Social Housing – winners or losers post-Brexit? Depends who’s asking
A pre-referendum survey by Inside Housing showed 73% of the housing association chief executives believed leaving the EU would result in increased borrowing costs, while more than half said it would make it harder to build new homes.
Maybe the two thirds of housing association tenants who voted “leave” foresaw something that the Remain camp, failed to see.
Two major housing associations have seen post-referendum instability as a serious opportunity, with their respective Financial Directors taking the bull by the horns, so to speak. Last week Swan Housing Association announced that they had taken advantage of the falling price of government debt in the wake of the EU referendum to issue £60m of retained bonds. Despite being both downgraded and put on a ‘negative outlook’ by ratings agency Standard & Poor’s last week, Swan’s overall cost of borrowing was lower than that at the time of its initial £250m issue in February 2015. Likewise One Housing Group (OHG) restructured £250m of funding, in order to lock in the post referendum low rates.
But as always the impact is multi-layered. Whilst the cost of borrowing is currently lower, there is still the question mark around the longer term impact of the downgrades by Moody’s and S&P’s on the cost of private finance and ultimately the availability of new forms of capital. This will no doubt be on the minds of executive teams in the sector.
Ask the housing association Development Director and they may have a skills issue in mind: the quantity and quality of labour available to actually build the houses for which the loans are secured. Major house builders have warned that housebuilding could be stymied if leaving the EU cuts off the flow of labour from Europe. Between 2007 and 2014, the proportion of EU migrants working in the construction sector in the UK rose from 3.65% to 7.03%. Also, the rising costs of imported materials for housebuilding will no doubt be on their minds too.
Brandon Lewis, the housing minister, campaigned for ‘Remain’, writing in Inside Housing that
“to continue towards our target of one million new homes – and meet that commitment on affordable housing – I am convinced that the UK cannot afford to leave the European Union. I know now that the vast majority of our housebuilding industry – and the investors who underpin it – agree with me.”
But a few days after the referendum I watched as he addressed the Chartered Institute of Housing conference, giving a firm ‘business as usual’ message. Lewis said the referendum result and the impending change of Prime Minister have created a "new world", but the Government remains committed to its housing policy.
Lewis said that the ambition (rather than the target) of delivering one million extra homes by 2020 remains achievable.
"Thursday does make that a bigger challenge than it was before; we are going to have some issues we need to deal with but we've got to be focused. The reality is the country made the decision, I've got to work with that decision and I still want to deliver one million homes in this parliament."
So it’s yet to be seen what the longer term impact of Brexit is, but one cannot escape the perspective of the frontline housing officer in the worst case scenario of a recession. An increase in the vulnerability of UK residents will further strengthen the pressure on affordable housing. The 1% rent decrease, LHA caps, reduced incentive for housing associations to increase the proportion of properties available for social rent. With all of this, frontline staff are already required to deliver more with less resources. One thing is clear: their jobs are unlikely to get any easier.
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