Cameron Watt’s speech at #NIFHA16 Annual Conference – The Challenge Ahead
Firstly, may I thank Minister Givan for taking the time to join us here this morning.
The Challenge Ahead is the theme for this conference, and this morning I want us to consider the nature of that challenge, and how together, we can successfully rise to it.
But I want to begin by celebrating some of our sector’s successes.
This has been a hugely successful year for the movement.
Last month I was delighted to attend the National Housing Awards in London with Newington.
They beat off competition from some of the biggest and best known housing associations in Britain to win the Best Regeneration Project Award for their work on the Limestone Road.
It was certainly Pimms O’ Clock when Alexander Armstrong presented the Award.
The movement again dominated the CIH Awards, with Apex, Choice, Fold and Helm all winning.
This is Fold’s Fearghal Burke, Young Housing Professional of the Year.
Meanwhile Triangle’s Ballymisert Supported Living Scheme on the Holywood Road won Social Housing Scheme of the Year at CEF’s Construction Excellence Awards.
Our political engagement has stepped-up.
Arlene Foster toured Connswater’s Dunmurry High School development.
Meanwhile Alpha hosted the First Minister for afternoon tea in Bangor.
Helm, Fold and Newington have celebrated their 40th anniversaries.
Tomorrow, Martin Pitt of PwC will present the sector global accounts, which are in your packs.
These demonstrate another year of strong financial performance, including driving greater efficiencies.
Our sector’s attractiveness to funders has again been demonstrated.
Clanmil agreed £135m in funding with three local lenders – Danske Bank, First Trust and Ulster Bank.
Co-ownership has just arranged a new £65m facility with Bank of Ireland.
And back in June, Apex and Choice made headlines when they secured £280m from the European Investment Bank.
Not only was it the biggest funding deal in our sector’s history, it was also one of the first deals EIB has done directly with UK housing associations.
It demonstrates that Northern Ireland housing associations are leading in housing finance across these Islands.
During the Assembly elections, the movement vigorously made the case for housing, including through our manifesto and hustings event.
However, it’s not been all work and no play over the last year.
The Housing Association Football League has just launched, the first business league established through the IFA.
Helm’s Denise Burns has played a blinder in making this happen, and I want us to thank Denise this morning.
This time last year, The Executive was still locked in stalemate over welfare reform.
Its collapse – and the return of direct rule – looked a distinct possibility.
Thankfully the Fresh Start Agreement was reached, and we now have a cross-community Executive and Opposition.
But the big change in our political and economic environment is undoubtedly Brexit.
We’re told ‘Brexit means Brexit.’
But will it be Hard Brexit, Soft Brexit, Full Brexit, Partial Brexit?
Brexit presents particular challenges for Northern Ireland and the whole island.
We can only speculate on the potential impacts for our sector.
In the short-term, the vote has triggered further QE and a cutting of interest rates by the Bank of England.
This should help keep borrowing costs low at least for the short-term.
Looking a bit further ahead, will the availability and cost of building materials be affected?
Will the shortage of skilled tradespeople be made worse?
Ultimately, Brexit’s biggest impact for us is likely to be in its economic fallout.
So within a few years, some NIFHA members will be operating simultaneously inside and outside the European Union.
But as a movement, we’ve always sought to engage across the island of Ireland.
And we mustn’t let Brexit change that.
Reclassification – Direction & Control
The other major change in our operating environment was more predicted.
During the referendum campaign and Tory leadership race, you may have had your fill of Boris Johnson.
But I was reminded of one of his quotes in the context of sector reclassification.
Boris once said that as far as cake is concerned, his policy is pro eating your cake and pro having it.
In relation to housing associations, for years, government across the UK has benefitted from our independence and the resulting access to private finance.
But government was having its cake and eating it, subjecting associations to onerous directions and controls.
NIFHA warned that these made of sector vulnerable to reclassification.
And so on 29 September, the Office of National Statistics confirmed reclassification of NI housing associations as public bodies.
Although presented as merely a technical accounting change, it is much more far-reaching than that.
Reclassification presents major potential impediments to housing associations’ ability to govern themselves effectively and to deliver new homes.
It could also seriously compromise our public finances, limiting the Executive’s ability to borrow and invest.
