Branch Secretary :

The Facts of the Matter

By Suzanne Muna (Branch Secretary) and Paul Kershaw (Branch Chair)

Links to all the documents and sources of information are provided at the end of the document. The bracketed numbers provide the source.

In this section we explore:


This is a large, healthy and increasingly diverse sector for investors …

The sector has benefitted hugely from favourable economic conditions in recent years. Wages have stayed relatively low, meaning that the sector has been able to grow fat.

In total, housing associations (HAs) owned almost 3 million units and bedspaces in March 2016 representing an annual growth of around 2%. Most of this growth (70%) was in general needs which increased by 37,000 units in 2015/16 (1).

There is consolidation of stock in an ever smaller number of associations. Less than 5% of the HA population owns more than half of all the sector’s stock, and 95% of the sector’s stock is owned by just 332 of the 1,500 active HAs (3). The trend is toward a transfer of stock from smaller to larger associations (1).

Running alongside the consolidation trend, the sector is also diversifying. The development of properties for outright market sale and shared ownership has grown, and HAs have increasingly relied on unregulated subsidiaries, joint ventures and special purpose vehicles to deliver their development programmes (2).

The gross value of housing properties owned by HAs increased to £138.1bn – a jump of £7.1bn. There are also other fixed assets worth around £88bn. Turnover increased by 4.1%, to over £16bn (3). Not surprisingly, surpluses have repeatedly hit record highs. The 2015/16 net surplus was a staggering £3 billion (2015/16) (3), and this represented a massive 25% increase on the previous year, which was also a record high. Surpluses on non-social housing activities alone was £172m in 2015/16, a rise of £55m in one year (2) and (7).

Associations are adding to their surpluses by developing a bigger proportion of homes for market rent and for outright sale (2). The latter in particular is an increasingly significant income stream for the sector. In the 2016/17 financial year, associations anticipate market sales reaching £2.3bn - an increase of over 300% on 2012/13 (2). If this trend continues, it will shift the focus of HA boards away from social housing (and social purpose) to emphasise more profitable market rents and sales activities. It is already the case that less than half of the income for many associations based in and around the London region derives from social housing (8). As such, their complaints over the terrible impact of the 1% cut appear somewhat hollow. For example, social housing represents just 41.8% of One Housing Group’s income, around half of Peabody’s income, and just under 53% of Catalyst’s income (8) - all incidentally organisations that Unite has been in dispute with over their attacks on the pay and working conditions of their staff.

To exploit this wealth even more for the benefit of private capitalists, City AM announced on the 1st November that an attempt was being made to launch a Real Estate Investment Trust aimed specifically at social housing. The unique selling point of this new body, Civitas Social Housing, will be that it will avoid risky new-build development schemes and instead funnel investment into existing social housing to turn a profit. It anticipates a very healthy return of around 5% for shareholders (13).


Nonetheless tenants and workers are being squeezed ever harder …

Despite its wealth, the sector has used the flimsy excuse of needing to manage the lost income from rents and welfare reforms to justify its reduced investment in repairs and services to tenants (2). Between 2016 and 2020, spending on major repairs are forecast to fall 10% (a 16% real terms reduction) (2), and spending on management and services are set to fall 5% per unit (a 12% real-terms reduction) (2). Associations even blame the National Living Wage increase as driving the need to cut the pay of other workers, particularly in the social care sector. It is indeed a race to the bottom (2).

Staffing costs are also coming under attack through another route. Julian Ashby, Chair of the HCA’s Regulation Committee wrote about the need for associations to keep pension costs under close scrutiny “Registered providers need to take a view on the balance between cost, recruitment and retention, and pensions’ provision for staff should be regularly reviewed to ensure it remains fit for purpose.” (2). Although not spelt out directly, many would interpret this as a pressure from the Regulator to reduce the pension costs of staff.

But of course the pay of chief executives and senior managers is not subject to the same squeeze – on the contrary. An Inside Housing poll of the 177 largest associations showed that the average pay rise for sector CEOs was in excess of 3% annually, with average bonuses rising 10.7%. Places for People Chief Executive David Cowans tops the pay league with a whopping 9.8% increase taking his basic pay to £528,870 (15). 

The point that cannot be emphasised enough then is that there is absolutely no justification for cuts to staffing levels, pay, pensions, or other worker benefits, nor is there any need to scale back on repairs and services for tenants. HA operating margins have risen annually (up to 28% in 2015/16 from 26% in the previous year), therefore rising costs are not the problem that the executives of HAs would have housing workers and tenants believe. In fact, where associations are having financial problems it appears be either because they have decided to lay off swathes of their staff, or because their brilliant entrepreneurial skills turn out not to be so brilliant after all. And to conclusively place the 2% growth in operating margins into context, estate agents and property consultants Savills have said that “An increase in operating margin of more than 1% is actually quite impressive.  A lot of the big PLCs would be pretty happy if they were achieving that” (8).


