Rental Housing:
Public-Private Partnerships as
Key Delivery Vehicles
A role for non profit organisations
Olu Olanrewaju
Housing
associationsThe most successful
public private
partnership in
Europe.
1. What is the role of non-for-profit
housing associations in delivering
much needed affordable
accommodation?
2. What is their Relationship with
Government / public sector
agencies?
3. Why have they have continued to
be successful despite increasing
challenges to their viability?
Olu Olanrewaju
 Private, non-profit making organisations
 Philanthropic roots
 Post war - ‘New’ Housing Associations
 1988 Housing Act
What is the role of
non-for-profit
housing
associations?
 Private finance to create ‘mixed funding’ schemes
The Restructuring of Housing Provision - Dwelling Stock, by Tenure,
Percentage of all dwellings
Great Britain, 1951-2006
(Source: CLG, Housing Statistics)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1951 1961 1971 1981 1991
Owner Occupied
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Rented Privately
RSL
Local Authorities
Olu Olanrewaju
 1,500 housing associations (relatively constant)
What is the role of
non-for-profit
housing
associations?
 Providers own or manage 2.7m homes (9% of the total housing stock)
 85% of turnover comes from renting general needs housing at sub-market
rents. 70% of rents are paid directly to Landlords from Housing Benefit.
 Currently build 45,000 affordable homes (including shared ownership) and
5,000 private homes every year.
 Private finance
 Falling grant levels have led to private finance becoming the main source of
investment.
 By 2011-12 accumulated grant totalled £43.8 billion while drawn-down
private finance totalled£ 47.9 billion.
 The trends  In 2014 turnover increased by 5% to £15.6 billion
 Surpluses for the sector have continued to rise and total £2.4 billion for 2014,
an increase of 22% compared to 2013.
 The gross book value of the sector’s assets has increased by £6.8 billion to
£132.7 billion as providers build new homes and invest in their existing stock
 Source: HCA 2014 Global Accounts
Olu Olanrewaju
 Grant funding
What is HAs
relationship with
Government / public
sector agencies?
 £2.9bn capital grant funding has been made available nationally to fund affordable
housing over the three year programme period, 2015–18.
 Government is moving towards providing guarantees rather than direct grant
 Housing benefit to support tenants that are unemployed or part employed
 Regulation of regime to protect social housing assets
 Housing associations are pro-actively regulated by the Homes and Communities Agency
(HCA)
 Planning gain –S106
 Planning obligations under Section 106 of the Town and Country Planning Act 1990 (as
amended) make a development proposal acceptable in planning terms, that would not
otherwise be acceptable.
 Common uses of S106 agreement are to secure affordable housing
 Land
 Partnership arrangements between associations and local authorities deal with land
transactions and the development process.
 Associations invest on council estates within a formal partnership framework where local
authorities influence schemes.
 In return for land sold at nil or discounted values, local authorities receive nomination
rights to new lettings.
Olu Olanrewaju
 Typical HA governance model
 Board
What is the role of
non-for-profit
housing
associations?
 Non Executive Directors with specific skills and expertise sometimes include
tenants
 Reducing in size
 Usually 8-10 members
 Committees – at a minimum include Audit and Assurance and Remuneration
 Executives
 Sometimes sit on the Board
 Normally 5 members, including Chief Executive
 Departments
 Development
 Property (Asset Management and Maintenance)
 Housing services (often includes other customer facing services like contact
centres, lettings etc. )
 Finance
Olu Olanrewaju
 Typical scheme for social rent
What is the role of
non-for-profit
housing
associations?










Grant per unit 15-20%
Land & Build cost per property £160k
On-costs 10%
Weekly Rent – per unit £150.00 comes to about 65% of market rent
Voids 1.0%
Bad Debts 2.0%
Management Costs £450
Reactive Maintenance £450
Planned Maintenance £550
Depreciation 1.50%
 Mixed tenure (cross-subsidy) often including a combination of:





Social Rent
Intermediate Rent
Market Rent
Low cost homeownership
Outright sale
Olu Olanrewaju
Why have they have
continued to be
successful despite
increasing challenges
to their viability?
 The sector remains attractive for both the banks and capital
markets :
 Strong asset base
 Predictable income streams
 Government support through housing benefit
 Regulation produces favourable pricing.
 Banks like a regulated sector – 200 bases points better borrowing
rates
 Ratings agencies like a regulated sector “Aa2-Aa3”
 Commerciality
 Cross-subsidy model
 Made challenging development schemes stack up through shared
ownership and private sale
 Developing partnerships beyond Government
 Other housing associations, builders, developers and private
enterprise.
Olu Olanrewaju