The recent Spending Review delivered good news for social housing providers, including local authorities and private registered providers (together “RPs). The overall picture was much better than many had feared and included a 10 year rent settlement at CPI +1%; a £39bn Affordable Homes Programme over 10 years; and consultation on much-needed rent convergence. Together these changes should help strengthen capacity within the sector and increase funder confidence, and have been positively received by RPs and by the NHF.

In order to deliver the full scope of much-needed investment in homes and/or development of new social housing, however, this will not be enough on its own and RPs need to look at their business plans careful to identify what else is needed.  Although some items were absent from the Spending Review (e.g. full access to the Building Safety Fund), the Government will likely feel that it has delivered on its promises to the sector and will expect RPs to reciprocate by doing what they can to deliver new homes.  All of this at a time where business plans are squeezed, building safety and efficiency continue to demand expensive investment in existing homes. Complaints to the Housing Ombudsman have surged by 500%, whilst concerns about housing quality, affordability, and supply continue to mount.  

Considering this, and high costs across the sector, how can RPs use their asset base to: 

1. release funding to carry out much needed works to existing stock; and  
2. support the Government’s plans to develop 1.5 million new homes?   

This insight looks at some of the options available to RPs to increase capacity in their business plans.   

In the current economic climate, it’s more important than ever for RPs to ensure that they are maximising the value of their housing assets. Not just to support financial resilience, but to improve outcomes for tenants and communities. 

• Stock Rationalisation: Focus and efficiency 

By narrowing their geographic footprint, or by buying/selling non-core stock (e.g. supported housing or market rent units), RPs can improve service delivery and lower costs.  Identifying underperforming or inefficient assets can also help to optimise resources and generate funds for reinvestment and/or retrofit, whilst focusing on maintaining and improving homes that align with long-term objectives, resulting in safe, modern and energy-efficient housing.  A streamlined portfolio simplifies compliance, repairs and upgrades – making management more efficient and cost-effective.  

The current market for stock rationalisation remains active, with opportunities for both acquisitions and disposals and values remaining steady. 

Stock rationalisation can also improve tenant outcomes by enabling more responsive repairs and better local engagement. For many RPs, it’s a strategic tool for long-term sustainability and enables them to best meet the community’s needs by ensuring they provide the right mix of homes/tenures where demand is highest.   

At Capsticks, we are finding that RPs are focusing on generating capital by transferring geographically remote units to more locally based RPs, which are often fully supported by residents.  We are also seeing an increasing number of RPs disposing of non-core units, particularly transferring supported housing to more specialist providers and disposing of private market rent units to fund development programmes.  There is also an increasing amount of interest from “for profit” RPs looking to acquire general needs stock as some of them shift their interest away from shared ownership portfolios.   

• Void Disposals: Releasing capital for reinvestment 

The drivers for void disposal programmes are similar to stock rationalisation, but they focus on disposing of vacant units on the open market, rather than transferring tenanted stock between RPs.  These properties are often sold in individual transactions by private treaty, or auction, but can also be sold as a portfolio to investment buyers.   

Properties that are expensive to maintain, in poor condition, not fit for purpose, or outside of the core geography can be a drain on resources, and can result in tenant dissatisfaction. Disposing of these homes when they fall vacant as part of a void disposal programme can release capital that can be reinvested into newer, more efficient housing.   

We have seen void disposal programmes becoming increasingly sophisticated over the past few years, with refined processes to identify and assess units for disposal. For some RPs, this has moved to the next stage as they recognise that, in some cases, tenants living in older, high-maintenance homes may actively prefer to relocate to newer stock. By understanding individual tenants’ wishes local authorities and housing associations can create opportunities to move tenants who want to be moved to homes which better suit their needs, whilst disposing of the newly vacated properties and reinvesting the proceeds into increasing both the quality of and the number of homes.  

This approach may not only help improve the overall quality and volume of the housing stock but can also increase tenant satisfaction and reduce long-term maintenance costs. 

• Commercial Rent Reviews: Avoiding missed income opportunities 

Where RPs own commercial units - such as shops beneath residential blocks - making the most of regular rent reviews is essential. These reviews ensure that rental income reflects current market conditions and that properties are contributing their full potential to the organisation’s financial position. 

