The venue was buzzing yesterday at the National Housing Federation’s Treasury in Housing conference.

Below are some of the key takeaways from the conference:

Current economic outlook

As expected, the economic outlook was rather bleak. Inflation is high, with prices now expected to climb 25% over a three year period from 2021. It usually takes a decade to see rises of this magnitude. This is being driven by rising energy and food prices (as a result of the war in Ukraine); disruption to supply lines (eg caused by summer droughts); and labour shortages. The pound is declining against other currencies, and borrowing is increasing, particularly to support the Government’s intervention on fuel prices. Demand for workers is rising whilst supply is falling. On a more positive note, Europe has responded well to the energy crisis and is putting in place alternative measures that should start having an impact soon, and it is thought that inflation will come back under control within 3 years or so.

The impact on residents is undeniable. Research undertaken by Karbon showed that its typical low wage customers are facing a 12% rise in the cost of living and a 26% reduction in disposable income over the 12 months to April 2023.

The proposed rent cap

There is a lot of concern amongst registered providers (RPs) regarding the impact of the proposed rent cap. Whilst organisations appreciate the need to alleviate costs for customers, this needs to be balanced against RP’s abilities to invest in new and existing homes, drive carbon reduction, and improve quality. Several RPs suggested that an RP-led approach of targeting support to those who most need it would be more effective than the suggested Government intervention on rent increases. Or perhaps calling on the Government to reinvest the estimated £4.6bn in savings that HM Treasury would make from a rent cap in the Social Housing sector. There is still time to respond to the consultation paper, if you haven’t done so already.

The Regulator reinforced its messages around stress testing, and the need to ensure businesses can survive the current period. Some RPs are expected to dip below investment credit ratings, and some will face regulatory downgrade, because they aren’t sufficiently robust. The Regulator will be looking particularly carefully at business plans and proposed mitigations. They want to know the future business plan, and what organisations are doing now to respond to the financial crisis.

The positives

The good news is that, although house prices could go down, rental yield remains strong and therefore MV-T valuations aren’t expected to dip significantly. The sector is still considered a good match for pension fund and annuity fund investment because the current volatility is seen as temporary.

The valuers are also starting to see that EPC B and carbon neutral units are worth more in stock transfer and security charging projects (compared to EPC D) because of the cost of retrofitting those less efficient units

Finally, JLL and Savills commented that the sector disadvantages itself by asking for valuations on a larger scale (for portfolio security charging/stock transfer projects), whereas “lotting” those properties into smaller groups might result in a higher value.

How Capsticks can help

Capsticks aims to be the firm of choice to registered providers, offering a full service across development and planning law, corporate and securitisation, housing leasehold and asset management.

If you have any queries around what's discussed in this article, and the impact on your sector or organisation, please speak to Susie Rogers or Kayleigh Bradford to find out more about how Capsticks can help.