Index linked

The big news in housing association finance this year will centre on efficiency. For starters, the Housing Corporation is set to issue its financial efficiency index. Meanwhile, a fresh version of the corporation’s first index, the controversial operating costs index, will be published in January.

The financial index is, however, unlikely to provoke the furious response that the operating costs – aka “efficiency” – index did in 2004, because many financial measures are standardised. But there are several areas that could spark a debate, such as the effective interest rate.

As the trend for mergers gathers pace, some of the biggest associations will start to nudge up against their borrowing limits. This means they’ll be looking hard at how they can increase their ability to borrow, and banks, keen to continue lending to their big customers, will be eager to find ways to help.

Lenders will also be looking at the implications of associations bidding for grant for private developers. The scheme will not be regulated in the same way as conventional grant and that worries the banks.

Building cost index

There’s bad news for anyone hoping to build homes in 2005: the cost of building is set to continue rising as labour and materials both cost more and more. Most wage rises continue to outstrip inflation and materials prices have risen sharply as a result of rocketing steel prices in particular.

Peter Rumble, managing technical editor of the Building Cost Information Service, which provides the indices, says: “Further wage increases in January for electricians and plumbers, and the threat of further steel price rises at the beginning of the year, are likely to put further upward pressure on the cost of building houses.”

Contractors will also be anticipating strong upward pressure on the cost of materials when negotiating fixed-price contracts, because of expected steel and oil price increases.

Once the homes are built, however, there’s a chance of recouping some of this extra cost because house prices are set to continue rising. The Royal Institution of Chartered Surveyors expects a rise of 3% in house prices based on the ODPM index.

The first half of 2005 will be fairly weak as the impact of interest rate rises continue to feed into weak buyer affordability. But with the economy continuing to display underlying strength, and growth in new jobs, a mild rebound in the housing market is likely in the latter half of 2005.

Homelessness

What’s the story?
Homelessness topped the political agenda at the end of 2004, as the number of households in temporary accommodation exceeded 100,000. With an election looming, the government will want to be seen to have the problem under control and emphasise its successes.

Temporary accommodation is going to be the next homelessness priority. Officials are talking to councils and associations that provide permanent housing for homeless families and versions of their projects could be replicated elsewhere.

Charity Crisis has called for more people to be recognised as homeless, such as sofa surfers and people in temporary homes who have not asked the council for help.

It estimates the true number of homeless people, including children, is 500,000.

What’s the sector saying?
Everyone agrees that something needs to be done about the rising numbers in temporary housing, but that this must not be at the expense of other groups, such as rough sleepers. However any scheme would need public subsidy – either for council homes or for the purchase of property on the open market. The question is whether the subsidy will be enough.

In the long term, deputy prime minister John Prescott seems to be setting a lot of store by his housebuilding programme as a way to end the housing shortage.

And despite hints last year, Prescott has said he doesn’t plan to revise the official definition of homelessness. He is, though, keen to emphasise the difference between people sleeping rough and those in good-quality temporary accommodation.

What happens next?
The ODPM is about to commission a year-long research project into the support needs of people in temporary accommodation. Talks on models of permanent accommodation are set to continue. The ODPM select committee’s report on homelessness is likely to be published in spring and the government is to revisit guidance on the groups of homeless people who are a priority for rehousing.

Plans to change guidance on priority needs categories will be welcomed by charities if they force councils to accept more people are homeless, but the more stretched authorities are likely to demand extra help.

Grant to developers

What’s the story?
The 2004 Housing Act included permission for the Housing Corporation to pay social housing grant to organisations other than housing associations for the first time. Private developers Taylor Woodrow, David Wilson Homes and Crest Nicholson have all said they’ll bid.

Arm’s-length management organisations are also preparing to pile in: Hounslow Homes, Westminster’s CityWest Homes, Derby Homes and First Choice Homes in Oldham have all expressed an interest.

What’s the sector saying?
Contention over the Housing Corporation’s decision to give grant to private developers smouldered in 2004 and will burn brightly when the pilot scheme begins in February – especially since chancellor Gordon Brown (below) said in December’s pre-Budget report the “pilot” would be extended to much more of the corporation’s annual £1.67bn budget.

Not everyone’s opposed: it would throw an unlikely development lifeline to social landlords such as Notting Hill Housing Trust and the Peabody Trust, which were not on the corporation’s list of those who would receive grant under its new system of long-term partnerships.

What happens next?
Who gets what will be revealed in July. In the mean time, how housing associations are regulated will become a hot topic, as registered social landlords continue to clamour for a level playing field in the conditions imposed on organisations undertaking corporation-funded development.

As private sector organisations will be held to “accreditation contracts”, with pressure mounting from the Treasury, corporation chief executive Jon Rouse will find it increasingly hard to resist regulating all associations receiving grant by contract. The same approach would have to be extended to non-developing RSLs as well – in other words, all other housing associations.

Future of the NHF

What’s the story?
It’ll be the end of an era for the National Housing Federation in June when the 16-year reign of chief executive Jim Coulter comes to an end.

Coulter is one of the old guard of housing who have watched the sector’s transformation since the start of the 1970s. Will the Fed follow the example of the Housing Corporation and recruit a relatively young outsider, like the corporation did in 2004 with chief executive Jon Rouse?

What’s the sector saying?
Many housing association chief executives are of the same vintage, so the smart money’s on Coulter’s replacement spearheading the rise of the next generation.

It’s also likely that the federation’s new head will have experience of the charitable sector but not necessarily of housing.

So far, potential candidates have been more keen to rule themselves out than publicly to throw their hats into the ring. But headhunters are on the case and the National Housing Federation is whittling down its longlist as you read this.

What happens next?
Interviews will take place at the Fed’s February board meeting, and the successful candidate should be announced in March.

As for Coulter, he’s heading back to his native North-east and has had a number of offers of work in the social housing sector.

Source

Housing Today