Delivering the Affordable Housing Programme

Brian JohnsonChief Executive, Moat

Moat

• South East focus

• Mixed tenure

• Service quality

• Innovation

• Local authority relationships (60 local authorities in 2008/9, 40 today)

• Local HomeBuy Agent for Essex, Kent and Sussex

• Develop 600 new homes each year

• Number of properties:

Rented and other 13,333 Shared Ownership 4,478 Equity Loans 2,889 Total 20,700

Social and affordable rent

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conversion of existingproperty to affordablerent

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Revenue subsidy

Capital subsidy

Is affordable rent working?

Moat• 168 conversions to affordable rent• £36,000 extra ‘subsidy’ created per new home

– (£40,000 in HCA offer)• 67% residents on benefits• No impact on void turnaround• Arrears no different to social rent

But• Not doing 4 bed properties• Capping rents at £180pw

Shared ownership

• Trends – profitability, staircasing

• Good product for South East

• Needs tweaking to promote staircasing

• We believe delivers £50,000 per home of social value

Shared Ownership

150000

155000

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185000

2009/10 2010/11 2011/12 2012/13

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2008/9 2009/10 2010/11 2011/12 2012/13

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redemption staircasing

This programme to 2015

• Bond funding remains buoyant

• S106 still in good supply

• Increased Moat programme size on back of rent increase

2015 and beyond

There are two issues on financing:Borrowing• Most housing associations will hit one of the three borrowing constraints in the next ten years:

1. Ability to meet interest costs (interest cover)2. Ratio of borrowing to assets (gearing)3. Ability to secure borrowing with assets

• The first is controllable by reducing costs• The second and third might be relaxed to some extent by the government guarantees but this is by no means certain

Subsidy• Subsidised housing requires subsidy! This can be capital subsidy or revenue subsidy (housing benefit)• The move towards revenue subsidy makes constraints 1 and 2 above more severe

Institutional investment?

The only attraction to institutional investors of subsidised or low end private rented sector housing is inflation linked income

We want more rented homes

CLGLet’s attract institutional investors

Treasury

It’s a “no brainer” that housing

benefit should not increase with

inflation

DWP and many government MPs

Institutional investment?

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social rent affordable rent

Revenue subsidy

Capital subsidy

• It will only happen if housing associations take on the risk of rent inflation• Should housing associations take on that risk given that it is unpredictable?• Might the loan guarantees begin to answer that?• Do the different government departments understand the inter-dependencies?

What are the opportunities

Creating subsidy from existing homes• Rent models• Shared ownership staircasing

Local authorities• Local vehicles utilising Housing Associations and Local Authorities (HRA) surpluses', LA land, RTB receipts and HA access to funds• Operational efficiencies

Cross subsidy from other activities• Private rented or open market sale• Be very careful that risk is understood and really tested against what is appropriate• Housing Associations run to very long business cases, developers to very short ones. Their respective funding structures reflect this.

So, what should we do?

Deliver Influence

Relentlessly reduce costs Coherent housing and housing benefit policies

Sustain high credit ratingsEnd the destruction of £75k of value

in every RTB sale

Develop and deliver better integrated products that can ‘pop out’ subsidy when not needed

Work with the spirit of the welfare reforms but influence the implementation

Push our understanding of all of the potential financing options

Be very careful that we understand what risksare appropriate – avoid self-delusion

Work much more closely with others – especially local authorities

Conclusion

Current programme is going well for Moat• Schemes available• Affordable rent working• Shared ownership good• Funding fine

Future more uncertain• Some controllable elements• Better performance and relationships essential• Huge political uncertainty