Virtual Roundtable: How has COVID-19 affected social landlords financially?

COVID-19 has been a big test of housing associations' finances. We explore the challenges faced and the opportunities that lie ahead.
Guests at our latest virtual roundtable in May 2021.

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A year on from the first wave of the COVID-19 pandemic, its human and economic effects continue to be felt strongly in every region and sector of the UK.

The UK economy slumped by 9.8% last year, the country’s worst annual performance in over 300 years. Meanwhile, at the peak of the first wave, over a quarter of the country’s workforce found themselves covered by the government’s furlough scheme. As a nationwide crisis, the pandemic has inevitably also had financial implications for social landlords.

According to the Regulator of Social Housing’s latest quarterly survey, the social housing sector has thankfully stayed financially strong, having shown great resilience through the pandemic. However, while forecasts indicate that performance is continuing to return to pre-pandemic levels, the situation continues to pose challenges, with providers still facing uncertainty and delays as we gradually ease our way out of lockdown.

Our latest virtual roundtable sought to discuss these financial challenges. What were the main risks that providers faced over the year, and what further challenges lie ahead as the country recovers from COVID-19? Could recovery provide opportunities for social landlords, or is the worst still yet to come? We kicked off by asking our guests how the pandemic has affected their relationships with customers, investors, and the RSH.

While customers were sanguine early in the pandemic, it appears that patience for providers is now coming to an end as life begins to return to normal and providers now have to address the last year’s backlog of issues. This has had an impact on customer satisfaction, our guests said – a trend picked up in our previous roundtable.

“Since the lockdown ended, satisfaction is dipping; it’s not huge, but it’s noticeable and it’s enough to take our attention, and we’re wondering if that’s around repairs,” said Michael Chinn, executive director of resources at Saxon Weald. “We’ve got a 30% increase in repairs since lockdown easing… and that’s a pressure on the organization this year now because loads of planned maintenance hasn’t been done.

“’We’ve rescheduled your new bathroom from last year to two years’ time’ is not something that people would necessarily want. We’re going to have a long-ish period of struggling to be good enough for customer satisfaction and that, I think, is our capacity is to actually do the work.”

While customers are starting to demand more from providers again, providers are also noticing the effect of the great move online. Jules Booker, executive director of resources at Peaks & Plains Housing, noted issues with tenant engagement, as teething problems with technology meant that her provider’s customer voice journey took “longer than we would have hoped”.

RHP’s executive director of finance Corinna Bishopp highlighted the “widening gap” between tenants who are “digital-ready” and those that aren’t, noting that this gap has become “much more stark and much more severe” than it was pre-pandemic. Ann Monk, executive director of finance at Magenta Living, agreed: “It is taking an awful lot more effort to keep people engaged now.”

However, the move online does not appear to have negatively affected how social landlords interact with investors and the RSH. Our guests reported increased interest from investors viewing social housing as a “safe haven” during the financial uncertainty of the pandemic, while the ease of meeting with investors online and cutting down on long distance travel was welcomed.

Understandably, since the arrival of COVID-19, our panellists found that the RSH has had a stronger interest in stress testing providers’ finances, with the regulator looking “quite strongly and quite sternly” at Saxon Weald’s situation, Chinn said. Overall, though, engagement with the regulator has been positive and perhaps even “light touch”, acknowledging that housing associations have already had plenty to deal with over the last year.

“The feedback that we got back from the regulator from our in-depth assessment was focused around particularly mitigation plans and how you bring those to life. We’ve done some sessions subsequently [virtually] with the board,” said Faye Gordon, director of finance at Believe Housing.

“I think COVID has probably been a real-life stress test. I’ll hold my hands up and say prior to this global pandemic, a global pandemic wasn’t on our risk register and it wasn’t one of my stress tests, I’ll be honest with you! Now it’s in there, on both.”

The discussion soon moved on to the current year and how upcoming financial pressures on the horizon will impact housing associations’ budgets. There are plenty of them on the horizon too, such as the end of the furlough scheme and the Universal Credit uplift, building safety spending and environmental investment.

