Last week, my co-director Juliette Tarrant reminded me that it has been a year since we embarked on our mission to deliver the first social housing real estate investment trust (REIT) to provide new affordable social housing, extra care and supported accommodation.
It has been a hectic year and one that has seen massive debate but little progress in terms of providing each and every UK citizen with a suitable place to live: A position exemplified by the contribution to the debate on affordable housing by Heidi Alexander of Lewisham East. She wrote: "We have heard much talk today about affordable housing and social housing. The reality of social housing in London is that between April and September last year only 56 new social rented homes were started, in a city of 7 million people. Is that acceptable?"
London is not alone. The same can be said for just about any city or region in the country. The government, however, has not said nor done anything. In attempts to stimulate house building, the government has relaxed planning rules, allowed renegotiation of section 106 agreements and promoted the building of non affordable market rent properties. In addition, indirect measures to free up under occupied family social housing are being introduced by encouraging tenants to move.
Unfortunately these measures are nothing but noise - designed to make heads turn in the real estate sector and make everyone believe that we are returning to the good old days of massively enriching PFI contracts.
The key to creating a durable, sustainable and successful REIT is its structure. The number one challenge in setting up a structure able to survive for a century or more is to filter the noise coming from parliament - instead, working in tandem with the flow of social and economic policy.
So when the government announces new planning relaxation it should be viewed against the fact that there are already 400,000 approved applications on which there has been no activity. It is nothing but noise and I chose to ignore it.
The government introduces a new 'bedroom tax' to encourage tenants to move to smaller accommodation, but fails to realise that there is no smaller accommodation for them to move to. It is a measure to try and justify cutting housing benefit spend which, instead, results rent arrears. It undermines landlords' obligations to the investor. It is noise.
When the government announces that it will allow flexibility of section 106 planning gains, listen instead to the member for Lewisham when she warns how this will result in social housing that no one can afford to live in. Listen to my followers on twitter who live in Lewisham when they talk about the many new apartments in the area currently sitting empty because no one can afford to live in them. This is an initiative designed to stimulate building jobs rather than help meet housing need and engage with the investment market on an honest long term basis. It is noise.
Although some of this noise is just ill informed, parts of it is rather more dangerous. Encouragement by government to registered housing providers to provide social housing at market rents is a disaster waiting to happen.
One of the key social policy issues faced by this country is rent poverty. At the moment this is being subordinated by the need to stimulate building and is covered by the fact that housing benefit is still, generally, being paid at close to market rent levels.
Once the recession is over and the desperate need to create employment has passed, future governments will want to take action to address rent levels.This government, already recognizes that market rents are too high and have started early work on the issue; albeit with a view to reducing the housing benefit spend than improving peoples lives. The government is driving down housing benefit for private sector market rents by linking it to CPI rather than RPI as is the case with the registered sector.
It is difficult to justify a housing association having two classifications of social housing operating on two different rental regimes. Since Weaver v. London and Quadrant Housing Trust [2008] registered housing providers have been subject to judicial review and it is difficult to see how they could square a two tier rental scheme with their objects if a tenant chose to challenge them. Even if a tenant does not challenge this apparent two-tier rental scheme, the government will ultimately have to act. It has in fact done so very recently by introducing a rent restructuring scheme where rents converged over an agreed period of time.
From an investor's viewpoint, this is not good news: It heralds uncertainty particularly for the unwary REIT that has failed to recognise this reality and invested in market rent housing. In any future rent restructuring there are only two methods of reducing rents: increased grant input or a reduction in return for investors. The latter scenario, where the government steps in with the sole purpose of maintaining investors returns, is rather unrealistic.
The more likely response will be to 'deflate' the difference (about 20 per cent) away over a period of time. Unfortunately this attacks one of the key attractions for investors in social housing namely access to an index linked income stream.
Despite all this noise, the government lacks a coherent sustainable housing policy and is instead simply implementing a range of haphazard measures that either constitute unhelpful noise or which store up problems for unwary investors. That is why the Houses 4 Homes REIT, a vehicle designed to service the needs of its tenants and investors for 100 years will stick to its founding principles. We will offer our investors the opportunity to invest in a REIT constructed by specialists in the field, who are able to ensure that their investment is future proofed and offers sustainability through the affordability of the housing it provides.
So as the government continues to conjure up measures to get the economy going through construction schemes, may I remind David Cameron that building houses does not necessarily equal building homes. For a house to be a home it has to have someone in it. Without occupants, building a house is just a short-term job creation measure with a poor return on investment. For a house to be a home it has to be affordable.