Housing Associations must start preparing for Brexit now
There is a lot of information and opinion available on the potential impact of Brexit. However, housing associations get little media attention when it comes to Brexit. Does that mean they don’t need to prepare for it?
At first glance, it may seem like this sector – some 17% of households in the country – is not impacted. Housing associations (HAs) only serve UK citizens. They only have properties in the UK. All their operations are based here.
However, as we (unfortunately) know, with Brexit the only certainty is uncertainty. No sector is exempt from needing to plan for it: housing associations included.
When guiding our housing clients through Brexit, one of the questions we always ask is “will the organisations you rely on be affected by Brexit?”. Because even if you are not directly involved with the EU, you are likely to be using EU materials or manpower further down your supply chain or to come under EU legislation somewhere in your operations.
Housing associations are on a mission to significantly increase the number of new homes they provide: to achieve this, a strong construction sector is needed. The G15 – an organisation of the largest housing associations in and around London – has committed to doubling the number of homes they provide to 180,000 over 10 years. This is on top of the proposals for the future of social housing in England, published in a Green Paper in August by the Ministry of Housing, Communities and Local Government. The paper aims to rebalance the relationship between landlords and residents, tackle stigma and ensure social housing can act as a stable based and support social mobility.
With such big expectations on the sector, HAs can’t afford to be held back in the run-up to, and after, the UK leaves the EU in March 2019. There are five areas HA leaders must get their heads around as a matter of priority.
Many of the materials used in construction are imported from Europe. In 2017, the trade deficit in construction materials was £9.9m*, with the value of imports being more than double the value of exports. The ONS cites the depreciation of sterling following the UK’s decision to leave the EU as one reason for the continued widening of the trade deficit.
The G15 has already revised their development costs in anticipation of a negative impact of Brexit on both building material and labour costs. If your materials come from Europe, consider the scale of the impact on your supply chain if tighter controls on EU materials and migration were to come into force. And put contingency plans in place to ensure housing provision isn’t impacted if there is a dip in construction.
Questions remain about how the vote to leave might impact your ability to secure funding to build new homes. Many housing associations benefit from funding from the European Investment Bank (EIB): is this your organisation? To date, the EIB has invested some £5.5bn in UK social housing; future funding is not certain. If you have previously benefited from such funding, what impact is there to your business if that is no longer accessible?
Currently, there is a requirement to publish contracts above a certain threshold in the Official Journal of the European Union (OJEU), meaning they are put out to tender across the EU. Do you have much interest from companies based outside the UK for OJEU housing procurements? Consider any effects if your supplier options are (at least temporarily) reduced. It is possible that OJEU notices may not be required in future, happily removing frustrating red tape which currently exists. Inevitably, future trade agreements will come with updated procurement rules. Is your organisation able to react and evolve as regulation changes?
EU migration exerts minimal influence on affordable housing demand, however, existing tenants may face new challenges. Some may struggle to pay rent if they must spend a higher proportion of income on food. A similar challenge may present itself if energy costs soar.
According to two reports published in The Guardian**, Brexit is predicted to make people outside London worse off by several hundred pounds. Do you know which of your tenants could be most at risk? You have the opportunity to identify and respond to those who may need more support in terms of rent payment planning, and arrears payment planning, in advance of tenants getting into financial trouble.
Current EU regulations which impact housing associations include climate change, energy, employment, health and safety, and tax. It is unknown how much of the regulation the UK will keep. Of the regulations you are currently bound by, which come from the EU? Are there any which particularly benefit or adversely affect your organisation? Consideration of these will allow to you to prepare for when changes come into effect, and even influence new regulations to better serve you through government lobbying.
By considering – and taking action on – the above, HAs will develop an understanding of the short- and long-term impact of Brexit on their organisations. This, in turn, will guide business continuity planning against some of the possibilities that may manifest in March 2019 and beyond.