Beehive co-founder Jonathan Bunt on the pressures faced by housing associations to dispose of stock and why making the decision to sell need not compromise social purpose – indeed, it can be turned into an opportunity to tackle the deepening scandal of temporary accommodation
Earlier this month, I spoke at the Social Housing Annual Conference. During my session and in various others, there was a recurring hot topic: housing associations cannot realistically expect to come through the current set of investment challenges while retaining all of their existing stock.
This, of course, has serious implications for a sector with such a significant role to play in tackling the UK’s housing crisis. It became clear from a number of sources during the conference that all providers have three major priorities competing for predominantly finite capital resources.
Firstly there is the need to address building safety and this, rightly, tops the list. The second, and increasing in prominence, is the ambition to meet the retrofit challenge of net zero. As well as the prescribed targets, associations want to improve the performance of properties as part of making tenants homes easier and cheaper to heat in the face of rising fuel poverty. The third priority, and the one that is at risk of being squeezed, is to build new homes.
This balance of priorities was highlighted at the conference by one well known housing association, which disclosed its current new build programme had been reduced by 25% as resources are diverted to safety and sustainability. In an ideal world, there would be grant funding to bridge the resource but that has yet to materialise at real scale. So far, as noted by Ann Pettifor, the available grants are proving harder to access – the small print is acting as a significant barrier to these funds.
This led to the clear and consistent message that some degree of divestment will need to occur and that associations must have a clear strategy to sell. Another very pertinent observation made by Sarah Waite from Capsticks LLP was there is a need to be very careful to whom an association sells any stock.
The temporary accommodation crisis
In parallel to all of this, local authorities, up and down the land, find themselves in absolute need for homes to meet the very high and rising numbers of households presenting as homeless. Where they do have access to properties, many would admit that a proportion of those are expensive and not always of the quality they would use.
Equally, due to the myriad of challenges that councils have to deal with, and with a significantly reduced workforce, they struggle for the capacity to identify additional sources of good quality, genuinely affordable supply.
This is the reason we created Beehive Affordable Homes. Our ambition is to act as an intermediary between councils and housing associations to keep as many homes as possible in the affordable housing space whilst adding financial and resource capacity.
The Beehive intervention
Our approach is to pay open market value to the housing association for portfolios of newly refurbished homes to provide capital receipts for reinvestment in new social rent homes. This is a very efficient sales process for the housing association as it has to work with a single buyer rather than a multitude of individual purchasers and their variety of conveyancing solicitors.
We then provide the homes to one or more local authorities at approximately 75% of the relevant local housing allowance. To make the process very easy for the council, Beehive takes the lead on all of the time intensive admin such as preparing the financial model, local searches, title checks. The lease arrangement is very flexible to enable the discharge of statutory duty and at the end of the lease term, full ownership passes to the local authority.
We have already demonstrated this model works, completing two portfolio transactions across a total of 76 homes, all with backing from our investment partner Macquarie Asset Management. The first deal was reported by sector press, including Inside Housing.
Scaling social purpose
Where Beehive is able to really add value is working with a multiple housing associations simultaneously with homes spread across a number of areas. Here, geographically disparate portfolios can be combined to create meaningful groups of homes for each council. The collection of homes leased to a local authority could be from, say, five different providers and efficiently aggregated under a standard agreement.
There are two key feature that makes Beehive standout as a potentially good partner for housing associations seeking to divest.
Firstly, whilst the homes may be being sold, Beehive efficiently transfers them to another part of the housing sector meaning that, where the receipt is used to develop new homes, there is actually a net increase in affordable homes.
Secondly, where the home being sold is not already rated at at least EPC C, Beehive provides a grant to the local authority to enable it to upgrade the property to that standard. This means that energy inefficient homes are being addressed rather than the problem merely being passported to another landlord for another family in housing need to potentially struggle with fuel poverty.
The ultimate aim is for Beehive to be part of the systemic change needed to improve life outcomes for vulnerable households by enabling increased provision of high quality affordable housing. We’re inviting housing associations and councils to be part of this market-led solution.
If you’d like to discuss any of the above, or hear more about Beehive Affordable Homes, please contact Jonathan Bunt via email@example.com