The future of housing associations

The latest trends and sustainability innovations in the world of commercial real estate.

Housing associations play a crucial role providing homes and support for millions of people in need across the UK. But, as not-for-profits operating what are often older dwellings, many must overcome big hurdles turning their low-carbon ambitions into reality.

In this episode, NatWest’s Ashley Toy and Paul Eyre are joined by Clare Miller, CEO of Clarion Housing Group for an in-depth look at their retrofit experience. Facing challenges such as lack of finance, and resident disruption when undergoing renovations, you’ll learn more about how effective planning and innovative solutions can result in successful long-terms outcomes. 

NB. This was recorded on 20 February 2025.

Get more tips, tools, and strategies to help navigate your sustainability journey today:

• Unlocking value in commercial real estate: strategies to decarbonise for growth
• Case Study: How Robertson Group is seizing new opportunities through retrofitting
• Case Study: How Barwood Capital is leveraging sustainability for long-term success
• Carbon Planner: sign up to measure your carbon footprint and explore how your business could potentially reduce emissions
• Retrofit training progress: support to help you make your premises more energy efficient

Transcript

SPEAKER_01 0:00

I really don't understand why housing associations don't have better PR. Because the things that they do that that for communities that they operate in are fantastic and and you only ever read about them when something goes wrong. So I just kind of wish that people would understand what they do and the value they bring to communities much more.

SPEAKER_02 0:17

Hello and welcome to Property Perspectives, a NatWest podcast all about sustainability. I'm Ashley Tori, I'll be your host today. I'm joined by Claire Minnet, CEO, Claire in Housing Group, and Paul Eyer, Head of Housing at NatWest. Thank you very much. So let's get into it. Claire, if we could start with you. So having been through some of your stuff, you've got an aspiration to be net zero by 2050. And I think you've organized them into three kind of distinct pillars. It'd be really interesting just to hear about the journey that you've taken to kind of set that goal and how you've gone about organizing the business around that.

SPEAKER_00 0:49

Of course. So I mean we're a long-term business. We've been around for about 125 years. And I know you have seen some of our properties which are almost that old. For us, investing in our homes and meeting the government's ambitions around net zero carbon is really important because it makes a huge difference to our residents. We want to have homes that are habitable, that are cheap to heat, and are fit for purpose for today, not for when they were built, maybe a hundred years ago. So 2050 is a natural fit with our business model. There's lots of challenges, of course, in getting to 2050, but I'm sure we'll get into that.

SPEAKER_02 1:40

Absolutely. So we walked around the Southern estate earlier, so thank you for that. Some great work you're doing down there. So when you were thinking about that estate and bringing it up to kind of not only present day, but I think we're talking about future prefect for up to 50 years. What were the main challenges you came across and how did you go about solving them?

SPEAKER_00 1:57

So that estate is one of the oldest that we own. Um we've continuously owned it. Um it was first let in 1913. Um and our big challenges um were making it fit for purpose um for the future. And we showed you four of the blocks, which we have completely um remodeled because when they were built they were tiny, tiny homes and they had bathrooms inside the kitchen. Um just not suitable for today's modern living. Um so we had to totally remodel those four blocks. Um it's a big estate, however. Um we've got many, many blocks there, and we've got nearly 500 residents on that estate. Um so for putting up with the disruption around the four blocks we were remodeling, we decided that we would take the opportunity to reinvest in the whole estate as well. So we've in the blocks we haven't remodeled, we've put in new kitchens, new bathrooms, um, we've put in new windows and we're repairing roofs. Um so everybody is getting something on that estate. And that's the way we think, because we think long term about the investment in our homes. We're not just thinking about the next electoral cycle to be controversial, um, which is what politicians tend to think of, and it's the policy environment that we operate within.

SPEAKER_02 3:26

Yeah, absolutely. And I think when we were going around we were talking about the you have the fact that you had to kind of reduce maybe the amount of units you had, but in order to provide better facilities for those that are there. So you lifts, um, you know, making the making flats I get gets a bit more spacious for people. Is that that's a conscious decision?

SPEAKER_00 3:44

I mean you're yes, I mean making flats accessible, you know, in 1913 that wasn't the top priority. Um and of course today it is. You know, people in social housing present with a range of vulnerabilities. Um the people that we're housing at tend to be older. Um and on that estate in particular, it's in the middle of London. Um, providing accessible family accommodation is so highly needed.

SPEAKER_02 4:10

Yeah. And I think from a sustainable perspective, there was you've done a lot of work on say ground source uh ground source heat. So maybe if we could touch on that slightly, Esther, I think the the things that you've done there definitely to us.

SPEAKER_00 4:22

So for the blocks that we remodelled, we took the opportunity to um to think ahead.

SPEAKER_02 4:28

Yeah.

