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Brexit: are social housing
providers underestimating
its impact?

Brexit: are social housing providers underestimating its impact?

Published: 15th August 2018
Area: Real Estate & Planning
Author: Rachel Gwynne

Social concerns – too much immigration and not enough housing and social care – were a key factor in the referendum. But while Brexit is dominating political life our survey of businesses nationwide reveals a comparatively nonchalant attitude towards Brexit by the social housing sector, with scarce preparation and a sense that the low impact felt so far will prevail.

Overwhelmingly our cross-sector research shows concern has grown about the UK’s strength after Brexit – signalling that prolonged uncertainty has dented business confidence. But confidence has dipped less for social housing providers: to 68% compared to 60% for businesses overall, down from 73% last year. Over half of providers (58%) expect Brexit to create a fall in inward investment and two-thirds (63%) expect the flow of skilled workers to drop.

Yet compared to businesses generally, social housing providers are more likely to think Brexit will have no impact on their organisation (52% compared to 34%). They are similarly understated about the impact of Brexit on demand for social housing, with 75% expecting no change. As a result, few have taken steps to communicate with their workforce over Brexit; fewer still to consider the impact of immigration changes. Yet concerns are evident for the sector overall, with 56% predicting Brexit having a detrimental impact and just 6% expecting a positive effect.

This sentiment is perhaps not surprising given the sector’s operations are almost exclusively UK-based – although scrutiny of supply chains might reveal otherwise. The sector has long experienced an unpredictable environment. But the turbulence of Brexit will be unlike anything else. Underestimating its impact could leave social housing providers exposed to greater risk – as well as missing out on potential opportunities.

The positives lie in the ability of social housing providers to walk the tightrope between austerity and prosperity with assurance. In the face of rent reduction and welfare reform, many providers have restructured their businesses to have their figurative houses in order. There’s recognition across the private and public sector that providers are key partners in solving the housing crisis, easing pressure on the NHS, and delivering local devolution plans.

On the flipside, Brexit risks hardening the housing crisis. Our research shows providers are concerned about it being harder to deliver new housing post-Brexit if the cost of materials rise (cited by 73%) and if labour supply for construction falls (69%). These limitations, along with higher interest rates, would thwart capabilities for new build and refurbishment work. The squeeze on people’s income will impact too, with providers already warning that rent arrears due to universal credit could affect housebuilding plans.

In this sea of uncertainty, one thing is definite: social housing providers know how to tackle society’s challenges head on. As Brexit edges closer, it’s time to confront the risks and seize the opportunities.

Firstly, development contracts. To reduce problems, like the ever increasing longstop dates of the last property crash, it pays to make sure contracts with developers and suppliers are as flexible as possible. Long term large contracts are not helpful in a dynamic climate where rising costs and delays are likely to fall at your doorstep. So consider buying plots over a larger number of sites to spread the risk, as well as allowing for market fluctuations in costs, regular reviews of supply arrangements, and exit clauses.

Secondly, collaboration. Relationships are essential for exploring new partnering and risk-sharing opportunities. For example, modular construction is central to innovative thinking about smarter ways to build new homes, with some housing associations and investors already embracing the government’s drive for it. Opportunities are ripe for making modular more mainstream by brokering ways to jointly tackle the hurdles around financing, contractual risk transfer and local planning.

And thirdly, driving value from community-focused diversification. Social housing providers offer more than just a set of keys to a home. Many are delivering services that create huge social value such as money advice, apprenticeships and employability training. Vulnerable households will be the hardest hit by any cost of living rise from Brexit. Maximising the return on these services, and widening access to those on the threshold of being affected by economic downturn, is mutually beneficial.

Being actively robust, visible and engaged will only strengthen social housing providers in the face of whatever change Brexit brings.

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