Hello everyone. We have been finalising our 30-year financial plan this week in readiness to go to the Board and then the lenders and regulators. I know some sectors consider 5 years as a long term plan, not 30, (outside sector FD usually react to this with a mixture of mirth and pity) but we are a long term sector, I guess.
It makes me recall a recently retired FD I know who spent just long enough in the sector to last out his first thirty plan. To young me, this would have seemed ridiculous. But it's worth noting I am more than halfway through my first plan now myself. Eek! I don’t work for that organisation of course so can’t comment if it is on track, although I have my suspicions! But it does make me wonder what welsh social housing will look like in 30 year’s time. It's a robust sector which has ridden out many challenges before after all. Despite this, however, I suspect that Covid-19, the ultimate accelerant for change*, which will stretch housing associations like never before. So here go my thoughts on what it might look like in 30 year’s time.
Efficiency and technology
As I write housing associations are still shifting services online (something which the banking sector managed to achieve nearly twenty years ago). This will become a necessity to achieve well before 2050. I think there will be increasing focus on investment and on thought on digital services, and these will be centre stage at the Board (and not an afterthought tacked onto FDs roles, which was sometimes historically the case).
Housing associations will also need to look at operating margins and find continuing ways to do more with less, as we are subject to further pressures on rent levels and funding. I am still rather chilled about the overall economic impacts of Covid-19, and whilst we are better placed than many sectors, its naive to assume there will be no negative impacts in future years. I think we will be clearer on how much all roles add value to the organisations and concepts such as business partnering will have been fully adopted and evolved into something much more advanced by then. We have not fully automated our back-office functions to date and whilst we will always be people-led businesses there is already pressure to use technology to do more and be more explicit about value for money, and these trends will only accelerate.
Decarbonisation will have an absolutely immense effect on the model, from the nature of the services receive, the way our homes work as “machines” and the funding model, which is still to be fully articulated. I suspect that even the plans we are writing now will look out of date pretty quickly, once these big items are fully known and explored. Whilst the numbers involved are daunting for our 30-year plans, if it means that billions (yes - it is in this order) are spent in our communities to achieve decarbonisation then the potential broader opportunities for badly needed economic regeneration are enormous.
Housing associations have started to step into other areas for a number of reasons — diversification of tenure as a result of grant changes when it comes to building new homes are probably one of the early harbingers of that, and that trend is likely to continue. It builds on the diversification into care and supported housing which already has a long tradition within housing, as do charitable arms, care and repair agencies and commercial portfolios for example. Most housing associations have been sufficiently diverse to warrant group structures for some time now, but by 2050 we will all be experts in complex cross-subsidy. The response to Covid-19, and in particular the need to engage with new organisations and rebuild profoundly shocked communities is only going to accelerate this journey. I suspect the 2050 plan will include JVs, partnership arrangements, diversification into childcare, education, commercial partnerships to a much greater extent than they do now.
An enhanced employee relationship
Welsh housing associations have always prided themselves on being good employers — generous pension schemes and flexible working arrangements for example — and I think this is a core part of our values as a sector which is likely to be maintained. However we are not completely immune to movements in the market and the wider world, and I think that there will be a flexibility and dilution of the employee benefit overall in the longer term, in particular, a significant reduction in permanent employment.
It's also interesting to note that millennials and younger groups place a particularly high value on the ethics of the organisation they work for**. Surely housing associations will be an attractive place to work therefore in the future, and I do really hope that housing associations (which traditionally has not been filled with younger employees, it must be said) reposition themselves to be attractive to other work generations. And be more explicit in its ability to offer work-life balance and flexible arrangements, which will have a great appeal to certain minority groups. The lessons learned from Covid-19 are incredibly important here. There is a great match to be made — we can provide opportunities where it really matters. At the same time, we will need to reflect and update our core values in the colleague sphere more often than we currently do, rather than being a by-product of good intent we will need to ensure that this is centre stage.
Caffeine intake — still nil!