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The Crisis of Employment and Pay: A housing association’s perspective

Introduction

The last year has heralded massive changes to the way we live and work. Millions of those in work have seen huge changes in the way they do their jobs, learning how to reduce Covid risks in the workplace, or carry out their job from home via video calls and remote working. Millions of others, however, have been out of work throughout this time – creating a growing gap with the new skills required in the workplace. Some jobs are starting to come back, but how many? In what areas? And will people whose jobs don’t return be able to find work in new areas?

Peabody Index background and findings

As a London-based housing association with over 150,000 social housing residents, Peabody has long been interested in helping our residents into stable employment with a living wage. Our Peabody Index reports track employment among our residents, comparing them with broader measures in London and throughout the UK, publishing updates throughout the pandemic.  

Job vacancies in London are recovering, but they are sill 14% below pre-pandemic levels, compared with vacancies back to normal levels (or higher) in the rest of the country. Unemployment is still growing faster in London, with a 4.9% increase between December 2020 and March 2021 compared with 3.8% in the rest of the country.

Falling incomes have caused a rising rate of people are in high levels of debt.  Worryingly, many are taking out bad loans just so they can buy essentials like groceries and toiletries. Young people and ethnic minorities appear worse affected.

The future is uncertain for those in work as homeworking seems to be with us for a long time. Londoners favour working from home more than their counterparts elsewhere in the country. Research suggests that about one third of them expect to work from home more in the future, mirroring the one-third of our working residents who are currently working from home. If workers in the City of London stay at home, there is serious concern for the future of the support economy that services those jobs.

What should policy do?

So what can be done? Employers need supporting to create jobs, and to support young people into the workplace – something that can be more challenging when staff are working remotely or when the economic future is uncertain.  Peabody are pleased to be getting involved with the Government’s Kickstart Scheme for jobs and apprenticeships for young adults, which shares many ideas with the Opportunity Guarantee that Peabody has supported.

Given the broader shifts towards homeworking, many of us have taken on new digital skills, some of which we might take for granted. In February 2020, how easily could you share your screen on Zoom or co-edit documents on Sharepoint? For people who have lost their job during the pandemic or been unable to transition to homeworking, coordinated digital skills programmes will be needed to prepare for a future of working remotely. Other people have worked outside the home and developed a range of new skills – from taxi drivers learning new road layouts due to increased pedestrianisation to care staff learning to use PPE, our residents have told us of a huge range of new skills developed. Those not in work may need training to catch up and renter the workplace.

And despite encouraging signs of recovery, we need to make sure the welfare safety net functions well at the time it is needed most. That is why we continue to call for Universal Credit wait times to be reduced and the £20 per week uplift to be made permanent.

Helping social housing residents into work

At Peabody, we try to use the best evidence to help our social housing residents. During the pandemic, this means the evidence must analysed quickly and spread through to our teams. The Peabody Employment  and Training Teams have helped 451 people into employment, supported 92 residents to achieve accredited qualifications and a further 103 residents into non-accredited training.

Delivering this support remotely has been challenging. We have developed a mix of online resources, independent training support, and general information sessions with guest speaker presentations. We try to make these sessions well-rounded, with guest speakers from local MPs, GLA Assembly Members and the South-East Chamber of Commerce. We are seeing a rise in those who are self-employed or planning to open a business. Our monthly business forums aim to help people get these ideas off the ground.

Not all work is done online, even during the pandemic. We have supported procurement opportunities and facilitated pop-up markets to provide the businesses with an opportunity to trade during and in-between lockdowns. This year we saw Thamesmead businesses, supported via our enterprise programme, on both the Greenwich and Bexley side win at their local business awards.

More needs to be done as we pull out of this pandemic. So much of the past year has been responsive – trying to make sense of the pandemic and its impacts. Only with rigorous research and evidence-based policies and programmes can we start to shape the future of work in London and the UK.

<span class="has-inline-color has-accent-color"><strong>Greg Windle</strong></span>
Greg Windle

Greg is a Research and Insight Analyst at Peabody.

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Crossroads or Dead End?

