The one per cent annual reduction to social housing rents over four years and other welfare reforms set out in the July Budget have left RPs with little option but to make further, and in many cases significant, efficiency savings. The sector is facing a huge period of change, and a range of financial pressures, and we’re seeing many RPs taking action now to ensure they remain fit for the future.
Over the last couple of years tenants have been fairly well protected from cost saving measures, with the majority of RPs reluctant to reduce tenant services. In our 2014 survey just 16 per cent of respondents had made or were considering making cuts in this area, and just 19 per cent in 2015. Fast forward 12 months and tenant services are now looking much more vulnerable, with 41 per cent of respondents in our 2016 survey having made or considering making reductions in this area.
The sector’s workforce is also becoming increasingly affected by the cut backs, with 29 per cent of respondents having already implemented redundancy plans (27 per cent in 2015), and 66 per cent of English associations reporting job losses by June 2016. It’s unsurprising then that 47 per cent of RPs have reduced or are considering reducing recruitment of new staff, up from 30 per cent in 2015, and we expect the overall number of people working in the sector to continue to reduce over the course of the year.
More than half of the sector (57 per cent) have or are considering re-thinking salary levels and benefits, and whilst the majority (93 per cent) of RPs were expecting salaries to increase during 2015, the outlook is not so positive this year. Just 59 per cent of respondents expect pay rises within their organisation over the next 12 months.
Those employees lucky enough to receive salary rises during 2016 are likely to see a smaller increase than in previous years, with just 10 per cent of respondents expecting salary increases of two per cent or more. This is a reduction of more than 40 per cent on 2015 responses to the same question. Despite all of the cuts within the sector, it’s perhaps surprising to see more than half of RPs expecting salary levels to increase over the next 12 months, but the sector is definitely taking a more considered approach than in previous years which is understandable.
Attracting board members with the right skills and diversity mix, and those able to commit the time required to fulfil the role effectively can be difficult, particularly for some of the more complex providers. Paying board members is becoming increasingly common within English associations, with 65 per cent of English RPs paying all members of their board a salary. Of those RPs paying board members, more than half (54 per cent) pay their board chair more than £10K a year.
In total contrast to this, it’s interesting to note that not one of our Scottish respondents pay any of their board members a salary. We are aware of some Scottish RPs who have started to pay their board members and non-executive directors salaries and it’s certainly a subject that is being discussed and debated across the sector in Scotland at the moment. However there still appears to be a strong belief in many Scottish providers that the unpaid board role is part of the philanthropic culture of the country.
We’re starting to see an increase in the number of providers reviewing their pension provision arrangements, with 52 per cent of respondents in our 2016 survey looking at making further changes to their scheme, up from 43 per cent in 2015. Of those providers taking action, we’re seeing an increasing number looking at closing their DB scheme to new members and many are asking for higher contributions from their employees. The SHPS/SHAPs and similar sector schemes’ deficits do continue to worsen so it is surprising to see that 48 per cent of respondents are not planning to take any further action at all.
To date, the impact of the Welfare Reform Act has not hit the sector as hard as many had predicted. The sector is clearly concerned though about the further changes to be implemented during 2016, with 82 per cent of respondents expecting them to have a significant impact on their organisation. The next 12 months will see the continued roll out of universal credit across the country, and whilst we see many RPs as well prepared for these changes, the concerns around rent arrears and bad debts still remain within the sector. 57 per cent of respondents in our latest survey think this will have a significant impact on their organisation.
To date RTB policies introduced prior to the July 2015 Budget have had little impact on the sector other than with ALMOs and LSVTs. We’re expecting to see the new voluntary RTB regime have a much greater impact on the sector, and this is a view shared by English providers in our latest survey, with 62 per cent of them expecting more than five per cent of their housing stock to be affected in the next five years.
There is an expectation of one for one replacement of properties sold within the RTB regime but this is not quite as straightforward as it might seem. There are many factors affecting an RPs ability to build new properties, including the right land being available and the big assumption that money received from the sale of one property will cover the cost of building a replacement. Only 44 per cent of English providers are expecting a one for one replacement of future RTB sales, which could leave the sector with a serious reduction in available rented housing stock.
50 per cent of respondents in London and South East expect the introduction of the pay to stay requirements to encourage more RTB sales within their organisation. Only 30 per cent of respondents felt this was a concern in other parts of the UK. It will be interesting to see how this develops as most would question the affordability for tenants to buy homes in and around London, even after the discounts on offer have been applied.