Brexit - The Finance View From The Housing Sector

Part 1: The Finance View from the Housing Sector: Preparing for Brexit

20 November 2019

We talked to finance directors from ten different housing associations about three key topics. We investigated how they are finding operating conditions during this period of change, and what decisions they are making to achieve the best outcomes for their residents and associations.

In the first of our series of three blogs, we look at how housing associations are preparing for Brexit. What measures are they taking to ensure operational readiness? What models and processes are they are using to ensure adequate stress testing has taken place? What are their successes and challenges around financial modelling?

It is widely agreed that for each individual Registered Provider (RP), preparation for Brexit and operational readiness are at the forefront of every finance department’s agenda.

Stress testing

Most organisations have conducted extensive stress testing modelling across multiple timescales and variables. The main area of concern for organisations is their workforces post-Brexit, most notably care and support staff, maintenance operatives and house builders.

It is estimated that around 9% of EU workers in the adult social care sector are likely to be affected by Brexit 1 so what can be done to ensure that these essential front-line staff are not only retained within their roles but kept also engaged through periods of change? What measures are organisations taking? It is clear that remuneration packages need to be attractive, but it’s not just about pay; it is also about assisting with accessing the paperwork to stay and being supported to complete the information required. This is also coupled with ensuring staff are engaged and instilling a supportive and strong working culture.


How to model is a big debate and most organisations are landing on a Doomsday scenario. Rather than consider every nuance, associations are putting considerable thought into what could break the plan and how they would recover.

For housing associations, the primary focus is around development, repairs and liquidity with development portfolios holding the most risk. Due to the fact that many organisations have large sales exposure, some have accepted lower margins in order to keep selling, but others have decided to flip if sales have not happened by a certain time.

Many organisations have flipped tenures into market rent with the slow-down of the development market. Others are finding that geographic demand (largely out of London) is still high, so therefore their development programmes have largely not been impacted. They are constantly looking at the viability of schemes, which remains extremely important.


When appraising, the role of the finance function has been to ask, “What if?” Holding more cash ensures liquidity is available if needed. If house prices are set to fall, this could be a lucrative opportunity for those RPs that have leveraged themselves wisely and are in a position to acquire during a period of downturn.

For many organisations, this appears to be a solution as holding more cash gives comfort to boards, regulators and ratings agencies. Many have been modelling stock as it comes through to ensure viability as well as considering new innovative ways to raise funds to support development.

Most feel that the biggest risk to the economy with Brexit is currency, but as this isn’t exposed in the housing sector, they have deployed the same rules as modelling for an economic downturn with a focus on operational readiness.


Many RPs saw an increase in sales after 31 March 2019 when Brexit didn’t happen. Demand for housing is still strong in desirable areas and there is hope that this trend will happen again post October 31st

This doesn’t necessarily extend to the supply chain and some suppliers such as major repair suppliers are very nervous. As a result, they are trying to push some of this risk back onto the housing organisation and this is having an affect on costings and insurance in contracts. Suppliers trying to offload risk is manifesting itself into additional clauses being added to contracts.

To mitigate this, some organisations are negotiating 5-year minimum contracts with contractors/suppliers so they can confirm terms down for the next five years, resulting in more certainty.

There is also a need to work with supply chains around materials including pricing, access to medicine and finally the impact of shelf life as stockpiling is not possible. Many organisations have factored this into their modelling and risk management as both aspects could have a major impact on RPs.


There is a greater focus on customers and residents, with organisations factoring in the impact on the customer if Brexit happens. As a result, many boards are extremely focussed on their residents. By actively engaging with Local Authorities on their Brexit plans, they are trying to be clear on their responsibilities and those of the Local Authority.

There is of course the very real prospect of a severe economic downturn, which would impact residents and customers hard. Finance departments have been focussing on the prospect of rent arrears and bad debts therefore resulting in some discussion around the provision of support packages for vulnerable customers. However, there is a real concern that an increase in homelessness could be a real factor of a hard Brexit.

Affordability is key

One of the issues arising with scrapping affordability checks is that tenancy sustainability is not always being considered and tenancy agreements are potentially being set up to fail. Housing associations are looking at how they can help people to sustain their tenancy by investing more heavily in support services. They don’t want to put customers in a position where they may fail. Organisations should be looking at whether this is more likely with certain Brexit scenarios. Some have even looked at the locations of food banks and other extra services, in case customers need to access them.


This is a pertinent topic and raises questions around how fit for purpose the commissioning regime is currently. There is a need for hostels, but many are being closed due to funding issues, which means there is a real concern that people are unfortunately ending up back on the streets.

There is recognition of the opportunity for a new political regime (and the likelihood of this in relation to current political events) but ultimately homelessness is a domestic issue and is not just about Brexit. The overall conclusion was that there is currently no joined up thinking around support provision.

One of the inevitable issues with Brexit dominating every political discussion is that whilst the topic seems all consuming this has resulted in issues such as homelessness perhaps being brushed aside and overshadowed.

Read our second blog in the series on ROI and Technology

Read our third blog in the series on Fire Safety and Compliance