A view from the city: challenge and opportunity
Housing providers face a more challenging funding landscape than they ever have. Rent reductions, right to buy and a raft of other measures have put pressure on just about every housing provider to look at their finances. Mark Davie is head of social housing at M&G Investments, which has more than £6 billion invested in social housing - we spoke to him about the financial challenges and opportunities in the sector ahead of his executive briefing on 22 September.
Hi Mark. So just how challenging is the financial environment for housing providers?
It’s extremely challenging, I’d go so far as to say the difficulty is unprecedented. The last few years in particular have seen a raft of policy changes which have hit housing providers and these have been compounded by changes in the market. It doesn’t look like it’s going to get easier any time soon with the likes of the LHA cap on the horizon. Add the uncertainty created by Brexit and you’ve got a very difficult and unpredictable financial landscape for housing providers right now.
What impact has Brexit had on housing providers’ finances?
There are some financial impacts that we know about. So the bond market has become more volatile and the uncertainty about the long-term impact our exit from the European Union is already causing some providers to be more cautious generally.
On the flipside, debt is cheaper than it has ever been, so there is an opportunity for providers there.
Of course, nobody knows the long-term impact of Brexit – financially or otherwise. It’s clear that not even the government knows the implications - there is still an awful lot that we don’t know. There’s no doubt that taken together with some of the policy reforms, a lot of housing providers are nervous at the moment.
Is it all bad?
No, it isn’t. The fundamentals of what housing providers want and what investors want will remain the same and borrowing is very cheap at the moment. Just last month we announced an agreement with Stafford and Rural Homes with £50 million long-term financing contributing to the development of 600 homes by 2021. Pension fund clients continue to seek cash flows over the long-term which are secured against residential property and I think we’ll continue to see deals like this.
What should providers be thinking about?
I think the key is not to panic. It’s true that social housing faces a huge number of challenges, but the tenants are not going away. While the financial landscape may be different, there is still a multitude of ways to make your financial plan stack up. It’s a case of adjusting your approach where necessary.
What are you covering in the executive briefing on 22 September?
I’ll be giving my take on where I think we are, what is going on in the sector and the wider financial landscape. Then I’ll be looking at the challenges providers face and the opportunities available. The session will be interactive and I’m really keen to give people the chance to talk about what they want to talk about.