And Little is Being Done to Ease the Housing Crisis …

Affordable Rent stock (using the government definition of up to 80% of market rates) increased by 31% and now stands at over 161,000 (1). Nonetheless, there remains a desperate need for homes at truly affordable rents. Housing charity Shelter points to 50,000 homeless households mainly living in temporary accommodation, and over 2,000 people sleeping rough (4).

Trends such as the growth in building for outright sale, implementation of Right to Buy, and stock transfers from councils do little to help resolve the housing crisis. Almost half of the sector’s ‘growth’ reported in 2015/16 came from one council transferring its homes to a housing association (1); a change in landlord rather than an actual increase in the homes available for rent. According to a survey by Inside Housing, 31,988 homes were completed by the top fifty HAs in 2015/16, representing a 20% fall compared to the previous year.  Yet only 16.8% of these units were social housing (6). Supported housing increased by 6.5%, although this represents just 7,700 units and bedspaces (1). Even this upward trend is a bit misleading however as it is partly accounted for by a reclassification of some stock. These movements give the lie to the oft-repeated claim that housing associations would fill the gap left by the retraction of council house building.

Indeed, a large quantity of stock now owned by HAs originated as council stock built with public funds. The majority of council stock transfers occurred between 1990 and 2009, with over 1.2 million council homes moving into HA ownership (1). The freedom that HAs have to dispose of this stock as they wish, even when tenanted, will be vastly increased through the ‘de-regulatory’ measures proposed the Housing and Planning Act. The Act will remove the requirement for HAs to seek the Social Housing Regulator’s consent for mergers and disposals of social housing property (2). This will make HA tenants vulnerable to transfer to a private landlord.

The bottom line is that this is an increasingly commercialised sector where market forces rather than social good drives decision-making. If an income stream becomes less profitable, HAs are able just to withdraw from provision. This is currently happening to Housing for Older People, with a fall of 1,349 units, representing a 0.4% decline in one year (1).

There is also a steady trickle of social housing stock out of the sector. The percentage of social housing stock lost from the sector rose by almost 17% from 2015, driven largely by significant increases in sales of ‘Social HomeBuy’ and other socially leased units (up almost 26%) and in disposals (up 48%) during the year (1). Given the declared intention of some associations to get out of social housing, and the undeclared intention of others to do the same, these are indeed alarming figures. 

When the tiny amount of social housing being built by HAs is offset against the number of disposals, the net contribution of HAs to the stock of social housing is minimal, revealing another lie at the heart of the sector’s preferred narrative. The vast profits on non-social housing activity are often excused on the grounds that it fuels investment in social housing activity, yet there is little evidence that the profits are being used in this way (9). Thus, the number of homes within the reach of ordinary working families continues its rapid decline.

The problems created by decision-makers within the sector are compounded by tendencies outside it. In particular, ‘social cleansing’ has become a feature in many cities, with speculators purchasing prime properties purely for their asset value rather than as living spaces, mainly  because many of the owners live oversees.

With large funds to invest and a willingness to pay at ever increasing rates, this trend fuels rising housing costs as well as reducing the amount of stock available for habitation. A Guardian article from January 2015 (11) highlighted a new development at Thameside which yielded few units affordable to locals, with 80% bought up by ‘wealthy international investors’. Estate agents eagerly position themselves to take advantage of the cashcow that such schemes offer, with one crowing that London was “widely regarded as the ‘gold bullion’ of international property markets [with returns] better than … the FTSE 100 and gold” (11). Despite the backlash that such activities generate from those in housing need, there is no sign of the trend decreasing. Another newspaper headline said it all when it exclaimed “Buyers are pulling out of house sales following vote Leave – but overseas investors are swooping in” (12).

And it is not just the price of purchase that is prohibitive in housing hotspots. In May 2016, the Guardian reported that average rent in London hit £1,543 per month, and outside the capital rose to £764 (14). Yet private renters in other regions are now struggling too. The report noted that rents “rose faster in Scotland than anywhere else in the UK, with the average up by 11.4% year-on-year to £704 a month. The next highest rise was in the east Midlands, where new tenancies cost 7.9% more than in April 2015 at an average of £646 a month”. Nor is the effect confined to students and young people. Working families are also being priced out, with more than a third of renting households now comprising families with children, and half are let to individuals older than 35 (14).

With all of these movements, plus the withdrawal and capping of many benefits, it is not surprising that the number of evictions is rising as tenants get into arrears. Almost 11,000 evictions were reported to the Social Housing Regulator in 2015/16, and (shockingly) this included vulnerable tenants in supported housing or housing for older people (1). It is worth noting that reporting evictions to the Regulator is voluntary for HAs, so the actual number will be much, much higher. With insufficient regulation or control over the private rented sector, Shelter has inevitably experienced a surge in complaints about private landlords, and a growing demand for housing advice from among private renters (4).