To its credit, the NI Executive has responded swiftly.
On the day of the announcement, it committed to taking the necessary steps to enable ‘re-reclassification’.
This includes amending the relevant legislation.
We thank Ministers Ó Muilleoir MLA and Givan, and their officials, for all they are doing on this.
Also encouraging was the Assembly vote on Monday on an Opposition motion on Monday imploring the Executive to expedite action to reverse reclassification.
Having the support of all the main parties is very valuable.
As we scope the necessary legislation, it’s vital the Executive does not just do the bare minimum that may be necessary to reverse reclassification.
Like a lazy teenager doing just enough to scrape an exam pass.
ONS give themselves ample wriggle room to keep us in the public sector.
Even if all the grounds for reclassification they have initially identified are fixed, they can cite other new grounds at a later stage.
Indeed this has already happened in England.
So we must use this opportunity to help re-set the relationship between our sector and the state.
Most of the necessary changes will be technical and non-contentious.
One area that is likely to attract debate is the future of the House Sales Scheme, our version of Right to Buy.
The scheme has helped tens of thousands in to home ownership.
But it’s also decimated our social housing stock, greatly increasing the private rented sector and putting huge pressure on the housing benefit bill.
Overall, it’s been a poor deal for the taxpayer.
It’s one thing the state selling off its housing assets at a big discount.
However, it’s quite another compelling independent charities to dispose of homes for much less than they’re worth.
Given the shortage of social housing, we believe the House Sales Scheme should be scrapped.
Government can better support home ownership through Co-ownership, Fairshare and other schemes.
When ONS is classifying organisations, one of the main things it considers is whether organisations truly control their assets.
When it comes to the House Sales Scheme, it’s clear we don’t.
Although the Scheme was not cited by ONS in their initial statement explaining reclassification, it may well be raised at a later stage.
Scotland has scrapped Right to Buy and Wales is about to follow suit.
If that’s not yet possible, we should consider the English option of a voluntary arrangement to replace the House Sales Scheme.
Impact of reclassification
In the meantime, what difference will reclassification actually make to associations’ day-to-day business?
Hopefully, very little.
However much will depend upon the derogation negotiated with the Treasury.
Finance Minister Máirtín Ó Muilleoir is bullish about securing the necessary interim arrangements.
We’re fairly confident the sector will be able to continue to function normally for the time being.
Avoiding real world damage will require swift legislating quickly to meet the deadlines set out in the derogation.
And given that ONS will want to reassess the devolved nations together, it’s vital we move at least as quickly as the Scottish and Welsh governments.
Not to do so risks our sector not being re-assessed until years later, which could be catastrophic.
Although the primary focus of reversing reclassification will be the necessary legislation, the new regulatory system must also be finalised.
ONS have stressed they will consider the legislative and regulatory framework in the round.
DfC’s regulatory team continue to do vital work for which we thank them.
Recently there’s been good engagement on the new financial standard and guidance, which are now nearly ready.
However there is frustration at the length of time it is taking to implement the new regulatory framework as a whole.
We’re still operating under the 2006 Regulatory Framework and the Housing Association Guide, both of which are now wholly inadequate.
Clarity is needed on the new governance and consumer standards, and how the revised framework will work in practice.
We recognise the Department’s workload pressures.
But we ask that the 2006 Framework and Guide are formally revoked by 1 April 2017 at the very latest.
Nature of independence
In the meantime, we all need to get on with the day job.
Although re-reclassification is essential, our sector’s independence extends far beyond an accounting classification.
Or the ability to borrow privately.
Rather our independence it is rooted in our enduring mission, purpose and values.
It’s rooted in our ability to think and act differently.
So associations must continue to chart their own course.
Boards must exercise primacy, set the strategic direction, hold themselves and senior teams to the highest standards, and take and manage risks.
We must demonstrate that without statutory compulsion, we are at least as effective, transparent and accountable as public bodies.
As our sector continues to grow, we can expect more scrutiny.
Sometimes that will be fair, sometimes perhaps less so.
We’re Northern Ireland’s biggest and best resourced charities.
That’s a privileged position.
It’s incumbent on us to always remember that all our movement’s resources are charitable assets.
With austerity biting over the next few years, our sector will come under the microscope.
Spending that is considered excessive or wasteful will be pilloried.