Those are just the macro issues too as providers have been hit by more practical considerations. Bishopp talked about the costs of running an empty office, while she and Monk both reported development partners going bust or into administration. Other contributors reported other difficulties, such as skills availability in construction or material shortages such as concrete and copper.

Mark Hattersley, chief financial officer at Clarion Housing Group, noted that despite non-COVID issues being on the backburner for the past year, social landlords still face all the “big issues” that they did before, such as building remediation and continuing their development programmes. While the outlook might be “buoyant” at the moment, he was unsure what the next six months holds in terms of government policy and the economic picture providers will face.

Hattersley warned against delaying planned expenditure on housing stock, saying that residents should be at the forefront with the new Social Housing White Paper on the horizon. Rachel Taylor, director of housing and corporate services at the ALMO South Tyneside Homes, agreed, stressing that understanding customers’ challenges will be vital in tackling financial pressures going forward.

“[With] people spending more time at home, their expectations… of what they want and quality has taken a step up,” Hattersley said. “If you look back and think we’ve just gone through for 12 or 14 months and where the sector’s positioned, there should be huge pride in the sector at what we’ve achieved. I think we do get that recognition from residents, but it’s making sure that we manage that and engage with them.”

Empty offices were a particular sticking point for our contributors, who expressed concerns about providing value for money, keeping staff safe, and making their provider a desirable place to work post-pandemic. With staff opinions ranging from those who can’t wait to return to the office and those who never want to go back, the sector will have to make compromises financially when it comes to retaining staff and ensuring their wellbeing in the short-term.

“For me, it’s getting that message out to the board [that], actually, we might have to take a bit of a hit on value for money because we need to think of welfare and wellbeing and those aspects,” Taylor said. “We won’t always get all those returns on the financial basis but… you don’t want to lose a lot of staff because that’d cost you an absolute fortune in recruitment and training.

“We need to retain our teams as much as we possibly can because whilst we’ve talked about developments and different things, we deliver our services through people, don’t we? We need those people, and it’s a real dilemma.”

We ended the session by talking about social landlords’ digital transformation programmes and whether these programmes will be agile enough to solve the challenges housing providers are facing in the here and now.

The first wave of the COVID-19 pandemic saw housing associations make great technological strides in weeks, implementing digital programmes that otherwise “would have taken us months or years”, Hattersley noted. However, social housing is still behind other sectors in terms of digitalisation, he added, stymied by a reliance on legacy systems and a lack of specialist software solutions.

Booker and Bishopp were doubtful that digital transformation will be helpful in the short-term. Booker shared a cautionary tale about Peaks & Plains pushing its customers online too quickly, leaving call waiting times of 45 minutes. She urged housing providers to take a step back and make sure to take their tenants on the journey with them.

“The seed savings that we were making by pushing people down the digital [route] were actually massively outweighed by the costs because we hadn’t done it properly,” Booker explained. “It’s really important that when you’re putting anything in, you have a really strong set of KPIs that measure the impact of that change and you do review them.”

Concluding the session, chair Julie Kennealy, property services director at social housing software provider Mobysoft, summarised the situation as “a bit of both: a short-term challenge in investment and getting your data right in order to reap that longer-term reward… In the business plan, I’m imagining costs of digitalisation are in the early years and [the] benefits, if they factored in, would be [in] later years.

“Anybody agrees [digitalisation] is a huge task and it’s not [an] immediate panacea. Perhaps because we were all lucky enough to have IT departments that were very fleet of foot at doing the basics quickly when the pandemic broke out, that’s given a bit of a perception that digital transformation can come quicker than maybe it will.”

It’s clear, then, that digital transformation is no cure-all for social housing – embracing new technology is a change that will benefit the sector in the long-term rather than one that will give providers quick wins.

Instead, housing associations will have to stay resilient, working with customers, staff, and their other key stakeholders to make the financial recovery they seek. It’s only through that hard work that they will navigate through the end of the pandemic to emerge safely on the other side.

Image: Guests at our latest virtual roundtable in May 2021. Credit: Housing Executive

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