“OMG! How messed up is this?” Determined to come to her own conclusions about the EU referendum and with wonderful youthful clarity convinced that logic and order would follow, my sage and independent daughter has been shocked by the economic and political panto erupting over the last week.
Me too! I’ve done my share of staring at screens, but as the improvised theatre extends to housing, I just don’t know what the consequences of Brexit will be for Grampian or the sector.
At one level the impact is not likely to be fundamental, with much of our day to day business done at local level, delivering one of the basics of life: a roof over folk’s heads. And when it comes to money, the financial institutions and banks with commitments in social housing are long term sterling investors.
Apart from one or two outliers, housing associations are sterling borrowers, our income streams are secure, tenants mostly stay put and housing assets likewise. Grampian is relatively small so we haven’t used the bond market but the world of housing titans has been rocked.
A number of large housing association groups, including Scotland’s own leviathan the Wheatley Group, have seen their investment status take a hit as the ripples spread out when Standard and Poor’s downgraded the UK’s sovereign rating.
Strangely the European Investment Bank is still committed to lending into affordable housing. Its shareholders are the EU member states and it might decide to take a different view but currently lends into Turkey, so membership is not necessarily a bar. HARIS (Housing Association Resource for Investment Scheme), a housing association procurement vehicle is a potential beneficiary, so here’s hoping. But there are other concerns even for a wee landlord.
European employees make up a small part of our staff but they are hard workers, use their initiative and are a valuable part of the Association. I personally hope and expect that their right to remain in the UK will be respected.
Central European trades people make up a small but significant part of the construction and maintenance industry. Significant numbers also work in the care and charitable sector and across the low wage industries in the North-east.
If Brexit means this skilled workforce is no longer available, I worry about the economy and whether we can deliver a big new build programme across the NE, and for that matter Scotland. And to add to the misery, the volume housebuilders are scared of a second property bubble and the knock to consumer confidence, so there is talk of “caution” on top of our very own Aberdeen slow down.
So are there upsides? One of my first musings on the Brexit vote was whether procurement legislation would suddenly become easier. Unfortunately, this is unlikely. Some things like the state aid rule on subsidy for affordable housing could become a lot more difficult if we do full-fat Brexit and default to World Trade Organisation rules. The EU bless them had excluded affordable housing. Oh dear. You don’t miss your water ‘til your well runs dry.
The devaluation of the pound has some positive effects. I won’t pretend to fully understand what happens to sovereign debt when the pound drops to a 30-year low, but we are suddenly a much more competitive economy.
The value of the pound should make marketing easier for energy and engineering companies in the North-east that trade across the World, for any exporting concern in fact, just like the drop in the price of oil had accidental positives: improving the disposable income of those that need to drive for work, improving the bottom line for many non-energy businesses outside the North-east.
The silver lining in a sterling devaluation is that it may import inflation but that’s actually quite good for housing associations, with their reliance on long term borrowing. Recent low inflation has not been kind to us.
The referendum cast up so many multi-dimensional issues: immigration, identity, the future of financial services (now bound for Frankfurt?), the economy generally, but what surprised most was poverty and social exclusion. Housing associations sit at the intersection between inequality and the economy.
One very strong positive may be a change in attitude in government and the business community. Any entrepreneur who claims that austerity and the fate of the poor has nothing to do with their business take note that it was that constituency across England, from Newcastle to Cornwall that voted Brexit. Inequality is not good for business. And Theresa May seems to have recognised the fact in her very first speech as Prime Minister. I really hope so.
Neil has been leading Grampian Housing Association for six years, prior to this he was at Angus Council. Neil’s ambition is to see Grampian Housing Association provide a sustainable solution to the North East housing crisis. He encourages proactive thinking across the political spectrum on the importance of affordable housing to working families, employers in all sectors, commerce and the economy.
