As temperatures soared outside, the atmosphere inside the Social Housing Finance Conference was cool, calm and collected. Our experts have summarised some of the key discussion points for those who were unable to attend in person. 

With the Spending Review only four weeks away, now is the perfect time for RPs to start considering next steps for their businesses so that the sector can respond decisively to the continuing challenges. RPs we speak to are generally eager to return to the “real business” of investing in existing social housing, and delivering new homes.   

Ocean Media’s Social Housing Finance Conference is a firm fixture in diaries, featuring engaging topics and insightful discussions about what is keeping RP Boards awake at night – and what might help them sleep better. 

This insight provides a bite-size summary of some of the key points discussed at the conference. 

Topics over the day were diverse, but some of the important themes included the following: 

• The sector is waiting, with bated breath, for the Spending Review on 11th June. The key asks are 1) a long term rent settlement; 2) rent convergence; and 3) access to the Building Safety Fund. If this is positive, then many RPs are gearing up to respond quickly and expand development programmes. This does, however, need to be approached with excellent governance and good data underpinning a strong approach to risk management and financial planning. Tight oversight of financial covenants is essential, as is early engagement with funders if any issues arise.   

• There are green shoots of recovery in the economy, which RPs are responding to. Although there was a drop in development spending at the end of last quarter (caused largely due to delays to major schemes and by contractor insolvency), projected development spend is now consistent and higher than anticipated spend on existing stock. A significant proportion of RPs are looking to increase their development pipelines.   

• The Regulator of Social Housing (RSH) continues to stress the importance of value for money. Inspections will look for a proactive approach that demonstrates a fundamental understanding of stock and tenants, and business planning that takes those into account. The RSH noted there has been a move from responsive repairs towards planned investment, which is usually accompanied by better value for money. Joint procurement and careful contract management are two key areas that can help ensure value for money.   
• With a record number of RPs holding a V2 grading (circa 63% - up from 29% in 2022), the RSH stressed that this is not a cause for concern in itself. There is, however, a wide range of V2 organisations and so the RSH will respond and engage differently depending on the reasons behind the V2 judgment. If a V2 rating is paired with a G1 grade, and was given because of careful planning to invest in stock with strong management of risk and financial governance, this can sometimes be a better position than a V1 grade. Ensuring an organisation attains a G1 grading should though be a priority.   

• There were several calls for increased subsidy to the sector to drive development, through additional grant and access to the Building Safety Fund. A long-term rent settlement and rent convergence were also mentioned as key components to drive new development. Delivering the Government’s ambitious target for new homes will likely mean RPs having to build new city centre high-rises – and there were mixed views on whether RP Boards can get comfortable with this. 

• We are seeing RPs raising capital in a number of ways, e.g. portfolio disposals, disposals of non-core business, taking shared ownership off balance sheet, and the conference echoed this.   

• Joint ventures are still a great way to deliver new development whilst sharing costs and risk. Several RPs are keen to work with partners, provided those partners are looking at long term investment at sustainable rates of return. We heard some good examples of this working well in practice, e.g. Karbon’s JV model.   

• Equity finance is still being discussed but isn’t always an easy option. Lack of control over rents means that housing offers a very different risk profile to utilities, and RPs need to be well informed and advised to understand the deals that are presented to them.  A risk-absorbing product for retrofit would make a significant difference to the sector, and considerable effort is being invested in creating something that works. But there are some really positive steps being made towards models that can be scaled up in the future.

• It is important to continue getting the basics right. Debt remains an important part of each RP’s portfolio, with low rates, and RPs need to continue ensuring that they are attractive investments (e.g. focusing on quality homes, keeping to the green/sustainable agent; sweating existing assets etc.). Although it is possible to get investment even with non-compliant grades, keeping your organisation’s regulatory and credit ratings high will give you access to funding quickly and on more favourable terms. We are supporting a number of RPs on their programmes to dispose of individual void properties where appropriate to raise capital and focus on the best performing assets.

• Stock transfers remain an excellent way of reducing costs and improving service to tenants.  We are seeing stock transfers used to raise capital for expenditure on investment in existing homes and the delivery of new social housing. We are also seeing stock acquisition that enables RPs to reinforce their presence in a particular geography and improve services through contract management of their supply chain.  
• MV-STT is still the most resilient valuation basis, and provides much higher values than EUV-SH in certain areas (particularly London, the South West, the South East and East of England). RPs should look to uplift values to MV-STT wherever possible.

As always, it was a very interesting day with varied topics and great speakers. Now is the time to ready your possible response to the Spending Review on 11th June – watch this space for further updates.  

How Capsticks can help 

Whatever your organisation's position and future aims, we can help.   

Whether you are looking at accelerating your development programme, through joint venture arrangements and/or equity investment or more vanilla debt financing, our experts can support you. We are working on several different joint venture models and finance arrangements, and would be happy to share experiences with you.  

We have expert teams working on governance, development, building safety, contract management, security charging, stock rationalisation, and void disposal programmes and would be delighted to discuss how we can support you.   

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