It's time to redefine the role of housing associations, says L&Q and PwC report

The role of housing associations should be redefined to meet the challenges of the new “age of austerity” in public expenditure, a report by L&Q and PricewaterhouseCoopers has claimed.

The report – Hard times, new choices – calls for a new contract between housing associations and government.

Its key conclusions include:

• Meeting the increasing need for housing as the country’s population grows and government funding reduces “requires radical new thinking”. Far more money will have to be generated from other sources. “As non-state, third sector providers, with sizeable assets, housing associations can make a strong contribution”
• Housing associations will need to be more autonomous in the future. “This will involve improving their financial strength, generating a surplus on their core business and using that surplus to meet more housing and community needs”
• Where housing associations are willing to contract to generate extra financial capacity, and to work using lower housing grant rates and public equity funding, the government “should in return contract to offer programme certainty for three to four years, greater availability of publicly held land for development, a degree of rent and asset management flexibility, a benefits system which supports associations’ creditworthiness, and a conducive regulatory environment”
• With the right freedoms and flexibilities, housing associations should be able to sign up to a new contract with government.
• Increasing the number of pathways to home ownership will allow associations to do much more. “Using a proportion of housing association voids for intermediate market sales or rent, and possibly market sales, would generate significant extra financial capacity to increase total affordable housing supply at lower public grant levels”
• A more flexible rent regime could deliver big economic and social benefits in housing
• Rent-to-buy options are needed and could be used to bridge the demand gap created by ongoing restrictions in mortgage credit. “A new form of time-limited intermediate housing tenancy, aimed at lower paid working families on housing waiting lists, could encourage social mobility, encourage employment and produce considerable additional borrowing capacity for housing associations to build more affordable homes”
• In pursuing a more coherent and logical welfare benefits system, the government should recognise the potential implications of housing benefit reform on housing association business plans and on future affordable housing supply.
• Housing associations gain strength and financial leverage from regulation that is independent, credible and effective. “As housing associations take on additional risk, credible, effective regulation has to be maintained”.

L&Q and PwC said: “Housing need does not respect public debt levels. Indeed, need tends to grow in economic conditions which mean public funding is in short supply.

“We now face a level of public debt which is virtually without precedent, matched with housing market dysfunction across all tenures.”

The report claimed that housing associations are in a relatively privileged position at present. “They combine strong creditworthiness with a flexible operational structure derived from their third sector status. What is more, they still have considerable scope through smarter use of their assets and improved efficiency to up their game, even in these difficult times.”

It said housing associations were affected by the public finance situation but not to the same degree as local authorities. “The challenge to housing associations is nothing less than to change the way they think and change the way they do business,” the report added.

The government, it argued, should allow associations the tools and flexibility “to do a job that government is no longer in so strong a position to do itself”.