NHF Future of Welfare Reform
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Transcript of NHF Future of Welfare Reform
The social housing regulator
Successful places with homes and jobs
A NATIONAL AGENCYWORKING LOCALLY
Rent reduction and Pay to Stay: What are the implications?
The social housing regulator
Life was already getting more complex for providers Gone: core assumptions
about rented products
Gone: the grant/bank debt funding model
Going: Rents always going up
More market exposure
Complex choices for Boards
Opportunities and risks
A more cyclical model
The social housing regulator
And then this happened…
The social housing regulator
Rent Reduction
Announced in the July 2015 budget
Included as part of the Welfare Reform and Work Bill 2015
Introduces a 1% rent cut for 4 years for all social housing (social rent and affordable rent) held by registered providers
Introduction date of 1 April 2016
Currently at the ‘Report’ stage in the House of Lords (25 January 2016)
Detailed regulations that support the Bill to follow
The social housing regulator
Main aspects of the Bill 1% rent reduction to social housing stock for four years
Low cost home ownership is not included within the Bill
1% reduction to be made within the new concept of a ‘relevant year’
Introduced a new implied term into tenancy agreements overriding any contractual restrictions on rent changes
Baseline rent to be used for the reduction set at rent as of 8th July 2015, although a new general consent announced which providers can use should their annual rent setting date be after 8th July
Bill contains provisions for the enforcement of the rent reduction through the use of the regulators existing powers under part 2 of the Housing and Regeneration Act 2008.
The social housing regulator
Specifics - Exceptions
Exceptions in the Bill outline where Section 21 (requirement to reduce rent) do not apply
Property subject to a mortgagee, receiver, or other party being in possession is excepted from the Bill
Bill outlines that Regulations will outline further exceptions
Government Impact Assessment on the Bill states that further exceptions may ‘include the types of accommodation and tenants that are currently exempted from the Rent Standard will continue to be exempted’
The social housing regulator
Specifics - Exemptions Exemptions replace ‘Waivers’ under the previous rent regime
Exemptions from the rent reduction requirement are much narrower in scope than waivers under the Rent Standard.
Exemptions will only be given where the financial viability of the organisation would be jeopardised by compliance with the legislative rent reduction following implementation of a full range of mitigating actions
A detailed business case and supporting evidence will be required from the provider as part of the process for obtaining an exemption
An exemption can only be granted if the Secretary of State consents
Exemptions can be given to the whole of the provider of can be limited to defined stock
Guidance will be issued by the Regulator
The social housing regulator
Specifics – Rent Setting
Requirement around rent setting set out in Schedule 2 of the Bill
Definitions of Formula and Affordable rent expected to remain unchanged
10 % Rent Flexibility on top of formula rent for supported housing is to be retained
5% rent flexibility for General Needs accommodation is to go for new stock and all accommodation that has not had it applied to date
We are expecting the social rent floor for affordable rent to be included within the bill before Royal Assent
The social housing regulator
Rent Reduction – Next steps
Royal Assent is expected from late February onwards with the regulations (including details of exceptions to the reductions) being released as soon as possible
Boards of providers need to take an informed decision on how they will comply with the legislation
Regulator will publish guidance on exemption criteria
G&FV Standard requires compliance with “all relevant law” – likely route of regulation of the reductions
The social housing regulator
Pay to Stay
Introduced in the Housing and Planning Bill
Builds on existing scheme brought in in April 2015
Makes it mandatory for Local Authorities to charge high income tenants up to full market rent
Enables PRPs to voluntarily charge up to market rent to high income social tenants
PRPs must publish their policy on high income social tenants if they have one
The Act makes provisions for the sharing of income data with PRPs
Further detail is expected in the regulations that support the Bill
The social housing regulator
The social housing regulator
Is this the future of social housing policy?
The social housing regulator
The business model for providers is changing…
ASSETS
Right to Buy
New Develop-
ment
DiversificationHousing Market Sales
Existing Stock
The social housing regulator
And the financing of that business is becoming more complex…
LIABILITIES
Counterparty Risks
Liquidity
Existing Debt
New DebtIndex Linked
Debt
Hedging Strategies
Accounting Issues
The social housing regulator
There are some key issues for boards and exec teams to consider What is the right strategy for our business?
Where do we want to be in 5 -10 years?
What do our charitable objects means for us in this new world?
What is the right development mix for our business?
What is our home ownership offer for our tenants?
The social housing regulator
What is the role of the regulator? We don’t have the answer for your (or anyone else's)
business We seek assurance that boards and executives are
managing the business effectively and have a thorough understanding of their risks
Where we have concerns that this is not happening it is reflected in our regulatory judgements and we look to providers to remedy the situation
Where they can’t or won’t respond then we look to use our power proportionately to bring the provider back into compliance with our standards