousands of homes often over the entire country.

The systemic issues

There are some deep-rooted problems in the UK when it comes to housing, and it strikes me that the very deepest of them is quite simple. The price of homes in the UK is simply too high.

House prices have grown dramatically faster than general prices and wages for decades. The first flat that I bought in South London back in 2000 for £150,000 last sold for over £500,000. How on earth can most people living in London afford even the deposit on a half-million pound one-bed flat? They can’t.

But for those of us lucky enough to be on the property ladder, it’s almost certain that our homes are our most valuable investment assets. With the ability to leverage debt against their property, buy-to-let landlords have become a thing over a number of years. Around 40% of the former council flats that were sold to tenants under the Right to Buy scheme introduced by the 1980s Conservative Government are now privately rented accommodation, no longer owner-occupied. The rents that are charged privately are in turn multiples of those charged by social landlords.

The growth in private renting, and the growth in house prices have seen a steady decline in the number of people living in socially rented homes. In 1979, 31% of all homes were rented from social landlords – either local authorities or housing associations. By 2020 that proportion had dropped to just 17%. We have also seen the average age of owner-occupation increase as it takes longer for people to reach the stage when they can buy, and fewer people will ever afford to buy.

Generation Rent is real, and it’s going to be increasingly problematic.

Housing associations’ response to this is many and varied. Some are now building general market homes. Many are providing shared ownership homes, where buyers who qualify by nature of their (lower) income are able to take a mortgage to buy a share of a property (in London often as low as 25%) and then rent at a below-market level rent on the remainder.

I can’t help but feel that this is problematic: if the underlying problem is that homes are simply too expensive, finding ways for people to buy into a portion of the high price, rather than lowering the price, seems economically flawed – surely that just further stokes the market? But moreover, wouldn’t the shared and open market homes investment be better placed in new social rent homes? According to Shelter, less than 7,000 social rent houses were built in the UK last year whilst 29,000 were either demolished or sold.

The counter-argument is that the profits from these other schemes subsidise the new social rent homes to be built. However, in the UK at the moment there are over 1,000,000 people on the waiting lists for social rent homes and that’s not being addressed by current approaches.

The legacy of the post-war settlement

The 1945 Labour Government was possibly the most idealistic administration the country has ever seen. Whilst the NHS continues to be seen as a national treasure, the other planks of the welfare state are maybe regarded with less admiration: selective schools and private schooling maintain their appeal over comprehensive general education; the benefits systems is means-tested to within an inch of its life; and we seem to have lost any general idea that housing is a right, not a luxury.

That it isn’t seen as a benchmark of a fair society that everyone should be entitled to a roof over their head is a political shift in the UK that accompanied the rise of the idea of the home-owning democracy.

Today there is a huge spread of types of tenancy and tenants who live in social housing. Some have tenancies that still have the right to be passed to the next generation. But given the current huge waiting lists, people coming into social housing today are likely to be disproportionately disadvantaged – age, disability, drug and alcohol dependency and other factors all have a role to play – but will also likely be given on a relatively short-term tenancy agreement of maybe only five years.

Whilst that’s better than much on offer in the private market, a social rent contract these days is seen often as a stepping stone to come out of social housing, not an agreement for life. But the reality for tenants who are disproportionately representative of disadvantages, the chance to step out of the social rental market is very slim. For the area in which RHP operates, even more so – Richmond Upon Thames is one of the wealthiest places in the country, and there simply isn’t an intermediate rental market that most people would be able to step out to.

The ONS published a brilliant data visualisation that made this point abundantly clear. Want to know where our large social rent estates are? Look for the red on this map:

But shorter tenancies put stress onto tenants who could often do without the uncertainty on top of everything else, and place a big administrative burden on the landlords to have to regular review and reissue tenancies.

A perfect storm?

The next few years are going to be challenging for many Housing Associations, and even more so for their tenants.

The economic climate is bleak for both tenants and landlords alike. Rising inflation impacts both. Energy price rises impact both.

Wages are rising, whilst not as quickly as prices or benefits, and that hits the bottom line for Housing Associations as employers. Rents will increase and that will impact tenants particularly when they have part responsibility for the paying of their rent (for many their rent payments are met in full through either Housing Benefit or Universal Credit).

The aftermath of the UK leaving the EU continues to negatively impact supply chains and the labour market for many of the commodities and skills that are required to maintain and build homes.

The new regulations that are the outcome of the tragedy at Grenfell will rightly put increased obligations onto Housing Associations both in terms of the way that they manage their properties, but also how they manage data about their properties.

The environmental agenda means that Housing Associations have to raise the base standard of all of their stock to Energy Performance Certificate Grade C or above by 2030. Whilst C is nowhere near a Net Zero home, it’s a start…

Green shoots – the big opportunity?

Social housing does provide a fertile ground of opportunity for the UK to hit its carbon targets for 2050 if there can be a huge level of collaboration to shape markets.

Domestic heating is responsible for a huge proportion of the UK’s carbon emissions – around a third. Today there are very few homes that operate at a carbon-neutral (or even carbon sink) level. There are two factors at play.

First of all, it’s expensive to retrofit homes to be much lower carbon producers. And that’s because of the quality of the housing stock, and the still-new nature of much of the technology required to improve domestic energy efficiency. There needs to be a lot more retrofitting before this becomes affordable for the mass market.

And secondly, a low carbon home simply doesn’t work like a house that most of us currently understand.

