Blog December 17, 2020

Building Sustainable Tenancies: New Models for Housing Providers

By MRI Social Housing

Long-term commitment to and investment in a community are the stand-out functions of social landlords. With experience spanning decades, the unique mixture of sustainable households and wraparound support is leading developers to team up with local authorities and housing associations to create thriving neighbourhoods.

Affordability is a foundation of tenant sustainability – and without truly affordable options on the housing market, people will struggle, tenancies will fail and organisations will incur costly voids. In London the aim over the next decade is to deliver 65,000 new homes a year, with 50% of those to being genuinely affordable. It’s unlikely that without the specific expertise around delivering homes for the community that housing associations and local authorities possess, that these targets will be met; the formation of partnerships will be crucial. The success of social housing providers in facing these multiple challenges has been notable, with housing associations in England having doubled in two decades their share of total housing stock from 5% – 10%.

Sustainable Growth

In an increasingly difficult and commercialised operating environment, Registered Providers are excelling in finding solutions that serve residents while future proofing the organisation for employees and future residents. Establishing funding is necessary to build new homes and is also required to raise revenue to continue providing quality resident support and care.

In November 2020 the intention was announced that 60 housing associations alongside investors and lenders would launch The Sustainability Reporting Standard for Social Housing. This would provide social landlords with an opportunity to accredit their ethical credentials as charities and social bodies, in order to capture a share of the £2 trillion ethical investment market looking to invest in ESG (Environmental, Social and Governance) assets. The sector is presently unique in its move to organise its own standards to make itself more attractive to ethical investors.

Housing associations are hybrid organisations, often with philanthropic or charitable roots, that operate on a not-for-profit basis; yet they increasingly compete in the private housing market and source their funding from the corporate bond market. As the 2014 front cover of one housing association’s annual report proclaimed, ‘Socially hearted, commercially minded’.

London School of Economics

Case Study: The Living Wage Joint Venture (JV)

Brighton & Hove City Council and Hyde Housing have entered an equitable limited liability partnership called ‘Homes for the City of Brighton and Hove’, both contributing £60m to the venture. Of the 1000 homes proposed, 100% will be affordable and half of the homes will offer shared ownership status, options given initially only to existing Brighton residents. The remainder will come with tenancy agreements setting rent at 37.5% of the household income for those earning The Living Wage.

The joint venture will establish ‘light-touch’ methods of housing management to give housing officers more capabilities to deal with vulnerable people living within the organisation’s homes. Five-year fixed term tenancies will be offered, where any future rent increases are capped at the cost of living to support residents to maintain their tenancy. Both parties expect that this effective housing management will create a high demand for the properties and ensure sustainable tenancies with low void rates and rent arrears.

Whole Systems Thinking

This project couldn’t have been launched soon enough. Research in 2018 showed that to live in a one-bedroom property comfortably in Brighton & Hove, a household would need to be earning at least £48,000 p/a. In Brighton it’s estimated that 54% of households earn below £30,000.

One of the external conditions for success is a city-wide approach to a fairer deal for supporting people to build stable homes. ‘The Brighton & Hove Living Wage Campaign’ sees 600 local employers across private and third-sector organisations in partnership with Brighton Chamber and has meant over 3,400 people have received pay rises. The campaign is the first and only of its kind that has been established by the business community. This city-wide commitment to whole systems thinking and partnerships with local organisations will strengthen communities along with the wealth of the city.

Working Together

For housing association, Hyde Housing, working with local authorities is an opportunity to share risk, reward and expertise. Peter Denton, chief executive of Hyde envisions a future where for-profit Registered Providers include social landlords as owners. Exploring equity models may help to plug the spending gap, where the English regulator has seen individual unit costs across the socially rented sector and the cost of maintenance rising by an average of 7%.

Broadland Housing group have noted that during 2020 “A new sense of collaboration between housing associations is emerging and awareness that housing associations working together can accelerate change, stretch their resources, and achieve greater impact.”

Mixed Tenure

The models of mixed tenure offered by Registered Providers in the housing market will grow in importance in order to build stronger communities where diverse households can establish firm roots. One challenge these developments may encounter are new rules outlined by the Ministry of Housing, Communities and Local Government (MHCLG), which will change planning applications so that local authorities have less insight into new developments. This includes the introduction of a ‘zonal’ system, whereby sites are labelled for ‘growth’, ‘renewal’ or ‘protection’, as well as proposals that scrap Section 106, which meant councils could mandate affordable homes as a requirement for development.

For social landlords, establishing affordable tenancies with residents can be the reason that households thrive rather than just survive. In order to do the same, private organisations will increasingly be forging strategic partnerships and secure profit-making projects to protect their social mission. In many cases, social landlords with their long-term perspective are more suitably equipped to sustain communities and deliver long-term solutions to the housing crisis.

As community anchors, housing associations are in a unique position. We work in a place for the long-term. We have the capacity to affect the recovery and reset of communities across the UK now and in the future.  There are significant risks ahead of us that we will need to navigate. By working in collaboration, by evaluating and learning from our experience, by being bold in our choices, we will be able to accelerate change, maximise our resources and achieve greater impact as place-based organisations.

Andrew van Doorn, CEO of HACT

Select your region

17000+

clients

10m

units

2.3m

leases

140+

partners

170+

countries