Housing giant warns of return to 1970s after 'challenging year'

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

Despite posting a healthy turnover and operating surplus in the last year, Home Group, one of the UK’s largest housing associations, is warning of a rough ride ahead – particularly for providers involved in care and support.

The group – which today reported an £8m rise in turnover year-on-year to £313.1m - said it was preparing for the potential of no grant post-2015 and pressures on rental income from welfare reform.

It said it also expects to see the "increased penetration" of private firms - particularly in supported housing - and further consolidation through mergers.

It said the continued systemic change in the way housing is delivered and managed - driven by substantial ideological shifts - is likely to continue possibly on a scale “similar to that last seen in the 1970s”.

However, it is in the Supporting People market where it has identified big challenges after posting a £5m and £0.4m fall in turnover and surplus respectively.

The trouble stems from councils making bigger cuts to the programme than expected – principally because the ring fence that protects the funding is no longer there and councils have been using it to plug their own funding gaps.

Although the Government has given "relative protection" to the £6.5 billion programme – reducing the grant it gives councils to fund these services by 12 per cent over four years – some local authorities have announced that they will make cuts of up to 50 per cent over the next three years.

Home Group, which manages some 53,000 homes, stressed its Supporting People income, down from £57m to £52m last year, was still healthy considering the struggles by some other providers in this market who have either walked away from contracts, are running them at wafer thin margins, or are clubbing together in consortiums to re-win the work.

It said that its care and support business had faced a "challenging year" with a combination of increased competition and reduced funding causing its management to "reassess growth". 

It warns: “We are likely to continue to see an increased constriction of public sector spending within general needs and supported housing until at least 2017.”

The Government is already piloting a payment-by-results model for Supporting People.

Home Group says that while this creates a serious challenge for the group, it will also provide opportunities because of its strengths as a large-scale national provider.

It said the supported housing market was also more likely to see the “increased penetration” of private sector providers, especially in areas where they can operate at scale through national or regional level contracts.

While it sees this as much as an opportunity, in the form of partnerships, as a risk, it warns that to take advantage it will need to be able to “clearly demonstrate financial outcomes for funders and government as well as a social return on investment”.

The group said it had a successful year in selling properties developed for sale with turnover increasing by almost £4m and the surplus increasing from £0.5m in the prior period to £3.8m in the period.

In a bid to strengthen in areas where it has a more strategic presence it concluded its initial stock disposal phase of 1,900 in April – but plans to dispose of some 3,000 more, 433 of which will be disposed of this month.

On the new homes front, things also look positive. Its successful bid for Homes & Communities Agency (HCA) funding - which will be invested in 2,100 of Home Group’s planned 3,400 new homes over the next five years - is a major highlight.

It has also hailed its partnership with Gateshead Council and Galliford Try to develop some 2,400 homes in the North East as its “model for future large scale regeneration”.

The joint venture deal, known as Evolution Gateshead, is thought to be one of the first times that a social housing developer and publicly-listed commercial developer have worked in "genuine partnership" with a local authority to deliver the new homes rather than as suppliers.