Challenging economic conditions and the Government’s legislative agenda will dominate much of 2023 creating continued challenges for social housing providers. Here, Winckworth Sherwood’s social housing team points to the seven things social housing providers will need to consider in the year ahead.
Tenant satisfaction in the spotlight
New tenant satisfaction measures take effect from April 2023. Social housing providers that do not already have the processes in place to collect and record data on these must act now, says Senior Associate and social housing governance specialist Matt Cowen.
“Social housing providers will from April 2023 be required to measure 22 key tenant satisfaction metrics. This information, relating to areas such as repairs and safety checks, must then be published and submitted to the Regulator for assessment.
“Most registered providers should by now have the processes in place to capture the data required by the tenant satisfaction measures. If they do not, they should act as a matter of considerable urgency.
“Registered providers can also expect to see the enhanced proactive consumer regulation regime take shape as the Social Housing (Regulation) Bill works its way through parliament, although we don’t expect it to formally make the statute books before 2024.”
Building safety
As predicted, Michael Gove ramped up the pressure on the construction industry in 2022 and in passing the Building Safety Act 2022, the Government has changed the landscape for all those in the built environment. It remains difficult, says Charis Beverton, Construction Partner, with the evolving legislation to advise how the multiple parts of the Building Safety Act 2022 will operate.
“More secondary legislation will come into force in 2023 including the introduction of Gateways 2 and 3, still expected in October 2023. The latest draft legislation to be published is The Higher-Risk Buildings (Descriptions and Supplementary Provisions) Regulations 2023, which define what a tall building will be, subject to the additional fire and building safety legislation requirements. There were no surprises; tall buildings remain residential buildings which have at least 18m in height or at least seven storeys and include buildings under construction.
“The Regulations also define what a ‘building’ is — namely “a structure is not attached to any other structure” and include, where applicable, plant rooms. Hotels, prisons, and military facilities are excluded. The definition of a building is likely to have wider implications, as will so much of the Building Safety Act, particularly for insurance where the definition of what is an insured building has often been contested.
“We anticipate conversations around the Building Safety Act will continue for some time.”
Increase in provider mergers
It is expected that the tough economic climate together with the increased regulatory burden on social housing providers will lead to an increase in merger activity in 2023, says Senior Associate and social housing governance specialist Matt Cowen.
“Registered providers are feeling the pain of a challenging few years, compounded now by a cost-of-living and economic crisis. Development costs have increased dramatically at a time when RPs are also being expected to invest in their stock to meet decarbonisation and building/fire safety requirements as well as expend resources to ensure the new proactive consumer regulatory standards are met.
“This is driving RPs to consider whether these challenges are best met in partnership with other like-minded organisations. Merger activity is expected to grow throughout 2023 and beyond.”
Cautious approach to borrowing to remain
Social housing providers will continue to take a cautious approach to borrowing in 2023, turning away from new capital market transactions and favouring short-term revolving credit facilities, says Winckworth Sherwood Housing Finance Partner Ruby Giblin.
“Whilst borrowing to build new homes has taken a nose-dive, borrowing remains necessary with restricted income following rent caps as social housing providers need to meet and fund new legislative and climate-change requirements.
“Whereas previously they would turn to capital market products, that is now an expensive option, although investors are making good returns. Following the Government’s disastrous September budget, new capital market financing seems to be on hold and is likely to remain so possibly for the first half of 2023 — there is a wait-and-see mentality. Instead, providers will continue to look to short-term, typically five years, revolving credit facilities to meet those obligations and take the time to tidy up their assets whilst waiting for the market to settle down.
“Private placements and bond financing are only temporarily on the back burner. There are already tentative signs of interest in new deals, and we expect that to gather pace in the latter half of 2023.
“The ESG agenda, largely driven by funders, will not be high on the RPs list of priorities and is likely to be relegated in 2023 by smaller social housing providers that have put their borrowing on hold. That would be a mistake, leaving them to play catch-up when funding will be needed. Many RPs are already collecting extensive ESG data for regulatory and business and just need help in analysing that data.”
A pause in the housing market
Affordability concerns and the end of Help to Buy may well prompt a short pause in the housing market, says Residential Development Partner Ruth Barnes.
“Affordability of new homes will dominate much of 2023 as the cost-of-living crisis sees would-be buyers holding off or unable to secure mortgage products at affordable rates. This coincides with the end of the successful Help to Buy scheme in March with the potential to create a perfect storm for the housing market.
“Whilst the First Homes scheme launched last year may take up some of the Help to Buy slack, it is a very different product and the effect of First Homes on shared ownership sales remains to be seen. But the housing market is remarkably resilient and we would hope that if there is a pause it will be short-lived, with activity picking up again in the spring and summer.”
Greater support for renters needed
Greater support for public and private sector renters is likely to materialise in 2023, says Winckworth Sherwood Partner Charlotte Cook.
“The new year will likely see renters in the political spotlight, with greater support and regulation to follow as Government recognises that they are not being treated in the way they should.
“We have already seen social housing providers under the spotlight and that will build — they are easier to target and regulate. But attention will turn too to private sector landlords. Good landlords will always try to do the right thing — we see that every day — and it will be important that any political and legislative action focuses on those that bring the rental sector down.”
Social care and assisted living crisis
The crisis in social care and assisted living will deepen in 2023, says Winckworth Sherwood Partner Charlotte Cook.
“Every year, social care and assisted living providers call for the Government to bring forward and prioritise its policy proposals, and yet we continue to wait. Surely, in 2023, the funding that the sector desperately needs and deserves will materialise?
“We recognise that this is costly and complex, but it is time for the Government to act. It needs to move from the ‘too difficult’ pile and into its priority list. It is simply unacceptable to kick this burning issue further down the road.”
Header image ©JulietPhotography/AdobeStock
