Social Housing Finance Conference
16th May 2024
The THFC team was pleased to attend the Social Housing Finance Conference in London last week on 8th May, which brought together hundreds of social housing leaders and finance professionals under one roof to discuss the most critical issues facing the sector today.
Delegates had the opportunity to hear about the latest political developments from Government leaders and journalists, glean insights into the current state of the economy, hear about the latest finance issues from social housing leaders, and network with colleagues within the sector.
Below are a few of THFC’s takeaways from the conference.
The economic and political backdrop
The first plenary session included an overview of the economic picture from Rachelle Earwaker, Senior Economist at the Joseph Rowntree Foundation. In positive news, inflation is slowly coming down and short-term interest rates are expected to trend downward as well. While this is of course welcome news, we must remember that this does not erase the economic damage from recent years, especially for the poorest in society. Continued support will be needed for social housing tenants as the country works to lift itself out of the last few years of macroeconomic turmoil.
In terms of the current political landscape, it is encouraging that housing is receiving more political oxygen, although it is clear that housing associations are still operating in a state of limbo during the leadup to the general election. While no one knows exactly when this will be, Stephen Bush, Associate Director and Columnist at The Financial Times, believes this will likely happen in the fourth quarter of this year.
A Labour government is expected to be the most likely outcome. In this scenario, although the public purse strings will remain tight, it is likely that affordable housing development and improvements to existing social housing stock will re-enter the limelight in the next Parliament.
Fiona MacGregor, Chief Executive of the Regulator of Social Housing (RSH) and THFC’s RSH Nominee Director, gave an insightful update from the regulatory perspective. She reminded housing associations of the importance of stress testing business plans with the realistic funding costs of today’s interest rate environment, in addition to reminding providers of the requirement to submit their Tenant Satisfaction Measures (TSM) data for the first time later this summer.
Fiona also underlined the importance of housing providers and funders working together to ensure that covenants are met and stressed that any signs of trouble should continue to be worked through as early as possible. While acknowledging the swathe of pressures housing associations continue to battle, Fiona emphasised the continued attractiveness of the sector.
In a well-attended mid-morning session, Clive Betts MP, Chair of the Committee for Levelling Up, Housing and Communities (LUHC) summarised the findings of the Committee’s newly unveiled report, entitled “The Finances and Sustainability of the Social Housing Sector.” This report summarises the findings of LUHC’s inquiry into the financial sustainability of the sector – for which Piers Williamson, former Chief Executive of THFC, contributed evidence – and includes several key recommendations. These include the need for government investment in social housing development, a long-term rent settlement, and the urgent allocation of the remaining Social Housing Decarbonisation Fund (SHDF).
Sustainable Investing and ESG Stream
A unique hallmark of this year’s Social Housing Finance Conference was the Sustainable Investing and ESG Stream, chaired by Luke Cross, Director at Social Invest, which consisted of four back-to-back sessions focused on ESG reporting, social impact, and sustainable finance.
Arun Poobalasingam, THFC’s Funding and Marketing Director, presented alongside the first Sustainable Investing panel in a session entitled “State of the sector: What story is ESG really telling us?” In addition to sharing some insights from THFC’s most recent Sustainability Reporting Standard (SRS) report, Arun highlighted the sustained demand for ESG information from investors in the capital markets. He also emphasised THFC’s continued support of the SRS, which will see housing associations report against the new Version 2.0 for the first time later this year.
Later sessions tackled important topics such as the quantification of social value, the future of sustainability-linked loans (SLLs), and incorporating the tenant voice at board level.
While the social housing sector inherently places social value at its core, it is no secret that housing associations have often struggled to communicate this positive social impact externally. In a thought-provoking exchange in the second session, Pete Gladwell, Group Social Impact & Investment Director at Legal & General, questioned the extent to which we should be striving to quantify social value in the same way we quantify financial metrics.
In the penultimate ESG session, panellists focused the discussion on sustainable finance, including the longer-term viability of SLLs. While Chinyelu Oranefo, Director of Sustainability and ESG Finance at Lloyds Banking Group, stated that SLLs are “in decline in the market” – largely because they do not currently offer significant pricing benefits – she believes they still have an important role to play in helping organisations meet sustainability targets.
The argument that funders should be aligning their own ESG ambitions more closely to the organisations they fund and hold to account was also raised.
The topics of ESG reporting and the need for better data quality were discussed throughout the afternoon, with Zebrina Hanley, Head of Environment and Climate Change at Royal Mail, asserting that in the not too distant future, organisations will be going to the funding markets and showing off their sustainability progress, rather than going to the markets to acquire funding for their sustainability objectives.
Conclusions
There is no doubt that the social housing sector continues to grapple with an extremely challenging operating environment, with cost inflation, increased regulatory requirements, and higher interest rates impinging on housing associations’ ability to develop new affordable housing while remaining financially viable.
Fortunately, though, with short-term interest rates expected to come down and with affordable housing gaining more relevance in Westminster, there is hope on the horizon. As the sector, and the country, await the general election, it is evident that funding and planning reform will be central to housing progress.
Social value continues to sit at the heart of the social housing sector, and with so much impactful work happening inside and outside of the sector, there is much to be optimistic about.
As Gail Teasdale, Chief Executive of Broadacres and THFC’s National Housing Federation Nominee Director, said at the conference, “We are long term organisations in a short-term world.”
Collaboration, as well as resilience to weather the short, medium, and long-term challenges that come our way, will be key in the coming years as we strive to create a better future for affordable housing tenants across the UK.