The Economic Impact of Housing Organisations on the North

Ian Wilson

Centre for Regional Economic and Social ResearchSheffield Hallam University

The Economic Impact of Housing Organisations on the NorthHSA Value of Housing conference: Wednesday 16th April 2014

• introduce the study

• activities of social housing organisations

• the economic impact of social housing organisations on the North

• factors influencing size of economic impact

• consider Welfare Reforms and their affect on economic impact

In this presentation...

Introducing the Study

• economic impact of social housing organisations on the North in 2011/12:− encompass 'day to day' activities− key metrics: expenditure, GVA & employment− direct and 'in-direct' impacts

• why important…− responds to requests to demonstrate impact− underpin case for housing− add to evidence base− baseline against which to assess change

• funded by NHC plus 7 case study organisations

The Study

• to provide a comprehensive evidence base• sent to 121 organisations each managing c1,000+

properties• includes Housing Associations (HAs), Arms Length

Management Organisations ( ALMOs) and councils• 58 responses: c54% of total turnover• questions covered: stock, building, employment,

income, expenditure and neighbourhood investment

Evidence base: Survey of Northern Housing Organisations

A (very quick) overview of social housing organisations activities

• Managing properties: − just under 1,198,000 dwellings managed

• Building:− 8,400 new build completions− 58 responding had 3,100 dwellings in development

• Community investment:− remit covers more than just housing: 'want to do it

& business case'− links with key Government policy agendas

Core functions which provide economic impact

The Economic Impact of Housing Organisation on the North

Output expenditure

• £5,005 million output expenditure into local economies

• in addition every £1 spent generates a further £1.05 in the supply chain...

• ...therefore social housing organisations support £10,269 million total output expenditure

Gross Value Added

• produce an estimated £1,699 million in Gross Value Added (GVA)

• this is approximately 0.6 per cent of total Northern GVA

• including indirect GVA social housing organisations support £4,646 million: 1.4 per cent of total.

Employment

• employ 46,200 employees at workplaces within 3 Northern regions

• that working in 'manufacture of motor vehicles' and 'call centres' combined

• 41,600 FTE employees work within 3 Northern regions

• plus for every FTE directly employed a further 1.8 FTE are indirectly supported: 116,900 FTEs in total

Direct Impact

'Indirect' Impact

Total Impact

Output:£millions

5,005 5,264 10,269

Gross Value Added:£millions

1,699 2,948 4,646

Employment:(FTEs)

41,600 75,200 116,900

Economic Impact on the North: summary

Factors influencing size of economic impact

• Income: gross expenditures

• Procurement: regional sourcing

• Composition of expenditure: multiplier effect

Total 'income' was £6,499 million, of which:

Net rental income

67%

Management fee7%

Loans6%

Affordable Homes

Programme5%

Sale of other fixed assets

3%

Supporting People

2%Other10%

Income

Procurement

• Gross expenditure was £6,940 million of which £5,005 million - 72 per cent - was sourced locally

• recognise responsibility to local communities and potential opportunities afforded to deliver economic, social and environmental objectives

• e.g's of procurement policies and practices:− panels which include many local suppliers− assist local SMEs to meet criteria to get onto panels− social contracts: e.g. take on apprentices− buying power to influence suppliers

Composition of expenditure (1)

• how organisations spend their money affects the size of the multiplier effect (indirect impact)

• construction, major repairs, refurbishment = larger effect

• financial and business services, transport/post/ telecommunications and labour costs = lower effect

Composition of expenditure (2)

Other

Hotels/distributions

Rents and rates

Community/N'hood Investment

Transport/post/telecoms etc.

Energy/water for offices/HQ etc.

Purchase of other fixed assets

Finance and business services

Construction of housing

Direct labour costs

Major repairs and maintenance

Refurb. & purchase of housing

0 5 10 15 20 25 30

11

1

1

1

1

1

2

2

12

17

25

27

Percentage of net expenditure

Welfare Reforms: potential affects on economic impact

Welfare Reforms: potential affects on economic impact• Removal of Spare Room Subsidy/Bedroom Tax

– HB paid based on 'need' = reduced entitlement for c240k, who collectively faced £168 million shortfall

– impact unclear: evidence increased arrears & collection costs, but not as bad as first thought...

• Direct Payments– housing benefit paid directly to tenant within Universal Credit

– impact unclear: increase in arrears for previously low risk tenants; DPDP DWP figures show 94 per cent rent collected (14 payments)

• Benefit Cap– cap on total benefits

– impact unclear: 'fewer' tenants affected, but those who are arguably least able to deal with a shortfall

Welfare Reforms: potential affects on economic impact• Income: increased arrears = reduced income• Composition of expenditure:

− increased rental collection, management, financial awareness ... associated with a smaller multiplier effect

− how is this achieved?... less work on high multiplier activities such as construction and major repair works?

• Procurement: likely impact limited; plus e.g. Public Services (Social Value) Act & Localism Act give more weight to local purchasing = less leakage

Summary

Summary

• housing organisations are an important component of local economies

• total impact (direct and indirect) on the North:− output: £10,269 million− GVA: £4,646 million− 116,900 FTE employees

• housing organisations are faced with considerable 'challenges' which could diminish impact

• important to consider how decisions affect: income, procurement and composition of expenditure

Thank you

Reports and video available at:

http://www.northern-consortium.org.uk/economy

Ian Wilson: • [email protected] • 0114 225 3539