As we all know, when it comes to our sector’s reputation…
We stand or fall together.
Some of you will be fed up with me banging on about sector independence.
Is it all just a wee bit Braveheart?
Well, if it is, I’m sure you’ll forgive me.
What difference does our independence really make?
Well, in recent years, our movement has undergone a transformation.
And it’s our sector’s independence that has been the key factor in enabling all this good stuff to happen.
Much attention has been focused on the creation of Choice and the forthcoming merger of Fold and Helm.
These are very significant and we commend those responsible.
We need associations that can access finance on the scale of the EIB deal, lead significant regeneration projects and deliver an increasing range of homes.
But of course bigger does not always mean better.
Similarly, merger is not always the best form of collaboration.
Newington and Hearth have entered into group structures with Apex and Clanmil.
Freed from the shackles of mandated procurement groups, five smaller associations have procured response maintenance services to better suit their needs.
There are also opportunities for community based associations to take on the management of homes developed by others.
Apex and St Matthews are entering in to such an arrangement for a new development in the Short Strand.
Therefore, thanks to our independence, collaboration is driving the renewal of our movement.
One area where continued collaboration and innovation is needed is in development.
Yet again we exceeded targets for new social and affordable homes last year.
The difference these new homes make to tenants is hard to quantify…
Such as this girl at her new Clanmil home at Felden in Newtownabbey.
From a target of 1,600 social housing starts this year, we expect this to increase to around 2,000 next year and around 2,200 for the two years after that.
The Housing Executive is fairly confident we’ll meet the targets again this year.
Although we’re consistently delivering the numbers, it’s not getting any easier.
One challenge is our reliance on an ever pooler small pool of contractors.
Which got even smaller when T&A Kernoghan went bust in April.
The small number of contractors may be helping to drive up tender prices.
Costs also increase through some contractors’ very assertive claiming of compensation events under the NEC3 contracts.
We were therefore relieved when last year, DSD agreed to a derogation from standard CPD Z Clauses, allowing the sector to develop its own standardised suite.
The suite should help manage risks and control costs.
Association procurement leads and Jennie Donald have done a huge amount of work to finalise the document, which will be reviewed on a regular basis.
New ways to deliver
Over the next five years, we’re going to have to fundamentally re-think how we provide new homes.
The days of the brickie may be numbered.
How can we deliver more efficiently and reliably?
Do Modern Methods of Construction have a role?
Could we be taking some construction capacity in-house through DLOs?
I’m convinced we need to pursue a wider range of delivery options.
In February, Legal & General announced its modernization of the home building industry by providing modern, precision engineered factory manufactured houses through a new factory near Leeds.
They reckon the technology is now proven, and that time spent building on site can be reduced by more than 70% using this approach.
Legal & General is a vast financial institution.
Surely they’re operating on a different scale to us?
But take Swan Housing Group, an 11,000 home housing association in Essex is investing in a factory to provide new homes.
Swan has invested £3m in set up costs and has guaranteed the factory £30m worth of orders for 570 new homes.
They project cost savings of 5% on development costs through this new approach.
If we want to sustain the quality of new homes whilst controlling costs, we need to be embracing new approaches.
For example, if our sector were to commit a meaningful proportion of the homes to modular construction it could give us critical mass.
We’ve visited local companies that have the scale and expertise to be credible partners in a joint venture, perhaps involving two or three associations.
Diversification across tenures
There are also huge opportunities to diversify our housing offer across tenures.
Co-ownership continues to help many hundreds of families on to the housing ladder each year through its core shared ownership product.
However it’s also getting huge interest in its new Rent to Own scheme, which allows people on lower incomes to transition from renting to buying their new home.
As well as supporting home ownership through Co-ownership and FairShare, a number of associations are looking at a wider variety of renting options.
From providing social lettings to people in housing need to apartments for young professionals.
With a steady property market, and undersupply in key locations, there are real opportunities out there.
So, in spite of the risks, which must be carefully managed, our sector does have the scope to increase the numbers and types of homes we can deliver.
At our Finance Conference, Máirtín Ó Muilleoir encouraged us to get involved in the regeneration of our urban centres.
Minister Givan spoke outlined the exciting opportunities around mixed-tenure, including the re-development of the St. Patricks Barracks site in Ballymena.
