Here's To The Next Time In Housing

Travelling back on Saturday there were two ladies in the next seats talking about their jobs.  One in a large educational establishment was wondering about her future in that it was running a large deficit.  Worse the accounts were in something of a mess.  The other had not long lost a job because of similar difficulties.

This was the public sector, not some fly by night outfits or a company in too much of a hurry or anything of that order.  It added to my impression now that it seems to becoming harder and harder to find organisations that are well run never mind delivering the service you hope for.

One of the headline stories is about the developers claiming that the economy could be saved by building more and more houses.  Given their financial support for the leading political parties it is clear that they are looking for pay off time.  There are a number of problems about all this that are known well enough.

There may be an even bigger area of difficulty and increasing risk that seems to be going unnoticed.  “Private Eye” last week in a small item on Page 5 (the lead page) referred to it.  I quote, “UK PLC wasn’t the only entity to lose its AAA rating last week.  The next day Moody’s downgraded the credit ratings of nearly all English housing associations, blaming the weakness of the regulatory framework governing them.”

The item briefly goes on to explain the chopping and changing etc. of this over the last few years.  It comes as little surprise to see the name Gordon Brown, the Ghost of Kirkcaldy, in the frame.  This is a major area governing housing and the rest that is of critical importance both to housing provision generally and to very many people, notably in the lower income groups.

It is a pity that neither “Private Eye” nor the other major investigative groups have taken a good hard look at what us going on in the housing sector that serves what might be called the “under class”.  The media as a whole are so entranced by the high end property markets and mortgaged private housing, if only for reason of their advertising potential, that the rest is ignored.

It may be that the public rental sector is gradually slipping into a state where it could become a major financial crisis area in the near future.  The story of the Associations and connected organisations is very complicated and difficult to sort out.  Essentially, however there are a number of Associations that are now big players in the money markets with a tail of many and various associates linked in.

Quite what the scale of their borrowing is and how it is financed is not clear.  But given the pressures put on them by the previous government it may be very large.  This may arise in part from the low interest policies etc. over the last few years.  It is my guess that a number of them could already be badly overstretched and vulnerable to even minor adverse shifts in market conditions and interest rates.

It you add to that top management that are frankly not very good, operate in a turmoil of reorganisations, initiatives, a variety of incoherent schemes and whose accounting systems are not just fallible but are unable to deliver reliable basic figures there are some potential disaster areas.

Who will pick up the bill for all this?  Given that so much social housing is in the hands of some of the biggest with many of the most vulnerable categories of people in it if the local authorities are now out of the picture in very many cases then it can only be the government who can attempt to sort out the gathering mess let alone the potential disasters in individual Associations.

The sums involved may not be the stratospheric figures that the failure of banks faced but they will be large enough and will impact across the whole sector.  They will be enough to throw all the present calculations of government finance into some disorder at least and mean another big hole in the budget.

Another area of worry is that in the other property management sector dealing with leasehold property and allied rentals; some also linked to Housing Associations is a raft of others, companies, amongst whom are some very “iffy” operations.  Currently, Companies House does not enquire about firms that do not submit accounts or simply shut down after a short period of operation.

The overall picture could be one of some very rickety Associations responsible for much of our social housing being in serious financial trouble and unable to explain why along with property management services that also have unsatisfactory features linked with others which are essentially fraudulent.

It seems that the relatively “light touch” regulation with limited powers means that none of this is touched notably how far either the overall financial strategy or the need for proper and careful accounting is required.  In fact to all intents and purposes there is something of a “free for all” in parts of this sector.

Here we go again.