UK Leasing

Inside Housing – Insight – Back from the brink: How First Priority is trying to rebuild

In October 2019, it commissioned its first tenant satisfaction survey using face-to-face interviews, with 82.6% reporting being happy in their home and 100% feeling safe. However, only 55.6% felt informed or engaged. The association is working to set up regular tenant feedback forums, to try to improve engagement.

Other rental-based SSH service providers have been censored by RSH for potential rent overcharging due to failure to prove that their inventory meets the government’s definition for tenure. First Priority says a comprehensive review of its own rents, submitted recently to the regulator, did not raise significant concerns.

Once the action plan is complete, First Priority states that it has monthly discussions with the RSH on the return to compliance.

“We’re working at a position where we can say we’re compliant,” says Higgins. “I like to think that the regulator really likes what we have been able to do.”

Experts from leasing service providers agree that First Priority has made tremendous progress over the past three years and will be of much less interest to RSH than some other organizations, but whether this is enough to be considered compliant is another question.

Last year Inclusion Housing made the unprecedented move to try to overturn its non-compliant regulatory classification in the High Court. It failed. In his decision, the judge seems to give carte blanche to the RSH to downgrade any housing association “whose economic model is considered too risky”. In this context, is it even possible for any organization operating the lease-based model to maintain compliance?

“Theoretically it is possible, but I think it is very difficult”, answers Jonathan Walters, deputy general manager of the RSH. “Such a reward often goes to the chief owner that there is very little money left in the business.”

In addition, it should be remembered that most non-compliant leasing providers have not had the opportunity to improve their situation as First Priority was able to do through the CVA process. The regulator has a policy of not commenting on individual cases, but Walters adds the following observation: “We have seen in many other industries that CVAs change the relationship between owner and tenant or between owner and owner. tenant, so we shouldn’t be surprised if that happened in this area.

First Priority knows that it remains vulnerable to turbulence. In a six-page document identifying specific risks to the association, she listed 36 issues that she currently doesn’t think she can manage effectively, even with post-CVA leases. These range from “relatively simple” to “more problematic”, says Mr Higgins, and include long-term demand for one’s housing, the ability to change the rules on the amount of housing allowance that is allowed. to claim and exposure to risks to its partners, such as healthcare providers.

“The model is financially over-designed,” he concedes. “And when it comes to managing those risks, we don’t have the ability to sell assets if they’re too high. REIT [real estate investment trusts] want us to take all of these risks in terms of effectively management fees, which I am not prepared to do.

The margins are still tight. CVA-related extraordinary items notwithstanding, First Priority recorded a surplus of £ 33,000 in 2020 – after suffering a loss of £ 3.1million in 2019 – and expects a similar result this year.

Mr. Higgins compares First Priority to a gas station. “Selling gasoline is a single-digit margin, so gas stations get most of their money from selling candy, snacks, and so on. in the store.

“The difference is that with gasoline, sales are pretty much guaranteed, with less risk, but we are not guaranteed of occupancy and selling other services to our existing tenants is not an option. appropriate. We looked to see if we could take on other activities to increase our margin, but we don’t have a massive amount of reserves, so not much risk appetite.

First Priority clearly wants to change its image. “It’s frustrating when you’re doing all of this work and people’s perceptions aren’t moving,” says Higgins. Under the right conditions, it remains open to all options, including a merger.

The association hopes that the improvements it has made since 2018 will be enough to convince the regulator that it must be compliant. But with the regulator still steadfast in its distrust of the leasing-based model, changing the minds needed will not be easy.

Leave a Reply

Your email address will not be published.