New research from Baker Tilly finds the impact of the credit crunch on housing associations has intensified dramatically over the last year, with many now planning to build fewer properties and cut staff numbers.
The study, which questioned senior social housing executives with a joint responsibility of 750,000 units, found that the proportion of associations affected by the economic downturn had risen from 78% to 96% in the space of around six months.
Out of the 61% of organisations that said they are actively reducing their overheads, 32% claimed to have put recruitment on hold, whilst 18% said they had made staff redundant.
Much of the current pressure on costs appears to come from financial institutions. Compared to 31% last year, 46% of housing associations now say they are experiencing difficulties with banks when renewing facilities. The increase in lending charges is cited as the biggest problem, while 26% claim banks are currently unwilling to lend to them.
Difficulties with banks appear to be compounded by an increase in rent arrears and bad debts, with 81% of associations claiming to have experienced an increase in this area over the last six months.
The fall in the number of property sales continues to have an impact on social housing organisations. In autumn 2008, 54% said they were no longer building new commercial development to help fund social housing projects. This has now risen considerably to 78%.
81% indicated that shared equity scheme sales had become increasingly difficult in the last six months, with 84% converting properties to alternative use.
Other key findings include:
Gary Moreton, partner and chair of Baker Tilly's Social Housing team, said:
"“Housing associations are clearly not immune to the impact of the credit crunch. The proportion which thinks it will affect the sector has risen to 96% and expectations for a full economic recovery have lengthened considerably.
"Cost-cutting and other restructuring programmes are now, however, in full swing and the vast majority of associations have revised their risk strategies and financial forecasts.
"Most organisations do seem to have drawn up tailored survival plans which include greater use of IT for efficiencies, the formation of strategic alliances and the redistribution of effort away from commercial property development. The fact that nine out of 10 associations believe the current climate offers an opportunity for their organisation should certainly be viewed positively.
"Associations cannot afford to be complacent as over the next 12 months further challenges will present themselves, not least coping with a possible change of government and significant reduction in government spending.
"Associations that remain alert and operate pro-actively will be in a stronger position when the economy does recover."
London and Quadrant Group (L&Q)
L&Q was granted planning permission to build a mixed tenure development in a historic conservation area of North London.
Kingsland Basin in the London Borough of Hackney was built in the 1820s as a loading and unloading depot for goods and materials being transported via the Regents Canal.
L&Q's site includes two listed buildings that historically provided stabling for the horses which dragged the carts containing the transported goods.
The site is within walking distance of the East London Line station at Haggerston, which is due to open in Summer 2010 and just a couple of miles north of Liverpool Street and the City of London.
L&Q plans to build 207 homes (42 for rent, 24 for shared ownership and 141 for private sale), a health centre, a cafe, shops and 5,400 square metres of employment workspace.
L&Q will also open up the area for greater leisure and recreational use by the public, and introduce more planting to provide a tranquil haven for aquatic birds and other creatures.
Construction work is scheduled to begin in September 2009, with the first phase of completions due in 2011.
Places for People
One of the UK's largest property management and development groups is set to offer its own mortgage range on a major new development in Milton Keynes.
Places for People is believed to be the first housing group to offer its own mortgages. The Group is offering homebuyers a number of new finance products at its WolvertonPark development.
Wolverton was the world's first railway town and former home to the Royal Train. It has been extensively redeveloped by Places for People to provide 300 new homes, shops, offices, and leisure facilities.
The finance products on offer include:
The products are being launched due to the high interest from buyers in WolvertonPark, yet who are unable to access or afford the necessary finance to purchase their own home.
There are two mortgage products: a fixed lifetime tracker rate of 4.55% and a two year fixed mortgage deal at 5.99%. The products are not restricted to first-time buyers, or those with a certain household income. The only restriction is that the property must be the main residence of the purchaser. Places for People will not be selling to investors.
The scheme is limited and available only at WolvertonPark. It is subject to status and affordability.
Presentation Housing Association
The Tenant Services Authority (TSA) announced that it has removed Presentation Housing Association (PHA) from supervision. This move follows a series of improvements in performance and a decision by PHA to join the Notting Hill Housing Group as a subsidiary.
PHA, which owns and manages around 6,000 homes across London and the South East, was placed under supervision by the Housing Corporation in July 2008 because of concerns about its governance and management. The Corporation used its statutory power to make three appointments to the board of PHA, and these continued under the TSA's authority.
PHA have delivered on all the key actions required to address the regulatory concerns and also took the opportunity to review its strategy for the future. This review resulted in the decision to enter into a partnership with Notting Hill.
The appointees, Tracey Fletcher, Susan Reizenstein and Tom Dacey, are standing down from the Board with immediate effect.