Before Blue Labour there was Red Tory.  And the think tank ResPublica, directed by the original Red Tory Philip Blonde, has just published an important report which they claim sets out ‘a progressive future’ for housing associations (HAs).   
ResPublica says that “At the Crossroads” is a radical new vision for HAs in which they would take on a much wider service role, bringing the big society themes of mutualism, localism and community ownership into the housing debate.
To be fair, the report is well written and well-researched and has a lot of interesting things to say about the work housing associations already do in communities, with some excellent examples of innovative work providing local services, supporting and funding community organisations.  I like the idea that HAs should declare a ‘social dividend’, but the rest of it is scarcely new.  There is no trend analysis of how community investment by HAs has developed over the years (slowly and often backwards) or of the retrenchment that is going on now.  It doesn’t properly consider the example of care services, a key role that HAs have taken on where there are huge cuts in many areas currently.  It argues a good case for the rationalisation of stock, devolution of management, and improvements in tenant engagement and control, but this is also a well worn path.
The report gets more challenging in its discussion of governance and the options for community control, arguing that associations that adopt new forms of community accountability, especially through active shareholder participation, should qualify for further deregulation, claiming that they would be ‘set free’.
Despite trying to be unremittingly positive about the coalition’s policies (and failing), the report is deficient on several counts.  It acknowledges that coalition policies will cut development, but it has virtually no analysis of the role of HAs in providing homes for people in housing need, which is of course their primary purpose for being.  It is hopelessly optimistic that HAs would be transformed by extending shareholding, not recognising that shareholders have few rights and little power, especially as Boards invariably control large numbers of proxy votes at AGMs. 
I can see the model working, indeed would welcome it, for smaller or geographically based associations.  I would welcome mass membership of such organisations, the much wider development of mutuals, and a huge extension of tenant influence.  But it ducks the challenge posed by the least accountable and most problematic HAs – the very large associations who own a major proportion of the stock, work in dozens and sometimes hundreds of council areas, and are hugely complex finance-driven organisations.  It is not just a matter of devolving management, the financial centre would always retain control.  They would have to be broken up and I can’t see that happening, especially as some are hell-bent on becoming plcs not community organisations.   
The form of deregulation that the report says should be on offer to HAs that adopt the community model is also extremely dangerous.  Organisations that are community influenced or indeed community controlled can fail just like others can, they embody large amounts of public resources and should be subject to external regulation to ensure they are meeting their purposes and maintaining efficiency and probity.  Good organisations should welcome good regulation and not see it as red tape or some unfortunate additional cost.  Localised tenant scrutiny is a good thing but it is open to manipulation and has no chance of working unless a lot of resources are thrown at it.  It is not a substitute for external regulation.  The history of HAs is full of chief executives who talked a good service until the inspectors called and revealed the reality.
It is also important to look at what ResPublica mean by HAs being ‘set free’.  Localisation of rent setting.  No thanks.  Use of flexible tenancies.  No thanks.  More flexible use of historic ‘recycled’ grant.  No thanks.  Converting existing homes to flexible tenancies.  No thanks.  These are not freedoms, they would amount to tenants giving away their rights.  
It is hard to predict what will happen to HA finances under the new regime.  Those that will build anything anywhere because they are little different from private developers may see rising rents and more cash to spend, but they are the least likely to give themselves over to community control.  Others foresee less development and therefore a reduced ability to spread their overheads, leaving less money to spend on anything but the basics.  If the money isn’t there, the community extras will gradually be stripped away and no amount of big society coalition-speak will make any difference.

