David Montague's January 2012 round-up
Feb 07 2012
For me 2012 started with a visit to all of our main offices to wish everyone a happy new year. We saw a lot of change at L&Q last year, but everyone I met came back from their Christmas break refreshed and ready for a new challenge.So what might that challenge look like? Already 2012 is shaping up to be an extraordinary year.
The economy and affordable housing
In Europe the new year brought with it all of the troubles which started in 2011. Portuguese government bonds were down rated to junk status, the European heavyweights conspired to take control of Greece and investors were so keen to find a safe place for their money that they paid the German government to take it.
Closer to home, UK public sector borrowing reached £1 trillion and the economy reported negative growth in the last three months of 2011, setting the path for a double dip in the first quarter of 2012. Vince Cable challenged businesses to become more transparent, Stephen Hester surrendered his £1 million bonus and Sir Fred Goodwin became plain old Mr Goodwin.
What does any of this have to do with affordable housing, you might ask. How can events in Portugal affect affordable housing in London and the South East? Our future depends on the availability of credit to finance housing for rent and sale – the ability of lenders to lend, builders to build and buyers to buy.
The housing market in SE England – Home Truths
In January the NHF published Home Truths, their regular update on the UK housing market. A few facts from the London report:
- The average house price in London in 2010 was £408,385, 15.1 times the median London income of £27,128.
- A person buying the average London home with a 75% mortgage would need to raise over £100,000 for a deposit and have an income of £87,500.
- Despite the recession, London house prices are now 40% higher than they were in 2005.
- 362,289 households, or over 800,000 people, are on the social housing waiting list in London, one in nine of the population and an increase of 84% in the last ten years.
- To meet this need, housing associations developed 12,179 homes in 2010/11.
- 237,000 households are living in overcrowded conditions in London.
In the South East:
- The average house price in 2010 was £284,379, over 12 times the median income of £22,870.
- Buying a home with a 75% mortgage requires an income of £61,000.
- House prices are 100% higher than ten years ago.
In England, private renting has now overtaken social housing, perhaps returning over the next ten years to levels last seen in the sixties. In London, private renting now represents 25% of total households, and is predicted to rise to 35% within five years.
We are seeing irreversible change in the UK housing market. Internationally, the old economic model is broken. From Wall Street to St Pauls, and from St Pauls to Parliament the search for a new model, for responsible capitalism, has begun. And in my view, responsible capitalism can learn a lot from the housing association model.
Housing associations have a track record of delivery which goes back generations, and for that reason we are attractive to international investors. We are for profit, but not for profit distribution. We share a social mission with government and local authorities, and every penny of our profit is invested back into our social mission - transforming communities; creating places where people want to live.
Increasingly, housing associations are taking responsibility for their own future, because in a world with little or no government investment, we have no other choice. We were born out of crisis, we are in good shape, and we are at our best when facing an impossible challenge. So, as others seek to define responsible capitalism, we have already defined it. Ed, David, Nick, Vince, look no further!
Openness and transparency
But housing associations are not immune from change. We have to adapt to this new world, and as every other sector learns that responsibility and openness are two sides of the same coin, we have to become more open, more transparent, and more accountable. For this reason g15, a group of the largest fifteen housing associations in London, have agreed to embrace openness and transparency in a way which is sector led, useful, meaningful and comparable.
On every g15 members website you will find over the coming weeks the same information about how much we pay our executive and non executives, how the Chief Executives pay compares with everyone elses, how much we spend on our top fifty contractors, how our performance compares. Already other housing association groups are looking at the g15 approach and agreeing to do the same.
Staying with transparency, in January I attended a ‘Chatham House’ event with other housing association bosses and people of influence for a discussion about the best way forward. The Home Group has thrown down the gauntlet by live streaming meetings on the internet and offering e-petitions to their residents. The race for transparency is on, and whoever wins, we will see a new, more open and transparent sector emerge.
Does size matter?
Changing the subject, in January I attended the launch of Does Size Matter?, the Chartered Institute of Housing’s latest offering. This report concludes that there is no evidence that mergers deliver efficiency. And so, once again, the flames between large and small have been fanned.
Does size matter? In my view the question is largely irrelevant. Larger associations can drive efficiency through consolidation and L&Q is living proof. But plenty of smaller associations find their own ways of driving efficiency. Smaller associations can provide a more responsive local service. But plenty of larger associations find ways to remain local. Sarah Webb, the most recent and much mourned Chief Executive of the Chartered Institute of Housing hit the nail on the head in this debate. In her view, it isn’t about large or small, national or local, specialist or generalist. It is about good or bad; those who get it and those who don’t. There are plenty more good than bad, and more of us get it than don’t. So we should stop criticising each other, celebrate our achievements and get on with the job.
Out and about in January
In January, I spent time with the politicians:
- I met with Jack Dromey, shadow housing minister, to discuss his plans for affordable housing. I was pleased to see a copy of L&Q and PWC’s Where Next (pdf) in his hand, and pleased that Jack showed interest in our proposals for a new Social Equity Fund.
- I met with Joan Ruddock, Jim Dowd and Heidi Alexander, the three Lewisham MPs, to hear their views on the service we are providing to their constituents. L&Q now provides a home to ten thousand families in Lewisham, and so Joan, Jim and Heidi have every right to hold us to account!
- I met with Ken Livingstone to hear about his plans for London should he become Mayor in May, and to share with him our plans for housing a London family every fifteen minutes.
- I met with Sir Edward Lister, Deputy Mayor, to discuss commercial and residential development in London.
- And I attended the final meeting of the Ealing Housing Commission, where I hope to have made a useful contribution to the Borough’s evolving plans for affordable housing.
So that's January. Once again the tectonic plates of housing are shifting, and once again we are well placed to respond.
See you in February