Housing associations are increasingly the main providers of affordable housing currently on offer in the UK. But despite this, their operating structures are not always transparent nor are their ownership or tenancy schemes always regulated in the same way as the more traditional forms of social housing provided by councils. One such housing association increasing its housing stock in the North West is L&Q, a huge provider that has recently partnered with a private Hong Kong-based development company, Far East Consortium, to deliver a new batch of affordable homes located in Manchester’s city centre.
Victoria Riverside is a shiny city-centre development offering over 600 homes in what its providers call a stunning collection of one-and-two bedroom apartments set within the elegant 17 story City View Tower. You would be forgiven for thinking this housing development was just one of many new luxury builds in the city centre, but L&Q – a non-profit, charitable organisation – advertises that approximately 20% of these new homes are classed as affordable housing.
Looking at Victoria Riverside, with its small apartment units, hefty up-front price tags and income thresholds cutting out low earners, it is hard to see how L&Q’s offering fits the bill for properly affordable housing. Why then are these types of housing schemes so detached from the real demands of the current housing crisis? And, perhaps more importantly, why are housing associations favouring notoriously costly shared ownership schemes to roll-out delivery of these ‘affordable’ projects?
Shared ownership offers initial ‘affordability’ but with greater long-term costs
Shared ownership schemes have been growing in popularity in recent years, and are often presented as the affordable solution to the problem of the housing crisis. Considered a form of ‘affordable’ housing because rates are set lower than those found on the private market but higher than in social housing more typically run by local councils, shared ownership schemes allow renter-buyers to take out a mortgage on a percentage share of the property while paying regular rent on the percentage they don’t own. These indentured tenants are encouraged to sink more assets into their property the longer they live there, in a process known as ‘staircasing’. However, despite these perks, shared owners consistently report less satisfaction with their housing, particularly with the costs, than tenants in social housing.
As one recent report on the chronic lack of building in the social housing sector suggests, the sole focus on shared ownership schemes and other forms of affordable housing that shirk the more stringent requirements of social housing makes it much harder to build good quality, genuinely affordable social housing in large numbers. And another cross-party parliamentary report also found that shared ownership schemes have ‘failed to deliver an affordable route to home ownership’.
So how does this type of ownership scheme claim to be affordable? The answer seems to be that affordability is an automatic virtue of non-profit housing associations. L&Q, which is responsible for Victoria Riverside’s glamourous City Tower offering the 20% quota of affordable homes, is one such organisation: as they claim on their website, “all the money we make is reinvested into helping house those in greatest need”.
The opaque operating structures of L&Q and similar housing associations
Despite these claims, L&Q is not structured like a simple non-profit organisation. L&Q, like other similar housing associations, operates through subsidiary companies, meaning money made is not always filtered directly back into the parent charity. This is unique in the charity sector, in which non-profits use a chunk of their funding to cover running costs and services from third-party providers but rarely incorporate second and third companies into their financial structure.
But operating via subsidiary companies which deliver in-house services such as repairs and maintenance is entirely commonplace for housing associations. Jigsaw Homes Group, operating largely in Greater Manchester, has an almost identical subsidiary structure to L&Q.
Both of the subsidiary companies owned by L&Q Group are profit-making. The first of these is L&Q New Homes Limited, a property development company which provides the main charitable organisation with the physical buildings it needs in order to offer more and more housing. Quadrant Homes, the second subsidiary company, provides L&Q’s crucial repairs and maintenance services used by virtually all of its tenants, leaseholders and shared owners.
This large group structure and the significant scale of the organisation – generating over £1bn in annual turnover – perhaps compromises the simple social objective of L&Q outlined as the provision of affordable homes.
Additionally, there is less oversight afforded to the commercial companies that are separate from the central charity. Since housing associations are charitable organisations, any salaries and bonuses paid to directors must be closely overseen by an independent government body, the Regulator of Social Housing. But the salaries and bonuses paid to those working for a limited company, however closely linked to a non-profit, are not subject to the same level of oversight as registered charitable entities.
Shared owners are significant money-makers for a housing association, paying a lump-sum at the start of their tenancy as well as providing regular revenue in the form of rent costs. This is particularly attractive for housing associations with high running costs, costs which may be exacerbated by the existence of subsidiary companies.
Shared ownership: popular for the housing association but is it affordable for renter-buyers?
Victoria Riverside’s so-called affordable housing makes all the usual claims about shared ownership: that it offers part-ownership of a property at discount market rates, that it is designed by and for the community of people it serves, and that it is fundamentally about providing housing to those most in need. Despite this, L&Q have imposed a lower limit on salary requirements as well as the traditional upper limit to keep out wealthy investors. To live in Victoria Riverside’s City View Tower, you must earn a salary less than £80,000 but more than £30,000.
If shared ownership is increasingly criticised as unaffordable by campaign groups, then salary limits further prove that these schemes are perhaps more attractive to housing associations than potential owner-occupiers. Alongside pushing affordable housing closer to the private market, shared ownership provides housing associations with much needed cash that is then used by subsidiaries within L&Q Group rather than being directly reinvested into the betterment of future services.
As long as there is little transparency around the relationship between L&Q Group’s charitable aims and the operating structures of subsidiary companies, shared ownership contracts can seem to be a way of making money for corporations, rather than actually providing a much-needed injection of affordability into the UK’s housing sector.
