Ian Wilson

Centre for Regional Economic and Social Research

Sheffield Hallam University

The Economic Impact of Housing Organisations on the NorthHSA Value of Housing conference: Wednesday 16th April 2014

• introduce the study

• activities of social housing organisations

• the economic impact of social housing organisations on the North

• factors influencing size of economic impact

• consider Welfare Reforms and their affect on economic impact

In this presentation...

Introducing the Study

• economic impact of social housing organisations on the North in 2011/12:− encompass 'day to day' activities− key metrics: expenditure, GVA & employment− direct and 'in-direct' impacts

• why important…− responds to requests to demonstrate impact− underpin case for housing− add to evidence base− baseline against which to assess change

• funded by NHC plus 7 case study organisations

The Study

• to provide a comprehensive evidence base

• sent to 121 organisations each managing c1,000+ properties

• includes Housing Associations (HAs), Arms Length Management Organisations ( ALMOs) and councils

• 58 responses: c54% of total turnover

• questions covered: stock, building, employment, income, expenditure and neighbourhood investment

Evidence base: Survey of Northern Housing Organisations

A (very quick) overview of social housing organisations activities

• Managing properties:

− just under 1,198,000 dwellings managed

• Building:

− 8,400 new build completions

− 58 responding had 3,100 dwellings in development

• Community investment:

− remit covers more than just housing: 'want to do it & business case'

− links with key Government policy agendas

Core functions which provide economic impact

The Economic Impact of Housing Organisation on the North

Output expenditure

• £5,005 million output expenditure into local economies

• in addition every £1 spent generates a further £1.05 in the supply chain...

• ...therefore social housing organisations support £10,269 million total output expenditure

Gross Value Added

• produce an estimated £1,699 million in Gross Value Added (GVA)

• this is approximately 0.6 per cent of total Northern GVA

• including indirect GVA social housing organisations support £4,646 million: 1.4 per cent of total.

Employment

• employ 46,200 employees at workplaces within 3 Northern regions

• that working in 'manufacture of motor vehicles' and 'call centres' combined

• 41,600 FTE employees work within 3 Northern regions

• plus for every FTE directly employed a further 1.8 FTE are indirectly supported: 116,900 FTEs in total

Direct Impact

'Indirect' Impact

Total Impact

Output:£millions

5,005 5,264 10,269

Gross Value Added:£millions

1,699 2,948 4,646

Employment:(FTEs)

41,600 75,200 116,900

       

Economic Impact on the North: summary

Factors influencing size of economic impact

• Income: gross expenditures

• Procurement: regional sourcing

• Composition of expenditure: multiplier effect

Total 'income' was £6,499 million, of which:

Net rental income

67%

Management fee7%

Loans6%

Affordable Homes

Programme5%

Sale of other fixed assets

3%

Supporting People

2%

Other10%

Income

Procurement

• Gross expenditure was £6,940 million of which £5,005 million - 72 per cent - was sourced locally

• recognise responsibility to local communities and potential opportunities afforded to deliver economic, social and environmental objectives

• e.g's of procurement policies and practices:

− panels which include many local suppliers

− assist local SMEs to meet criteria to get onto panels

− social contracts: e.g. take on apprentices

− buying power to influence suppliers

Composition of expenditure (1)

• how organisations spend their money affects the size of the multiplier effect (indirect impact)

• construction, major repairs, refurbishment = larger effect

• financial and business services, transport/post/ telecommunications and labour costs = lower effect

Composition of expenditure (2)

Other

Hotels/distributions

Rents and rates

Community/N'hood Investment

Transport/post/telecoms etc.

Energy/water for offices/HQ etc.

Purchase of other fixed assets

Finance and business services

Construction of housing

Direct labour costs

Major repairs and maintenance

Refurb. & purchase of housing

0 5 10 15 20 25 30

11

1

1

1

1

1

2

2

12

17

25

27

Percentage of net expenditure

Welfare Reforms: potential affects on economic impact

Welfare Reforms: potential affects on economic impact• Removal of Spare Room Subsidy/Bedroom Tax

– HB paid based on 'need' = reduced entitlement for c240k, who collectively faced £168 million shortfall

– impact unclear: evidence increased arrears & collection costs, but not as bad as first thought...

• Direct Payments

– housing benefit paid directly to tenant within Universal Credit

– impact unclear: increase in arrears for previously low risk tenants; DPDP DWP figures show 94 per cent rent collected (14 payments)

• Benefit Cap

– cap on total benefits

– impact unclear: 'fewer' tenants affected, but those who are arguably least able to deal with a shortfall

Welfare Reforms: potential affects on economic impact

• Income: increased arrears = reduced income

• Composition of expenditure:

− increased rental collection, management, financial awareness ... associated with a smaller multiplier effect

− how is this achieved?... less work on high multiplier activities such as construction and major repair works?

• Procurement: likely impact limited; plus e.g. Public Services (Social Value) Act & Localism Act give more weight to local purchasing = less leakage

Summary

Summary

• housing organisations are an important component of local economies

• total impact (direct and indirect) on the North:

− output: £10,269 million

− GVA: £4,646 million

− 116,900 FTE employees

• housing organisations are faced with considerable 'challenges' which could diminish impact

• important to consider how decisions affect: income, procurement and composition of expenditure

Thank you

Reports and video available at:

http://www.northern-consortium.org.uk/economy

Ian Wilson:

• i.wilson@shu.ac.uk

• 0114 225 3539