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Budget response 

George Osborne has delivered his seventh Budget as chancellor, the first for a majority Conservative government since November 1996.

In response, the chair of PlaceShapers Tony Stacey said: "We understand the Government’s need to balance the books and as Placeshapers we want to play our part in delivering the government’s commitment to end the housing crisis within a generation.

Much of our financial capacity has been focused on delivering new homes and getting people into work.  Our concern is that these changes will  threaten our ability to deliver these things, and undermine our common purpose with the government to solve the housing crisis.  

PlaceShapers are ready to rise to the Chancellor’s challenge of greater efficiency and need to look at how this can be done while delivering new homes and local services. In the past year alone, PlaceShapers delivered £109m worth of efficiency savings, equating to a 2.8% saving on a combined turnover of £3.84bn."

Tony's full blog which appeared in Inside Housing

So we know now what Osborne had in store for us.  I will start – and finish – with the good news. Firstly, what didn’t happen?  Young people between 21 and 25 will not have their entitlement to housing support removed.  The rumour that our tenants would have to pay the first 10% of their Housing Benefit has not materialised. There are no plans to claw back from housing associations the additional income generated from “pay to stay”. The NAHP has been protected.   The rent rebasing of minus 4% comes to an end in 5 years’  time when the CPI +1% settlement will be restored.  Finally, the living wage is to be introduced by 2020.

Now the bad news.  The reduction of the Overall Benefits Cap to £20,000/£23,000 is disastrous for the hundreds of thousands of families who will be on the receiving end of this.  Much has been written about the iniquity of the OBC; there is not space to develop this here.  All social landlords will now be assessing what this means for their customers.  For SYHA this means that the number of families affected goes up from 11 to 254.  The average reduction for the 2 parent, 3 child household will be £40 per week.  The fact that this reduction comes entirely off Housing Benefit and leaves landlords with nowhere to go if tenants start to fall behind, means that homelessness is bound to increase.  The Government has stated that families evicted under these circumstances should not be considered “intentionally homeless”.  Nevertheless, the personal distress that this will create, and the additional financial pressures on local authorities, are disastrous.  40% of affected households are BME. It is also desperate news for some of our poorest neighbourhoods where these families are clustered  The knock-on effect on local economies is severe.

Then there are  the other benefit cuts.  Vulnerable 18-21 year olds will be required to return to homes where, for many, relationship breakdown and abuse drove them out in the first place.  The Chancellor’s assurance that vulnerable people will be protected has to be delivered.  ”.

So what of the impact on associations’ Business Plans?   A combination of the 4% rent reduction, a prospective hike in interest rates next year, the loss of control of our assets that Right to Buy 2 constitutes and the impact on cashflows of welfare cuts means many Boards will see no alternative but to  cut their new development programmes.  How easy will it be for associations to find the required efficiency savings is a question which all  must now address.  Many will feel that they have already driven out costs through their work on VFM in order to compensate for reductions in grant. How much more is left?  This will be tough – really tough, but it should not lead to a rash of bankruptcies.

Nevertheless, savings on this scale cannot be found by better process management.  Jobs, services and community investment will inevitably be cut back.  Some associations will feel they cannot continue in their present form, and will look to alternative structural solutions including mergers and demergers.  Do not assume that the large associations will be exempt from these pressures. 

A critical issue which is still to be decided, is whether rent rebasing will affect rents for supported housing.  This will be far more difficult to accommodate as over 80% of costs relate to staffing, and commissioners impose  specific requirements on staff input.  The campaign on this issue begins today.

To finish with good news – the Budget does not constitute a declaration of war on housing associations by Government as some commentators had suggested.  In Greg Clark and Brandon Lewis we have politicians who value housing associations and the impact we make on our local communities.

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