Missed rent reviews mean that income raising opportunities are also being missed. By staying on top of lease terms and review dates, RPs can ensure they’re making the most of their commercial assets.  We are also working with RPs across the country to ensure that lease expiry dates aren’t missed, as a failure to put an extended lease in place can sometimes result in the commercial tenant acquiring security of tenure.   

• Using assets as security for funding 

Using assets as security is a tried and tested way to raise funds for investment.  There are some key developments/refined approaches that you should be considering if you are planning to raise external finance in the coming months: 

        a) Rolling Charge Programmes: A proactive approach 

Rolling charge programmes are a great way to ensure that your property portfolio is always in the best possible shape for funding. Proactively preparing assets for security charging in advance, such as by updating agreements or registering land, can significantly cut transaction times and ensure that funding is available when needed.  By maintaining a steady flow of properties prepared for charge, RPs can identify and resolve issues early, maximise values, maintain flexibility, and be ready to access funding quickly when opportunities arise. This approach means that legal defects that prevent properties being used as security, or which limit values to EUV-SH, can be varied as part of a proactive rolling charge programme in plenty of time before the assets are needed as security. 

One of the main concerns that we hear about a rolling charging programme is whether there might be duplicated costs/expenses.  We recommend that you speak to our experts about this – we can design the right approach for you, to ensure that your properties are ready to charge, but without incurring costs that might need to be repeated later on.   

          b) Value Uplifts: A key opportunity 

Maximising the value of stock for security charging purposes is essential to ensure that you are optimising borrowing capacity, thus providing greater financial flexibility for development and investment.  By securing assets at their highest possible value, you can also strengthen your financial position and potentially negotiate better terms with lenders.   

A large number of social housing properties, both unencumbered and already in charge, are affected by restrictions on use, ownership, or tenure. These limitations can prevent properties from being valued at Market Value Subject to Tenancy (MV-T), capping their value at Existing Use Value for Social Housing (EUV-SH). 

The difference between these two valuation bases can be substantial, particularly in regions such as London, the South East, South West, and East of England. For RPs operating in these areas, this means that identifying and rectifying defective provisions can unlock considerable value. 

Many local authorities across the country are open to revisiting and amending these clauses. With the right advice, RPs can often correct these issues at relatively low cost.  We have been working with many RPs to help them release significant additional value from their stock in this way. 

          c) LSVT Uplifts: Revisiting legacy stock 

Many homes transferred from local authorities under Large Scale Voluntary Transfers (LSVTs) remain charged at EUV-SH, despite regulatory changes in 2017 that allow them to be valued at MV-T. These properties often have simpler titles and fewer planning complications, making them ideal candidates for value uplifts - thereby releasing additional value to support further borrowing. 

In most cases, a new certificate of title will be required, but with the right advice, it is a straightforward process which can deliver a significant uplift in value. For RPs with any number of properties acquired from local authorities, this represents a major opportunity to enhance financial capacity with minimal effort and cost.  

          d) Strategic Charging Reviews: Revealinghidden value 

We have mentioned above the key advantages of maximising values.  But not all facility agreements allow properties to be valued at MV-T. Some restrict properties to EUV-SH even where MV-T could be achieved elsewhere. Strategic charging reviews can help identify stock that could achieve a higher value charged to a different facility. 

We’ve worked with several RPs to carry out these reviews, uncovering hundreds of millions of pounds in untapped value. In many cases, the additional work required to uplift values is minimal. In other cases, variations may be needed. 

It’s also worth reviewing where affordable rent stock is being used. Some funders allow greater flexibility in how affordable rents are treated from a valuation perspective, which can further enhance value if stock is placed strategically. 

How can Capsticks help

We are working with RPs across the country to best leverage their assets for development and retrofit funding.  This includes stock rationalisation and void disposal programmes, raising external funding, and security charging.  If you are looking at any of these areas then please do get in touch and we would be happy to discuss, free of charge, what options might work well for you.   

Want to Learn More? 

We’re running a series of webinars over the coming months exploring these opportunities for your organisation in more detail: from value uplifts to strategic charging and stock rationalisation. To find out more about and to sign up for our first webinar on Tuesday 1 July, click here.