However availing of these opportunities will require a significant investment in new capacity, not least to ensure the continued delivery of core social rented homes.
Faced with uncertainties from Brexit to Reclassification to welfare changes, the temptation for boards could be to hunker down and tough it out.
However I believe that would be a real mistake.
Northern Ireland needs us to be willing to push at a few more boundaries.
Care and Support
Care and support is another business area in flux.
NIFHA has continued to energetically campaign for Supporting People services.
Whatever else our future may hold, we need to continue to prioritise housing, care and support for the people who depend on it.
But each year it gets more difficult.
Supporting People project funding services has now been frozen for the ninth consecutive year.
This is now seriously compromising the quality of services, and in some cases their sustainability.
The Department and Housing Executive have gone to great lengths to protect the SP budget in cash terms.
But that offers little comfort to a support worker who’s not had a pay rise for eight years.
Or the providers who can’t retain the right calibre of staff.
Among staff cost pressures are the National Living Wage, changes to rules on sleepover pay and pension auto-enrolment.
So SP funding will have to rise to sustain existing services.
But we also believe that there’s a growing need for housing support services, not least through our ageing population.
Therefore there’s an urgent need to accurately quantify the growing requirement for housing support.
This is vital in securing the funding necessary to secure these services’ future.
We’re working with DfC and the Housing Executive to establish that firmer evidence base.
Minister Givan has re-allocated £3m from this year’s DfC budget to help alleviate some of the cost pressures SP providers face.
This additional funding is welcome, and we thank the Minister for it.
But one-off, end of year top-ups are no substitute for the necessary consolidated increases.
The Bengoa report on the future of our health and care system is to be published shortly.
I’d expect it to endorse the vision of Transforming Your Care.
Wherever possible, services should be shifted from acute settings to the community, with the home becoming the hub for care and support.
But this ‘shift-left’ will not be achieved easily.
Nor will it be realised without properly funding – and expanding – housing, care and support.
Make no mistake, even in these tougher times, Northern Ireland can sustain a properly funded Supporting People programme, should we choose to do so.
But it means prioritising Supporting People in the new Programme for Government and Executive budget.
To achieve that, we need to continue to raise Supporting People profile and vigorously advocate for its future.
But Supporting People doesn’t just need adequate funding; it also requires major reform.
Providers are participating fully in the group implementing the recommendations of the fundamental review of SP.
Progress is being made, but the scale of the task is daunting.
The work on strategic needs assessment is vital and must be expedited.
Improving commissioning may entail moving to a tariff-based system.
There’s also work to do on measuring outcomes and regulating services.
However there’s also plenty for us to do as providers.
There are still far too many providers, including single service providers, and duplication of services.
This has to change.
Providers, along with DfC and the Housing Executive, are holding a two-day conference in December to engage with delivery organisations on the need for change.
I hope NIFHA members will attend with their managing partners, who are the target audience for the event.
It’s also important that the Supporting People Commissioning Body engages with the sector in this reform process.
Its modus operandi is akin to the Soviet Politburo.
We still don’t know the names of its members.
That’s not acceptable.
There are many tough decisions ahead, and there needs to be trust and openness on both sides for successful reform of the programme.
Supported housing models
We also need to consider the optimal models for supported housing in future.
The fundamental review signalled a major shift from accommodation-based models to floating support.
A re-balancing is needed, especially in homelessness as Housing First is rolled-out.
But we’re going to need both new accommodation-based and floating support services, even if some existing provision has to be decommissioned.
To help balance the SP budget, new accommodation based services are no longer being commissioned.
That’s short-sighted, and needs to be addressed to avoid losing vital expertise in development teams that will later be needed.
So we call on government to work with us developing the new generation of supported and sheltered housing.
Welfare changes are going to pre-occupy the sector for the foreseeable future.
Over the last few months, we’ve begun to see the implementation of the first reforms that most directly affect our sector.
For a full update on welfare reform, get along to the breakout later with Kevin Higgins and Sharon Geary.
The household benefit cap was applied a limit of £26,000 in May, and that will be reduced to £20,000 in November.
The Bedroom Tax will be implemented in January 2017.
Of course these cuts are mitigated for three years.
