Balancing risk and the housing crisis in the wake of the Grenfell Tower disaster

The Grenfell Tower tragedy means that housing associations now face a fundamental choice about their housing priorities. Should their focus be on the maintenance of existing housing or on development plans to help build new homes?

The call for criminal prosecutions including from government ministers before it is clear whether there is any criminal fault, may have an unwelcome and unexpected counter effect for government. Senior leadership teams would now be hard pressed not to react to a new paradigm where compliance with generally accepted practices may not be sufficient.

Although housing associations have always had a need to maintain their properties, when faced with uncertainty about what materials are acceptable in their buildings, they will be hard pressed not to prioritise this. Local authorities are being told extra funding should be available from central government but it’s not clear whether the same will apply to housing associations.

There is an argument that housing associations already spend a huge amount on repairs, maintenance and planned works each year, so for some there will only be a temporary change in their direction. But with many questions remaining about the extent of the problem and what changes will be required, there is also a large risk that housing associations will need to spend their surpluses on repairs, some of which may ultimately be shown to have been unnecessary from a risk perspective.

Because of the press and political treatment of the causes of the tragedy, decisions appear to be being made on the causes, and money spent on remedial works, before it is clear what has actually happened. While it is understandable that simple answers are easiest to communicate, often it’s a combination of things which contribute to a tragedy. So whatever the outcome, will this reduce capacity to build new homes? If it does, it will also reduce the surpluses housing associations increasingly depend on from development sales, without additional Government financial support.

If associations do pull back from development, this change of direction may take a while to be noticeable. As many housing associations have already committed to development programmes, it will be new strategic land acquisitions which will be the first to fall off the line, so the separate parts of government, which are thinking about the responses to the tragedy and new supply, will need to co-ordinate carefully.

As things stand, questions also arise for senior leadership teams about what is “business as usual”. For example, procurement directors will be questioning what is “best value” and insurance directors and company secretaries about insurance cover.

As ever it is a question of balance and a measurement of risk, but in this new complex and unpredictable world, the appetite for risk may be considerably lower. Within this gap, government has a clear role to plan to give the sector the confidence it will undoubtedly need.

For further information contact Partner Andrew Cowan, Head of Social Housing.

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