At a very simple level think of it like heating in a car. For those of us who grew up in the 70s and 80s, car heating consisted of putting the fans on full blast if it was too cold (and then opening a window if it got too hot), or opening the windows if it was too hot (and often not using the fans because they’d just pump out hot air).

Then in the 1990s and 2000s we started to get Air Conditioning units. They worked a bit like things did previously but without having to open the windows. Turn up hot if you are cold, and cold if you are hot.

And now many cars have climate control – set a desired temperature and then leave it. But people who knew previous models still behave as they did before.

A low carbon home will be used differently. You are likely to have far lower temperature heat sources. You are likely to ventilate the home in very different ways. That all takes time to learn, both from a resident’s perspective, but crucially from an installer’s perspective too. They will need to know how to implement these new technologies in ways that are usable and useful.

Housing associations, particularly if they could act in concert with each other, have an opportunity to both shape the market and buy in bulk to dramatically reduce costs, but also to skill the workforce needed to decarbonise the rest of the UK’s housing stock.

At the moment they appear afraid of the challenge, and are unwilling to set stretching goals, rather instead just content to meet minimum standards. But a couple of measures could be put in place that would really drive innovation and implementation that could benefit the whole country in a number of ways.

The first would be to decide to include the carbon emissions of their customer’s heating in the Housing Associations’ own carbon footprint calculations. Tenants have no real choice in the ways in which they can heat their homes. And it’s a huge block of the country’s overall emissions. Landlords taking responsibility would have a massive impact on their willingness to change how things work.

The second would be to decide to become a net carbon sink, rather than merely net-zero. Given that the country will still continue to emit some carbon come 2050, to reach net zero we have to have some carbon sinks. How could social housing become carbon capturing, rather than just more efficient? Such a target would show huge ambition in a sector that currently contributes massively directly and indirectly to the country’s carbon output.

Low emissions would also, then, hopefully mean low energy bills. And that’s crucial for the tenants of social housing.

So what about info tech?

You may be wondering what I’ve learned about Information Technology through all of this? Well…

First of all, as with many sectors, there is a whole market of “line of business” software specific to the housing industry that has a stranglehold on their clients, with aged products that are simply too big or important to be able to change, and therefore will little competition the vendors get lazy. And expensive. Most of my work has been putting in a strategy and partners to address this mess.

For the larger associations, there may be the opportunity with modern Cloud and low code/no code platforms to build their way into a better world, but for the smaller ones (of which there are many) there are a few alternatives.

A bit of a market has emerged for products that have been built around the Microsoft Dynamics cloud platform. I’ve seen this in other sectors too, where products like Dynamics and Salesforce are used as an application platform and tailored to specific sector needs. Being evergreen platforms the vendors can’t get lazy because they have to keep their products up to date with the technology underneath. Being relatively open platforms, clients can also build things themselves using published APIs.

I also wonder, though, if service desk tools like ServiceNow might, in the longer term, be more sensible platforms for Housing Associations to use to manage tenant and leaseholder interactions than CRM systems?

It seems that many if not most Housing Associations are struggling with their back-office systems, and this, in turn, leads to issues with how services manifest to tenants.

Much has been made in some quarters about introducing digital services into the sector, and many housing associations now have the ability for transactions like making payments or raising requests for repairs to be performed online. But whilst there is a significant part of the audience for whom this is of value, issues of digital inclusion are particularly thorny – it’s likely that access challenges to digital services are likely to be of higher probability for tenants than the population at large, with a combination of factors including poverty, disability, neurodiversity and age at play. This was illustrated in a recent tweet from journalist Pete Paphides about the experiences of his father:

I think though that there are some underlying questions that need more investigation in the sector. Particularly, against whom to benchmark. It’s easy to think that exemplars for good digital services are the likes of Amazon and Uber. But their business models are underpinned with a monopolist mindset, and many, many years of huge losses to build a market big enough to then (sometimes) turn a profit.

In those services, the whole idea is to create a platform that drives more use. A Housing Association needs to drive less use, for the most part. Contact, whether by phone or by a more modern digital channel drives cost, but also, most importantly, is a cost of failure.

So rather than looking to online retailers, maybe landlords would be better to look at other models for what digital service might look like – government organisations, insurance company claims, roadside assistance, healthcare services, blue light services.

We’ve been putting a great deal of effort into using Service Design methods to help shape what we do, but in comparison to some other sectors (central government in particular) it still feels quite a nascent approach across the sector as a whole.

The final area in which there has been much debate in the housing sector in recent years is of the Internet of Things and sensor data being used in homes. Whilst there have been lots of trials, the idea that landlords should have sensors placed in people’s homes has massive ethical and duty of care implications – it was for this reason why we created a framework for ethical decision making at RHP last year.

This is a realm with many competing standards, and my hunch is that connected devices will only get significant traction as part of the green agenda where there will be greater rewards to be had from implementing new technology.

What I’ve learned…

I’ve really enjoyed my time in the role. I’ve had the chance to shape a direction for the organisation which will last long after I leave, and probably most importantly I’ve been a part of building a wonderful team. One of the main reasons that I left the world of free-range consulting was because of the loneliness I felt working solo, and leaving the team will be the single biggest bind about changing jobs.

I have learned so much, as well, about the sector. How it operates, where the pain point are, and the challenges of meeting tenant and employee needs when operating at a relatively small scale and with relatively high degrees of regulation.

I’ve also learned how much social housing is embedded all around us. It’s easy to think of the stereotypes of big post-war council estates. But in this part of the world, there are small pockets of social housing dotted all around. I know so much more about my local community now, things that were simply invisible to me before.

One thought on “On housing

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.