And coming at us fast over the horizon are much bigger threats.
Chief among these is the limiting of housing benefit for social tenants to Local Housing Allowance levels.
In Britain, from April 2018, social tenants that signed their tenancies from April 2016 will have the amount of benefit limited to the LHA level for that size of household.
Also, if the tenant is single and under 35 years old, the benefit eligible rent and service charge will be capped to a shared accommodation rate.
The LHA cap will apply to older people as well as working age households, so effectively it’s a Bedroom Tax for pensioners.
Based on last year’s rents, 28% of our sector’s general needs homes were over the LHA cap.
That’s a very significant proportion.
The cap will particularly hit rural areas where social rents tend to be higher, but LHA rates are lower due to their smaller private rented sector.
As well as leaving many tenants with a shortfall in their rents, the cap could make development unviable in most of Northern Ireland.
At least without a significant adjustment to grant rates to compensate.
The Assembly has yet to legislate for the LHA cap, but it’s inevitable it will.
Be in no doubt: the LHA cap is the single biggest threat to our sector’s financial viability over the medium to long-term.
But it’s not the only threat.
In England, social landlords are implementing the Government’s 1% cut in social rents over the next four years.
Treasury is now looking for similar savings in the housing benefit bill in the devolved nations.
The Scottish and Welsh Governments, as well as our NI Executive, are being put under a lot of pressure.
But they need to resist.
It’s not for the Treasury to set housing policy in the devolved nations.
Especially when Northern Ireland receives proportionally less in Housing Benefit than England, due to our lower rents.
We should not have to pay the price for a ballooning Housing Benefit bill in England, partly caused by their failure to invest in social housing.
That said, given the squeeze many tenants are facing, Boards will want to be particularly sensitive when setting rents for next year.
Significant rent rises may not be possible for the foreseeable future.
Of course the more we are able to limit rent increases, the stronger our prospects of successfully resisting statutory rent controls or even rent cuts.
At last year’s conference, we proposed a sector-led approach instead of rent controls.
Part of that offer was further transparency and openness.
As promised then, we have just published our website a report setting out sector rent levels, broken down by association and size and type of property.
This will help associations in bench-marking and rent-setting, and provides transparency to tenants, elected representatives and others.
We look forward to developing the analysis further, and also working towards sector-led guidance on rent-setting over the next year.
Supporting tenants in tough times
All the benefit cuts we’ve been discussing are part of a wider agenda to fundamentally re-shape the welfare state.
In future, government will be providing less help to those in greatest need.
Especially when it comes to housing costs.
Northern Ireland may resist, but our ability to diverge from the new British welfare system will be very limited.
This new settlement creates big challenges for associations around income collection and financial viability.
Having said that, the challenges faced by people facing major cuts to already low benefit income may of a different order.
In future, reconciling social purpose with commercial imperatives will not be easy.
The Joseph Rowntree Foundation has just launched a new report on solving poverty in the UK.
Its recommendations for housing providers include making tackling poverty an explicit aim in their business plans and strategies.
I can’t argue with that.
With the state stepping back, civil society will need to step forward.
That includes us.
That might mean providing more money and debt advice, to help tenants maximize incomes, budget effectively and manage crisis situations.
We can also partner with foodbanks, furniture re-use projects and other schemes that help tenants minimize their outgoings.
It’s said that work is the best route of poverty.
With in-work poverty soaring, that’s only partly true.
But we are in the business of releasing potential, and associations are increasingly helping tenants’ fulfil their ambitions.
I think of the bursaries Newington provide.
Clanmil’s work with Womens’ Tec.
Helm’s partnership with Bryson FutureSkills.
Fold’s participation in the West Belfast Works scheme.
Many of the people our movement serves will be far from the labour market.
Securing and sustaining work may not happen overnight.
But we can take a bigger role in this space, helping people and communities to help themselves.
NIFHA is committed to helping our members in our area.
We’ve employed a full-time NIHACT manager for the first time.
Conor Creaney will be supporting members’ work in a wide range of community investment areas, including in tackling poverty and training and employment.
This includes identifying new funding and partnership ideas.
We’re showcasing the sector’s community investment work to MLAs at Stormont on 7 November, and I hope many of you can join us then.
Helping build a shared future is one of the most important ways we can serve this society.
