HCA proposes new VfM standard and predicts sales income peak

Julian Ashby, chair of Homes and Communities Agency’s regulation committee, said the agency will consult on a new standard just after the election.

The standard will propose a suite of metrics drawn from the 15 indicators that make up the sector scorecard, as Social Housing revealed in January 2017.

Mr Ashby told delegates at the Social Housing Finance Conference yesterday that the code of practice would give examples to help associations better understand and comply with the code but would not set out any additional requirements.

He said over 200 associations had signed up to the scorecard, which was created by the efficiency working group.

Sales income to peak in 2019

Mr Ashby also told the audience that income from open market and first tranche sales was expected to peak in 2018/19 at double its 2016 level of £2.8bn, according to figures from associations’ financial forecast returns.

However two thirds of income would still come from social housing lettings by 2020/21. He said: ‘The fact that two thirds of the business is market-proof is an enormous strength in a downturn.’

He said £11bn of the £35bn the sector expected to invest over the next five years would come from debt with the rest from surplus and reserves.  

He said gearing would remain ‘broadly unchanged’ and EBITDA MRI would have a modest increase.

He said the agency found it ‘reassuring’ that the majority of non-social housing work was carried out by a small number of providers because large, financially strong, experienced specialist organisations have good prospects of coping with adverse circumstances.

However the HCA was ‘not always so reassured’ about the financial indicators of some of the small number medium to large associations that plan substantial non-social housing work relative to their size.

But he said the agency can use data to identify vulnerability to systemic risk and then carry out In-depth Assessments (IDAs).

He said: ‘The growth and concentration of non-social housing will be matched by evolution of IDAs. They are bespoke but we will further develop the methodology.’

He said the ‘problem cases’ that the agency deals with tend to involve governance and executive failures, such as poor stress testing or serious problems with assets and liabilities registers.

He said that two years after the introduction of the requirement to keep up to date asset and liability registers, the agency expected associations to have implemented them and ‘the working towards compliance excuse will not be acceptable’.