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Institutional chaos

The Chief Executive of the National Housing Federation, David Orr, spoke last week about the ‘institutional chaos’ facing housing associations and the need to think carefully about balancing the needs of their business with their mission. 
He said “You might take a strategic business view that the smart thing to do is wait until all the moving parts have settled down and not take any risks. But that is pretty disastrous in mission terms with the scale of the housing crisis.”
Housing associations (HAs) certainly face huge dilemmas in the current policy framework.  It is no longer possible to build what is needed most – social rented housing at genuinely affordable rents – except in tiny numbers as a special case.  So, if HAs with development programmes want to keep them going, and most are assembling their bids at the moment, there is little choice but to plan a mix of private housing, shared ownership and the new, grotesquely-named ‘Affordable Rent (AR)’ product (which is little different from the intermediate rent products we have seen before).  Of course it can be argued that building almost any housing is useful given the current shortage, and AR at 80% of market rent is not that much different from social rents in those parts of the country with the lowest values.  But everywhere else, the virtual removal of social renting from the mix totally disregards the needs of communities and the people on lowest incomes.    
One thing HAs with a development programme can and must do is protect the existing stock of social rented homes when they become available for re-letting.  The government wants them to re-let a share of their existing homes at AR rent levels to generate funding for new development.  I think they should demonstrate their commitment to their mission, to borrow David Orr’s word, by refusing to do so and by re-letting these homes at social rent levels.  Councils, in revising their housing strategies and setting their new ‘tenancy strategies’ under the Localism Bill, should set out their opposition to existing social rented homes being re-let at such high rents. 
Lettings policies, already the art of getting a quart in to a pint pot, will come under even greater strain.  Demand for homes that are re-let at social rents will increase as supply contracts even further.  Who will the new AR tenancies at up to 80% market rents be allocated to?  The government argues that the profile will be the same as those who currently get allocated social rented homes, but they also say that the new policy will not impact on the requirement for housing benefit – and they can’t have both of these.  Higher rents require more housing benefit, as we have argued before and as Family Mosaic’s research showed.  Once again their housing policy and their welfare reform agendas are in direct conflict. 
HAs caught in the middle say quietly that this is an argument that the lenders may ultimately decide – they don’t like it when the tenants can’t pay their rents and this will be reflected in their risk assessments of new schemes.  One middle course would be for HAs to refuse to set AR rent levels above the limit for Housing Benefit, irrespective of local market rent levels.  That would reduce the yield but would keep the homes available for people on housing benefit.  But, in higher value areas, it is the total benefits cap (rather than the housing benefit limit) that will prevent many tenants from being able to pay their rent.  This will be reflected in the risk assessment for new schemes and the pressure will be on to let to people with sufficient income to be able to afford the rent. 
So, there are dangers both ways.  If AR homes are let to people on low incomes who would previously have qualified for a social rented home, then housing benefit spending will go up.  If AR homes are let to people who can afford the higher rents, then people on lower incomes will be squeezed out and more will end up in private rented accommodation at higher rents with a higher requirement for HB support.  Either way, there is likely to be upward pressure on HB spending: the government will have to find more money or look for more cuts.  The prospects are grim.

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What are housing associations for?

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

There has been speculation in the last few days that the charitable status of housing associations might be under threat.  It would cost the sector a huge amount in additional tax if charitable status was lost.  The issue has been bubbling under for a while, but the new debate has been triggered by a request from the Tenant Services Authority to the Charity Commission to express a view on the implications of the new (mis-named) Affordable Rent regime. 

The Commission’s response is of course equivocal: it depends on the circumstances of each association, what their charitable objectives are, and how Affordable Rent fits in with their activities as a whole.  The key sentences in their reply are these:

“Generally, where an association has a charitable purpose to relieve those in need by providing housing, then those who benefit must be poor and in housing need…….. Associations will be aware of whether, in practice, some affordable rent products have rents at a level that people in poverty cannot access, and where housing benefits are capped at a level below the rent.”

“In summary, in principle, charitable housing associations can provide an Affordable Rents product. However, the extent to which the product will be used to relieve poverty may determine whether it is able to satisfy the public benefit requirement and one aspect of this will be the extent to which housing benefit will cover the rental. Charitable associations operating in areas of high market rents will therefore need to look at this aspect in detail to see whether the affordable rents can provide a means of relieving poverty.”

From an ideological point of view, it is clear where the Government is headed.  By dictating that there will be no new social rented housing built in future, only ‘Affordable Rent’ (ie up to 80% of market rents), and by requiring that a proportion of re-lets in developing associations are also let at ‘Affordable Rent’ levels, the government is signaling the transformation of housing associations from bodies dedicated to providing homes for the poorest in society to institutional private landlords of near-market homes.  

Some people in the sector have also been asking for this problem to visit them.  Many housing associations are brilliant at what they do and serve homeless and badly-housed people, their tenants and their communities very well, but some look and act less and less like charitable bodies as each year passes and give every impression of not liking poor people much let alone wanting to relieve their poverty.

Charitable status might be protected as long as it is possible for people on low incomes to access ‘Affordable Rent’ homes.  That in turn will depend on the allocations policies followed and the continued availability of housing benefit.  Some associations think they will not be able to let the new homes to people who could be defined as charitable beneficiaries; for schemes to be viable they will have to let the homes, or at least a significant proportion of them, to people who can afford the rent without the risk associated with needing housing benefit to support their payments.  For the moment, the government says HB will be available for AR properties, but in high cost areas it is the operation of the overall benefits cap and the uprating by less than real inflation that will make it impossible for families on benefit to access these homes. 

The loss of charitable status would be a blow, but, in the context of government housing policy, it is the bigger question ‘what are housing associations now for?’ that needs to be answered.

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Passing the buck for new homes

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

The proposals for the new ‘Affordable Rent’ regime published today by Communities and Local Government department and the Homes and Communities Agency  are in the classic style of this government. 

