SNG chief: sector funding model needs ‘major surgery’

Mr Washer said that in the short term, a 10-year rent settlement and a return to rent convergence is needed. But he said in the longer term there needs to be a fresh funding model that thinks about new forms of ownership and government investment.

He said: “We need to pretty quickly – and we should be able to do this I think, working with government – redirect the £3bn that goes in temporary accommodation spent by local authorities every year. So, there are opportunities. I am positive, but I think we have to say this needs major sort of surgery.”

Mr Washer said that the sector must think “more widely” than it perhaps has done in the past and that he is more open now to not owning the assets of homes.

He said from conversations with insiders, he believes the government wants to come up with different solutions. For Mr Washer, potential solutions could include include grant, other forms of funding, and other forms of ownership.

“We do need to think about different forms of government investment, which might not simply be grant, it might be equity, it might be repayable loans, it might be some form of underwriting,” Mr Washer said.

He added: “I am far less wedded to owning the assets that we buy or build than I have been for all of my time in housing. Because otherwise, I think we’re simply not going to be looking at those opportunities.”

Rosemary Farrar, chief financial officer at Platform Housing Group, agreed and said that she believes there is an opportunity to bring in some more equity involvement in the sector.

“I think for housing associations which are clinging on to that whole part of the model [of having to own their homes], I think that is gone, it’s past,” she said.

Priya Nair, chief executive of The Housing Finance Corporation, said that for some of the structures the sector is thinking about from an innovation perspective, assurances will be needed around what the governance looks like as a consequence. For example, if there is a separation of owning from managing homes.

“A topic that I think needs to be addressed very pertinently is, how are these newer financing models using the proceeds, what are those proceeds being used for?” she said.

“So, an alignment of who you’re partnering with, what those proceeds are being used for; that is something which needs to be addressed, because we talk about private capital as a general how do you crowd in, but it’s such a vast universe.

“There’s equity, there’s debt, there’s even – within debt – what are the different costs of capital? So, there are assurances to be had as we look at bridging the innovation gap that are very particular to the sector, but [it] needs to be looked at with an open mind.”

Ms Farrar said that the government needs to sit down with the sector and talk about how to make the funding model work.

She said the sector faces a crisis in the short term that requires some sticking plasters.

Ms Farrar said making adjustments to rent control would be “very welcome” and finding a way of increasing the grant payments to the sector by adjusting the way that grant is calculated in Treasury terms would also be “extremely welcome”.

“I think the model needs to be better understood,” she said.

“Sitting down talking to us, as opposed to house builders, would actually be hugely beneficial for the economy generally.”

Jess Tomlinson, managing director, head of real estate and housing at Lloyds Banking Group, added to calls in the sector that housing should be thought about as a piece of national infrastructure. She added that collaboration on “how do we crowd more private finance into the right models” is needed.

Ms Tomlinson said: “We think about our energy system, our transport system, our digital infrastructure as national infrastructure, and we need to think about social housing in the same way. It’s a fundamental building block of a strong economy.

“But the current funding model is under real pressure, and we need to think about new ways of approaching it.”

Ms Tomlinson added: “And one of the things we’ve got to figure out with government, and as an industry is, how do we crowd more private finance into the right models that will support the kind of housing that we want to see in our economy?”