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Social Housing
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2024 Outlook: Social Housing
Settling into the new year with a big picture view.
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A clinically efficient maintenance and repairs programme, good use of data to maximise operational efficiencies, and multiple channels for community input and tenant engagement will be some of the keys to success for social housing organisations in 2024.
Head of Social Housing, Barclays Corporate Banking
Focus on existing stock
The complex macro-economic environment, sharply higher inflation and interest rates, and the uncertain geopolitical climate all created considerable headwinds for the social housing sector throughout 2023. The negative impact on investor and consumer confidence, combined with high construction materials costs and labour shortages, resulted in a general – and persistent – decline in growth ambition largely characterised in this sector by reduced development.
Smart deployment of capital remains key and I expect the newly articulated Social Housing consumer standards and the formal launch of Decent Homes 2 to have a big impact on many organisations. They will need to divert considerable investment and resources into retrofitting existing stock to meet the new legislative demands regarding building safety, tenant wellbeing and improved EPC ratings as part of the broader journey to net zero. These factors will be key to investment decisions going forward.
Further consolidation
Many social housing organisations I talk to are grappling with multi-faceted cost challenges with limited ways to increase income. Scale brings with it the ability to achieve economies and the chance to tackle the critical twin objectives of better existing homes and more affordable homes. I expect to see a continuation of the high volume of mergers we’ve seen over the last 12 months, as organisations look for ways to drive efficiencies and concentrate resources, management and expertise to provide decent homes in a challenging economic environment.
Strategic merger activity is also likely to be driven by the need for improved resource allocation to drive higher tenant satisfaction and meet decarbonisation goals. As such, mergers are becoming a strategic necessity for many organisations in order to achieve their objectives and, in some cases, simply to survive, rather than being a ‘nice to do’ option. Fortunately, mergers within the sector tend to benefit from a strong cultural glue, with organisations often sharing common values and motivations.
It’s inescapable that mergers will be necessary to concentrate resources, management and expertise to address the key challenges of the future. From being ‘nice to do’ they’ll increasingly become a strategic necessity.
Head of Social Housing, Barclays Corporate Banking
Maintaining credit quality
Demonstrating long-term sustainability and continuing to attract investment are key to a social housing organisation’s success. As we head into 2024, in my view, maintaining credit strength and funding terms with lenders will become increasingly important – a task that is likely to be made more difficult if inflationary pressures persist and interest rates remain higher for longer.
While the sector has broadly been able to maintain positive credit ratings, this is starting to come under pressure and we’re beginning to see greater divergence in ratings across the sector. Given the key headline challenges referenced above, management teams will need to be very focused on operational efficiencies and tenant wellbeing and satisfaction. The introduction of a new regulatory “C” rating, and how this influences credit ratings will be very interesting to monitor in 2024.
Key takeaways
Prioritise tenant wellbeing
Make sure you have a plan in place to operationalise the new tenant standards through investment in the right people and processes.
Be relentless about efficiencies
Ensure procurement processes are fit for purpose to deliver value for money across your supply chain, particularly for maintenance and repairs.
Understand credit rating drivers
Stay focused on the key drivers of credit-worthiness, including management expertise, tenant satisfaction, sustainability and effective use of data, to continue to attract investment over the long term.
Keeping fraud front of mind
Fraudsters are as active as ever across the Social Housing sector, impersonating our colleagues and attempting to defraud our clients. To help protect you and your business we have a wealth of resources available. You can view our quarterly fraud webinars and take a look at our other educational resources on our Fraud Protection Hub.
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