Blog 13th October 2020

Oct 13th 2020, 09:43

Blog 13th October 2020

In this blog I consider the financial position of housing associations as revealed by the Regulator of Social Housing and analysed by the ‘Social Housing’ magazine; the implications of the £1.5billion deficit on the Social Housing Pensions scheme; the increase in food poverty especially among children; and our webinars.

Analysis by the ‘Social Housing’ magazine based on the ‘Global Accounts’ published by the Regulator of Social Housing, has shown that social housing costs have increased among every type of housing association. The weighted average cost of a social housing unit increased to £4,120 (6%) between 2018 and 2019.


An Abbeyfield Housing Association sheltered scheme in Solihull, West Midlands.

The Regulator for Social Housing said that this was significantly ahead of the Consumer Price Index of inflation in the economy as a whole and was due in part to rising maintenance and major repairs costs. In the Social Housing analysis, maintenance costs saw the highest weighted average increase of nearly 7%, with management costs following with almost a 5% increase.

On management costs, the Regulator for Social Housing said increases were likely to be influenced by upward pressure on wages. Unemployment rates were at 3.8% between August and October 2019 that had helped to create an increase in real wages.

Average total weekly earnings in Britain increased by 3.6% compared to 2018 and by 1.8% in real terms, so for those organisations with a significant number of staff being paid minimum wage or close to minimum wage, real staffing costs were likely to have increased by a higher proportion following the introduction of the new Living Wage rate (that is 4.9% higher compared when with 2018).

Overall headline costs across all the associations increased by more than 11% to £11.2million. A breakdown of what made up unit costs – management, service charge, maintenance, and major repairs – saw service charges accumulating the highest total.

Meanwhile, the latest actuarial valuation of the Social Housing Pension Scheme shows that, despite increased employer contributions since the last valuation in 2017, the deficit on the scheme is still £1.5billion, £500million more than expected. This means that employers’ contributions are likely to increase by between 30% and 50% when the outcome of the next review is implemented in 2022. It is also likely to lead to more associations seeking to move their staff from defined benefit schemes to defined contribution schemes.


An Impact Housing Association Bungalow in Salterbeck, Cumbria.

Looking forward, most analysts expect the cost of maintenance to continue to increase more rapidly than general inflation. If anything, the gap is expected to increase as the British construction industry faces a shortage of skilled labour and more expensive materials because of ‘Brexit’. The position with management costs, however, is less clear as mass unemployment caused by Coronavirus may exert a downward pressure on salaries and wages reversing the recent trend for management costs to increase in real terms and offsetting the increased costs of pensions.

All of this makes it even more important that people in housing associations, including board members and non-financial managers as well as finance staff have a good understanding of housing association finance. Our series of webinars: ‘Introduction to Housing Association Finance’ start next week with a session on revenue issues on 20th October 2020. For more information or to make a booking, please click here.

The ‘Food Foundation’ announced this week that there has been an increase of 900,000 in the number of children registering for free school meals in Britain bringing the total to 2.3million. This is obviously due to the economic impact of the coronavirus crisis. Eligibility for free school meals is restricted to children in households where parents claim out of work benefits, including some on universal credit.

The ‘Food Foundation’ has also urged ministers to prevent a growing food insecurity crisis for millions of children by widening eligibility for free lunches to all children up to the age of sixteen whose families are claiming universal credit or other benefits.

The Food Foundation analysis showed that even where they were eligible for free school meals, many children were missing a hot lunch, an important meal for children in poverty. This is because coronavirus measures mean some school canteens have not yet become fully operational, with only 45% of canteens running as usual and 8% with canteens closed. In 10% of schools, most pupils are being asked to bring packed lunches, while in 21% of cases canteens are only serving a minority of pupils.

The deepening impact of the economic crisis is illustrated by a big increase in registrations from families who do not normally claim free school meals, typically where the main earners have been in relatively well paid and administrative and supervisory roles.

Marcus Rashford, the Manchester United and England footballer, who campaigns against child poverty told the ‘Guardian’ that:

“The numbers recorded here just reinforce the need for urgency in stabilising households … we must act now to protect the next generation and the most vulnerable across the UK.”

Marcus Rashford also urged the government to extend its £15 a week holiday food voucher scheme for children on free school meals over half-term. The period coincides with the end of the existing job retention scheme ends, raising the prospect of a fresh wave of unemployment.

Sarah Hewitt-Clarkson, the headteacher at Anderton Park primary in Birmingham, told the ‘Guardian’ that the proportion of her pupils claiming free school meals had risen from 35% to 47% in September. She said that some struggling families were unable to claim free school meals because they were ineligible for social security benefits. Others had suffered big reductions in household income but would still not meet the threshold for school lunch support. School meals are £45 a month for one child which represents a lot of money for a family with financial challenges.

Widening access for free school meals was a key recommendation of the government-commissioned National Food Plan published in July 2020. It concluded that 1.5 million more seven to sixteen-year-olds in England in households claiming universal credit should get free school lunches, at a cost of £670million a year.

With today’s announcement that unemployment in Britain now stands at 1.5million (and that is only the official figure) and with every expectation that this will increase, a greater priority should certainly be given to addressing child poverty including the provision of free school meals to those in need.

We will be holding webinars from September 2020 to January 2021 including:

  • Introduction to Housing Association Finance in England
  • Introduction to Housing Association Finance in Wales
  • Introduction to Local Authority Housing Finance in England
  • Introduction to Housing Association Finance in Scotland
  • Introduction to Service Charges
  • Introduction to Local Government Finance in England
  • Business Planning in the Housing Revenue Account
  • Lifting the Lid on Local Government Finance
  • Introduction to Risk Management in Housing & Local Government

For further information or to make a booking, please click here.

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