Social housing is facing numerous challenges, both in the current economy as well as in tenant expectations in a post-pandemic era. High inflation rates have caused operating costs to rise sharply, while the cost of debt has also grown significantly. This pressure on resources comes at a time when additional pressure is already being applied by tenants due to increasing costs of living. On top of that, a proposed rent cap and the weakening market for housing only add to the existing difficulties faced by those providing social housing.
During the latest budget, the UK government announced plans to implement a rent cap of 7% over five years. The proposal was designed to reduce overall rental costs by £7.4bn compared to the previously proposed cap limit of 5%. A government impact assessment published in August reported that the 7% limit would in fact reduce social landlords’ rental income by £4.9bn over five years, with a £3.2bn loss for housing associations and a £1.7bn reduction for local authorities.
Social Landlords are tasked with not only maintaining safety standards and improving the quality of life for tenants but also rolling out building safety improvements, sometimes on a large scale. This places them in a difficult position, often requiring them to make hard decisions about where to allocate their resources. With an ageing housing stock and limited access to grants and other financial sources, social housing providers often have to stretch their budgets—and themselves—to serve those who need it most. It is a difficult balancing act between safety, improved standards of living, and financial security that requires precise decision-making in order to be successful
The issue is that greater pressure means less flexibility; with tighter budgets and less space for manoeuvre, it can be difficult to deliver against all goals.
Social housing providers need to consider how best to manage their resources within this context and develop strategies which allow them to stay agile and resilient enough to meet these demands. Fortunately, with entrepreneurial spirit and collaboration, there are ways for social housing operators to succeed even with reduced resources.
“The Chartered Institute of Housing (CIH) has been clear that affordability for social housing tenants and residents is of utmost importance, but rents also need to be balanced with the need for ongoing investment in housing so it’s a difficult balancing act. We support the government’s decision to cap rents at 7 per cent, recognising that this is a maximum limit and not a target. Housing providers will need to look hard at whether they can set rents below this and continue to do all they can to support people through this difficult time.” Rachael Williamson, Chartered Institute of Housing
Everyone is on the same page that housing affordability is an issue. However, there has to be a consideration for the housing organisation and the potential impact the rent cap could have on their income stream. Whilst tenants will be able to better afford housing, there could be long-term consequences as major infrastructure programmes and upgrades will inevitably be looked at as ways to cut costs.
On publication of a recent report by the Regulator of Social Housing (20/10/22), Chief Executive Fiona MacGregor said…
“Providers must take a strategic approach to managing the significant risks we have identified in our Sector Risk Profile and act appropriately to maintain their continued financial viability. Boards and councillors are the custodians of people’s homes, and it’s absolutely vital that tenants’ homes, safety and the delivery of essential landlord services are not put at risk”
With hundreds of thousands of tenants across the country, it can be challenging to effectively balance the requirements of safety and essential landlord services while managing and reducing budgets. Digital transformation strategies offer some possible solutions to this complex problem. But in order to make the most of it, Housing Associations must first identify which areas they should focus on when investing in digital solutions.
Most, if not all, Social Landlords will be well underway with devising and delivering against their Digital Transformation Journey, but this change to income has made many take stock. Many parts of that journey may be mapped against infrastructure changes that may now be put on a ‘back burner’ due to cost implications, so what now? How do the transformation team double down and become even more valuable to the organisation and how do they flex to still deliver with even more efficiency?
A starting point would be to take another look at your digital transformation plan and create a scoring matrix against the new pressures that consider various data sources and stakeholder voices. This involves tracking key performance indicators (KPIs) in order to identify any additional inefficiencies in the systems, validating information gained through customer feedback, and developing a reliable system for customers to express their concerns so they can be addressed quickly and effectively. Constant monitoring will allow organisations to make informed decisions on which areas best benefit from digital solutions while also keeping an eye on overall financial health.
A well-constructed process of data and stakeholder integration demonstrates an organisation’s commitment to making responsible yet innovative changes over time, ensuring long-term sustainability regardless of financial belts being tightened or loosened.
Although this approach takes dedication and ongoing investment, it is essential for staying ahead while still meeting customer needs in critical times. By leveraging both data and stakeholder voices together, organisations can move towards digital transformation with confidence—encouraging innovation and growth without compromising their values.
Of course, there is no one-size-fits-all approach, but a well-thought-out plan with room for flex can be instrumental in helping Housing Associations maximise its benefits for everyone involved. By embracing these strategies during a time of unprecedented challenges, housing associations can still provide excellent service despite financial constraints - helping build a better lifestyle for tenants. It is essential that we continue exploring and investing in digital transformation strategies so that we can help turn the current challenges into opportunities for improved outcomes now and into the future.
This sector has consistently shown itself to be adaptable to a wide range of circumstances and historically, it never fails to be creative with its responses and demonstrate enormous adaptability. But will this latest cluster of challenges mean a further wave of mergers? Is there still real potential for smaller organisations in the future or is scale the only true answer to improving financial health and reducing costs?
It is certainly an exciting time for the industry as it adapts once again. Who knows what the future holds but one thing is certain - this sector has always been adaptable and so far, it has never failed in its response. Technology could very well be the answer. Time will tell.
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