Make huge cuts.  Change a few rules.  Devolve responsibility.  Then wash your hands, it’s nothing to do with us.

Passing the buck developed as an art form.  Pontius Pilate has nothing on these guys.  Nothing could be clearer than the one underlined and emphasised sentence in Grant Shapps’ introduction:

 “So Government is getting out of the way where it needs to, and is supporting you where it can. Ultimately, though, delivery depends on the initiative of providers, and the support of local authorities and local communities. It is now up to you to deliver the homes we need.”

The mis-named ‘Affordable Rent’ (AR) product will be the main form of provision in future.  Providers will be able to get some grant from the Homes and Communities Agency, but the pot is about half what it used to be.  They will have to show how they can generate resources  by borrowing (I thought the government didn’t like borrowing?) against the increased rental stream from letting new homes and a proportion of re-let homes at AR levels (up to 80% of market rents), together with other resources such as existing surpluses, s106 planning gain, free or cheap public land, recycled grant from previous developments and so on. 

But there are no numbers – no specific expectations, not even a regional distribution of the HCA’s funding (although London is expected to get the same share of outputs as now, around 27%), no expected or even hoped-for split between city town and country.  The outcome will depend on the bids, what providers think they can do and where they think they can do it.  From housing strategy to housing chaos in one easy step.

The HCA paper does include some detail about AR.  The product (and therefore the rental income) will only be available to Registered Providers who achieve an HCA contract for delivery, so that will exclude virtually all councils and all non-developing housing associations and any existing developing HAs who do not win a contract.  So that will keep the numbers of AR lettings down and ensure that most re-lets across the stock will be under a continuation of the existing ‘rent restructuring’ rules.  Under AR or social rent, the terms of tenancy will be up to the landlord to decide within a policy framework set by local authorities – subject to a 2 year minimum term for AR tenancies.  So all future tenancies could be short or long term at the landlords’ whim. 

The relationship between AR and housing benefit is going to be crucial.  The HCA paper implies that HB will be payable on an AR letting even if the 80% market rent takes it above the local LHA limit.  That might offer some protection to tenants who will be on benefits for a long time.  However the overall benefits cap of £26,000 will still apply, irrespective of the rent being covered: in high rent areas, that will be the worst of all the new rules in practice.  If the aim of building 150,000 new affordable homes is achieved, and say 90% of them are AR and say 60% of those are let to HB tenants, then the cost to the government will run to several hundred millions of pounds, proving yet again that cuts in one place often pop up as extra costs somewhere else.  

Providers have to submit their ‘offers’ by 3 May and initial contracts are expected to be sign in July.

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For one day only, I agree with Nick

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

It became a catchphrase during the Election TV debates and I haven’t found a lot to agree with Nick Clegg about since the coalition took over.  But, just as Red Brick agreed with Grant Shapps when he made sensible remarks about the need for a period of stable and not inflationary house prices, now it is time to agree with Nick in his comments about the extension of the Freedom of Information legislation.

Labour had plans to extend the FoI to cover some additional agencies (such as University admissions services and the Association of Chief Police Officers) which the current government is also going to pursue, but Clegg spoke about going much further and my ears pricked up when ‘housing associations’ got a mention.  Since FoI came in, we have had the strange position where the regulators (Housing Corporation then Tenant Services Authority) were covered by FoI but the organisations they regulated were not. 

Clegg said that “Free citizens must be able to hold big institutions and powerful individuals to account…… There are a whole range of organisations who benefit from public money and whose activities have a profound impact on the public good….. citizens must first know what goes on in these institutions. ”

It is Clegg’s suggestion that private bodies performing ‘functions of a public nature’ should be covered by FoI that catches housing associations – although careful definition will be required to avoid any suggestion that the change might trigger the re-classification of housing associations as public bodies (thereby running the risk that their loans – around £40bn – might transfer to the public sector balance sheet).  The FoI Campaign has argued for years that private providers of health and social care and other public services should be subject to the Act – which contains safeguards around information that might be commercially sensitive.  As Clegg says, there should be a simple rule that organisations that benefit from public money should be subject to public scrutiny.   

I suspect that housing associations are probably no better and no worse than most bodies that are subject to the FoI already.  But non-disclosure and a lack of public scrutiny can make organisations too cosy in their internal procedures, and then it is easy to fall into bad habits.  Public scrutiny (especially through Inside Housing’s annual survey and league table) has made a difference to housing associations that had a penchant for paying over the odds for their senior staff.  But I think they are often unnecessarily secretive, for example many do not publish routine information like non-confidential Board papers.  Tenants often complain that they cannot get hold of financial and other information that council tenants get routinely from their landlords.  And you hear the occasional story about Chief Executives’ expenses, posh dinners and trips abroad….. all of which should see the light of day.