It was a privilege to attend the launch of Apex’s shared TBUC development in Ravenhill this year.
During this conference we’ll see films showcasing the excellent work of Clanmil and Fold in this area.
When I lived in London I worked and socialised with many of Northern Ireland’s brightest and best.
For some bizarre reason, one of them even agreed to marry me.
Gavin Megaw, who we’ll here from tomorrow, is another example.
New figures show that a fewer than a third of our young people who study in GB ever return.
Obviously many conclude they have better job prospects across the water.
But so many rule out a return because they don’t want to live in a divided society.
We can’t afford this continued loss of talent.
I suppose the point I’m making is that all of our futures are compromised by lack of progress on a shared society.
Of course excellent work is being done, and there are many signs of hope….
Such as the Housing Executive’s recent dismantling of a north Belfast peace wall.
But without generating much greater momentum, our children and grandchildren will be denied the future they deserve.
Many of our leaders are ambivalent, or lukewarm at best, when it comes to building a shared society.
This makes it all the more important that we’re bold and brave in helping provide the leadership required.
And chivvying our politicians to move further and faster.
Through Fresh Start, the British Treasury is making hundreds of millions available for new mixed tenure shared developments.
That’s a huge opportunity for us.
We must also lobby for another phase of shared housing schemes in the core social housing development programme.
For it’s in areas of social housing that divisions are most stark.
That’s why NIHACT is currently leading a bid for Peace IV funding to help the sector achieve a step-change in good relations work in existing estates.
And beyond on-the-ground delivery, all of us as sector leaders need to be a bit more willing to put our head above the parapet in advocating for a shared society.
Role of NIFHA
Don’t worry, we’re nearly there!
So as a sector, we’ve got our work cut out.
We know that as housing associations, you have never been as busy.
And I promise, as your representative body, neither have we.
I want to thank the staff team for their sterling work over the last year.
The team has grown, and I believe we’re delivering more than ever before.
Our lobbying voice is strong and effective.
We’ve expanded our range of conferences and events.
A key partner in so much of our work is the Department for Communities.
We welcome Andrew Hamilton, Bernie Rooney, Ian Snowden and Stephen Martin here today.
DfC is currently funding two posts at NIFHA for a second year.
Among other things, this is allowing us to do more intensive work on preparing for welfare reform.
We’re deepening and broadening our relationships with the sector’s commercial partners.
This includes our new Corporate Partners scheme, which we’re delighted to launch today with our first two Partners.
The first is Arthur J Gallagher, the sector’s main insurance broker, and we’re pleased Shane Matthews and his colleagues are with us today.
Secondly we have Danske Bank, now well established as a leading sector lender. Chris Martin and Oonagh Potter are joining us at this conference.
I know that you appreciate the service these firms provide you with, and also their investment in the sector through support for NIFHA.
We thank Arthur J Gallagher and Danske Bank for partnering with us, and look forward to developing the relationship further.
This is a critical juncture in our movement’s development.
Although the sector’s overall size is steadily growing, the number of associations continues to shrink.
We need to be sure we can effectively support you in future.
To that end, our Board has established a Strategic Review Group, which will meet over the next three months.
All members had the opportunity to be represented on the group, which reflects the sector’s diversity.
Over the next three months, it will consider our service offer, the staffing required to deliver it, and the affiliation fee structure and levels needed to fund our work.
The Group will make recommendations to the Board early in the new year.
I’m confident the Group’s work will help put us on a firm footing for the next few years.
As well as lobbying and influencing, we’re looking to further extend our service offer to you over the next year.
This includes the creation of a sector-led procurement vehicle, of which more later.
To conclude, there are some daunting challenges ahead.
However our sector is in a good position to chart a distinctive and bright future.
Fundamental to success is securing our independence.
Reversing reclassification is essential to this, but it’s as much about associations continuing to think and act differently, pushing the boundaries and being willing to take risks.
So as we secure our independence, let’s ensure we’re fully harnessing it to deliver great things.
From supporting tenants through welfare reform, to diversifying the housing offer, to playing a leading role in building a shared society.
Our sector has a vital role to play in building a thriving, just, and inclusive Northern Ireland.
It’s an exciting future.
Let’s be bold and brave as we pursue it together.