We have been investing in housing associations for well over 30 years, with the social and economic credentials of the sector helping us to discharge our responsibilities to clients to deliver long-term, sustainable cashflows.
However, following the tragic death of Awaab Ishak in 2020, and the publication of the coroner’s report last year, there has been an acceleration in negative headlines nationally regarding the condition of social housing, with a particular emphasis on damp and mould in properties. While the sector has a clear social purpose, it remains incumbent on us, as key stakeholders, to ensure that this purpose is being delivered effectively.
To supplement the refocused efforts of the Social Housing Regulator in this area, in the fourth Quarter of 2022 we contacted all our housing association borrowers to help us better understand how providers manage and mitigate the risk of damp and mould for residents. We accepted responses from housing associations up to the end of March 2023. As well as ensuring our borrowers understood the importance of this issue to us as funders and stewards of our clients’ capital, the responses we received – which varied in both comprehensiveness and quality – have helped us to assess what best practice can look like.
In broad terms we have been able to summarise responses across critical categories, including governance structure & Policy, resources & prioritisation, remedial actions and customer engagement & communications. It is encouraging that some of our borrowers have systematic monitoring and remediation processes but there is also additional work to be done. While the regulator estimates that less than 0.2% of social homes have the most serious damp and mould problems (Category 1) , the individual severity of these issues demands greater scrutiny and accountability. The insights we have gathered from our review have enabled us to develop an engagement strategy to deploy in our numerous interactions with housing association borrowers on an ongoing basis. We also welcome the announcement of next steps by the regulator, including the introduction of more active consumer regulation from April 2024 .
Sadly, we feel the issues raised, while relatively isolated, are indicative of a sector that has seen its funding squeezed over a long period and is now also having to absorb rising costs including the necessary yet increased onus on fire safety and decarbonisation. Royal London Asset Management’s ‘Net zero social housing’ report, a collaboration between our Credit and Responsible Investment teams, and the Friends Provident Foundation, was initiated as a direct consequence of these observed trade-offs. In combination, these two projects, coupled with our extensive experience as lenders to the sector, serve a key purpose, on top of those outlined above. Put simply, the more we appreciate and understand the increasingly interwoven social, environmental, and financial pressures the sector is currently facing, the more effective our sector lending decisions become.
Although we cannot rule out further negative headlines over the coming months, given the significant number of properties owned and managed by housing associations and the extent of historic underinvestment, we firmly believe that the sector’s credentials are overarchingly positive. As well as being ‘not for profit’, allowing generated reserves to be fully reinvested in the provision and management of affordable housing and community regeneration, we believe housing associations, in partnership with funders, can be a key enabler of positive environmental and social progression.
- Damp and mould in social housing: initial findings [accessible version] - GOV.UK (www.gov.uk)
- Reshaping consumer regulation: Our implementation plan - GOV.UK (www.gov.uk)
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