I argued unsuccessfully to the TSA that the principles of FoI should be part of the new regulatory code, thereby avoiding the need for an extension of the legislation.  That didn’t happen, and now regulation itself will be severely restricted (Clegg got that one wrong), so the only way forward is to extend the Act.  The principle has to be right, the risks can be avoided, and I don’t accept the line that it will involve ‘too much work’.  If it also helps change the culture of some HAs, it might have the added benefit of making the government’s plans for tenant scrutiny more effective.

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What will housing look like at Christmas 2014?

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

Just published on the Labour Housing Group website is a fascinating article by LHG Executive member Graham Martin, who tries to predict what will happen to the 3 main tenures between now and Xmas four years hence, when we will be 5 months away from the most likely date of the next General Election.  What will the Labour Party, when returned to government, be facing in housing?  Here is a summary of Graham’s conclusions (figures are for England only).   

Social Housing

Housing Associations currently own around 2.3m affordable homes.  Given the size of the stock, the overall numbers will change slowly despite the planned changes. 

  • The current (inherited and new) social rented programme will produce about 100,000-120,000 extra ‘target rented’ properties.  But between 100,000-170,000 existing target rent homes will be relet at intermediate (upto 80% market) rents.  In 2014 it is likely to be 50,000 fewer in total than now.
  • There will be around 285,000 more homes let at intermediate rents (say 135,000 relets and 150,000 new build). 
  • The debt funded/rental cross-subsidised new Intermediate rented homes will be produced mainly in London and the South East (with some in the South West and Midlands) as it is here that the maths work best.  In other parts of the country, intermediate rents will result in either a small increase or even a rent reduction, making development on the new model unviable. 
  • The biggest impact is likely to be caused by the interaction of the various benefit changes, and in particular the overall benefit cap of £26,000, restricting tenants’ ability to pay.

Council house numbers will change slowly.  There is little appetite and resources for significant stock transfers.  Some other conclusions: 

  • The reform of Housing Revenue Accounts is likely to improve councils’ financial strength and their ability to invest in their own stock.  There is a risk that there will be a smash and grab raid on HRA money (rising rents, financially more secure) to cross subsidise the General Fund.
  • The provision by councils of Intermediate rented housing is likely to be slow.
  • Management issues around benefits are likely to be the same as with Housing Associations.
  • Changes to statutory homelessness rules, and changing letting priorities will have a significant impact.

Home Ownership

Graham projects that house prices might fall another 20%, maybe 25%-30%, as measured against inflation. This will be mainly due to the long term ‘deleveraging’ of the residential mortgage market – i.e. there will not be the money to lend to home owners to buy new homes (such money as there is will go mainly to those buying the nicest properties with the biggest deposits).

Home construction for home ownership will be remain low until 2014, after which is may start to increase again (from a very low base).

The lack of affordable homes for (all but the best off) first time buyers will result in increased pressure on the rental market, and more adult children living in the parental home.

Private Rented Sector

The hardest to predict. The only certainly is that there will be big change.

The changes to Housing Benefit (and total benefit) rules will profoundly impact on the sector. Landlords may split their properties into smaller flats to respond to the benefit caps and ceilings.  Savills are projecting that the impact will be, first, large falls in demand for and rents of 1 bedroom flats (due to under 35’s now being subject to the ‘single room rate’ rule), and, secondly, increased demand for larger ‘shareable’ properties.

The new 30% centile cap on maximum HB and the plan to greatly widen the ‘Broad Market Rental Areas’ will have a big impact.  There are areas where over 30% of private tenants are dependant on HB, but will be constrained to living in the 30% of cheapest properties. 40% into 30% just does not go….

It is likely that the gap in housing (especially ‘green’) quality between other tenures and the private rented sector will grow significantly upto 2015.

Regulation and quality control are likely to be drastically reduced due to spending cuts, and there is a danger that undesirable landlord practices will increase. This is unfair to tenants but also to responsible landlords and managing agents.

There is an opportunity to promote high quality institutional landlordism, with investment available if the regulatory structure is right.  REITS – Real Estate Investment Trusts – could work well in residential letting, kick starting the UK residential construction industry, and providing high quality, long  term rented property at market rents.