Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
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WELCOME
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Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
Opening remarks from the Chair
Stuart Macdonald
Editor, Inside Housing
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Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
Matthew Bailes
Director of Regulation
Homes and Communities Agency
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Perspective of the social housing
regulator
 Financial strength of the Sector
 A changing market – future risks
 What is the regulator’s interest?
 What do we want to see?
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Commercialisation
in Housing
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£ billions
Income and Expenditure Account
Income
Costs
Operating Surplus
Year
2009
2010
2011
2012
11.6
(9.9)
1.6
12.3
(10.1)
2.2
12.6
(9.9)
2.7
13.8
(10.5)
3.2
Profit on sale of Fixed Assets
Other Items
Interest Payable
Surplus for Year
0.3
0.3
(2.1)
0.2
0.3
0.1
(2.0)
0.6
0.3
0.2
(2.1)
1.1
0.5
0.4
(2.4)
1.8
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Commercialisation
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Balance Sheet
Balance Sheet
Housing Properties at Cost or Valuation
Grant
Depreciation
Net Book Value of Properties
Other Fixed Assets
Net Current Assets
Year
2009
94.6
(37.4)
(2.4)
54.8
2010
100.9
(40.4)
(2.9)
57.5
2011
109.4
(43.2)
(3.5)
62.7
2012
118.6
(43.8)
(6.8)
68.0
2.6
2.5
2.9
1.4
2.7
2.2
3.2
2.1
Total Assets Less Current Liabilities
59.9
61.8
67.6
73.2
Long Term Loans
Other Creditors and Provisions
Reserves
Financing and Reserves
39.5
4.3
16.1
59.9
42.2
4.1
15.5
61.8
44.4
4.9
18.4
67.6
47.9
4.7
20.7
73.2
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Commercialisation
in Housing
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Sector risks
 Second sector risk profile published September 2013
 Welfare reform
 Diversification within the sector
–
–
–
–
of activities
of business structures
for profit entrants
commercialisation of traditional sector
 Rents post 2015
 Sales and development risks
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Commercialisation
in Housing
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Diverse activities – the regulator’s
interest

We are the social housing regulator

It is not our job to tell independent providers what to do, or what not to do

It is our job to protect tenants and taxpayers, and help support the supply
of social housing.

We will do this by protecting the social housing assets

Therefore our interest lies in the relationship between social housing and
non-social housing activity.
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What do we want to see?
 Compliance with our economic standards
 Limited recourse to social housing assets. This might, for
example, mean holding the assets off-balance sheet, and
securing debt on assets held for commercial activities not
social homes.
 Board level grip on opportunities and risks, with
sensitivity analysis
 Appropriate pricing of risk
 Structure in line with charitable vires, with commercial
activity to x-subsidise charitable objects, not the other
way round
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Commercialisation
in Housing
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Future development of the regulatory
framework





Strong response to discussion document
Sector and its lenders get the problem….
...but providers in particular concerned about ring-fencing
Our response?
– No change in determination to protect assets
– Always our view that risk is inevitable if new homes are to be built. Issue
is the potential level of recourse to the assets
– Need for providers to understand level of recourse.
– Stress-testing of businesses to ensure they can withstand the most
serious challenges
Conversation continues over the Autumn
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Commercialisation
in Housing
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Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
Afzal Ismail
Julian Beaney
Executive Director
Business Services Director
Service Matters (Orbit Group)
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Commercialisation
in Housing
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Commercialisation
in Housing
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Commercialisation
in Housing
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Organised by:
Commercialisation
in Housing
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Organised by:
Commercialisation
in Housing
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Organised by:
Commercialisation
in Housing
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Organised by:
Commercialisation
in Housing
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Organised by:
Commercialisation
in Housing
Sponsored by:
Organised by:
Commercialisation
in Housing
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Commercialisation
in Housing
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Commercialisation
In COMMERCIALISATION
IN
HOUSING
Housing
Victoria Jardine
Partner
Anthony Collins Solicitors
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RPs: between a rock and a hard place
•
Regulatory success: social housing assets are
protected
•
Commercial success: make lots of money
•
“Safe” middle ground: identify and manage risks
of commercial activities to achieve an appropriate
return whilst ensuring social housing assets are not
put at risk
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Commercialisation
in Housing
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Regulatory / charity law position on
diversification
•
“Primary purpose”
•
Investment
•
Trading (for profit):
• Low / no risk
• Tax implications (for a charity)
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Commercialisation
in Housing
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Managing risk
•
Deliver outside the RP?
• Funding/ers
• Procurement
• Governance
• Intra-group support
•
Deliver outside the Group?
• Joint venturing / cost sharing
• On/off balance sheet
• New sources of external funding
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Commercialisation
in Housing
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Back to basics: strategic questions
•
What is your motivation?
•
What is your market?
•
What are the resourcing requirements?
•
What are your challenges?
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Commercialisation
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Plan for success as well as failure
•
How do you measure it?
•
What are the key indicators?
•
What are the risks of failure and success?
•
What do you do when you get there?
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Commercialisation
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Getting off to the right start
•
•
•
•
•
•
•
•
•
Executive team “ownership”
Board engaged, informed and supportive
Appropriate(ly robust) external advice
Corporate structure aligned
key resources designated
Implementation plan in place
Contingency planning done
Rigorous and risk-focussed ongoing monitoring
Exit strategy agreed
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Commercialisation
in Housing
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Commercialisation
In COMMERCIALISATION
IN
HOUSING
Housing
QUESTIONS &
ANSWERS
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Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
Closing remarks from the Chair
Stuart Macdonald
Editor, Inside Housing
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Commercialisation
COMMERCIALISATION
in Housing
IN
HOUSING
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THANKYOU
the webinar is now closed
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