SPEAKER_00 4:28

Um and we have put in ground source heat pumps, as you say. We've bored down into the ground um quite a challenge in central London. I mean, we had a range of experts who worked with us, and in particular, I'd have to mention Kensa, um, who did all the technical um feasibility studies around it all, and we're a great partner to work with. So our four remodeled blocks, which provide 80 homes, um, are now all net zero carbon ready um individual um heating units within the flats, which are small enough that they fit within a cupboard. Um, and what is really interesting about this is this is the oldest homes that we have tried to retrofit. It's been much easier on some of our more rural homes which are traditionally built and not as old, um, to fit new technology into them. So this really was groundbreaking work, and we've learned a lot as a result of that, and hopefully a lot that we can apply to the rest of our estate as well.

SPEAKER_02 5:33

Yeah, great. And individual metering, I think, which is quite important to a lot of the residents.

SPEAKER_00 5:37

Yeah.

SPEAKER_01 5:38

Actually, a question to me on logistics is a it's a living, breathing estate with families that many of which have lived there for many years. So, how did you manage the logistics? Because obviously a lot of that stuff you have to do inside the houses. So, how did that work?

SPEAKER_00 5:51

Um, so we work very closely with our residents, and this is a project that has been many years in the making. Um, and much of that has been about taking the residents on the journey with us. Um, the four blocks that we remodeled are situated on part of the site that we were able to isolate. So that really helped. But there's no doubt that our residents have been putting up with a lot of disruption, dust, noise, etc. Um, so it was so important for us that everybody was getting something out of this project.

unknown 6:22

Wonder.

SPEAKER_02 6:23

Thank you, Claire. Paul, if we come to you, I guess then Claire's talked about some of the broader challenges that housing associations face when you think about the broader sector and how they're facing off to sustainability. How does that compare and what are the other things we need to think about?

SPEAKER_01 6:37

Yeah, so it's intro. I think the things that Claire and the team at Clarion are doing are fantastic in really tackling some of the uh the some of the trickier assets, as you said, to learn. Uh and I think the sector's pretty good at sharing some of those learnings as well. It's clear to me that you know there are a couple of things on on people's mind. One is around EPCC by 2030, which is kind of very imminent and gets a lot more focus. Um and I think there are varying degrees as to how advanced people are or how succession varies are with their thinking about what's next. Yeah. You know, how much will it cost, how will we do it? So it does feel that we're at the start and some are going faster than others, and and there's there does sometimes tend to be a nervousness about first mover. You know, if I go first and if I do it this way, what if in five years' time I just look silly because now it's cheaper or different ways to do it? So I think um there are challenges around that, and I think the big challenge is also around um just where we fa where we find ourselves at the moment. The challenges facing housing associations where um so their costs have have gone up, you know, a period of inflation. Uh rent hasn't quite track uh tracked that because of the rent settlement uh a couple of years ago. Um a big increase on spend on the existing portfolio, on existing homes. We're kind of seeing that, and some of that is standards, expectation, regulation have gone up, but also inflation, the costs have have gone up. Um for some fire safety, you know, dec that that's kind of a big, a big cost for for some. Um and then decarbonisation that kind of fits in there, which is still kind of you know uncertain about you know how much, how will we do it? How much will it cost? What happens to the the homes that you can't get to net zero? So there's still quite a lot of uncertainty. Um and I think the lever that can be pulled, and I think is pulled quite a lot, which is in some ways sad but understandable, is that when you have all of those pressures on your cash flows, you need to make choices. All the bits that I mentioned before, uh, you know, that they're compulsory. You have to do them. Um and new build homes is one of the things that kind of suffers a little bit. Um generally we're seeing that kind of reduce across the sector and which is a natural kind of consequence of those those pressures. So uh it's on the agenda all the time. We speak to our customers about it all the time. Yep. They're very focused on it. The um where they are in the stage of understanding what needs to do to be done, how you can do it, what it will cost. I think there's there's there's uh there's variations. I think it would be fair to say.

SPEAKER_02 9:11

Well, let's stick on the theme for a sec. So now it's funding is obviously something we can do to support the sector, but um maybe if you could touch on the ways we're thinking about funding and other things to support the sector from a sustainable perspective.

SPEAKER_01 9:23

Aaron Powell Yeah, sure. Look, our primary purpose is to provide funding to housing associations, they provide families that are safe and warm, cheap to heat. You know, that's the main thing. And we're kind of really pleased that we've recently been able to announce uh an increase in our ambition from five billion over twenty-four to twenty-six billion to seven and a half billion. Some of that's just because we had some great success last year where we lend about 4.1 billion to the sector. So the primary focus is provide the funding that helps the housing association do what they they need to do. Um actually within that um 4.1 billion last year, we also uh undertook three, we did some uh pilot retrofit loans, so some loans that were specifically to fund retrofit work works, um, which was uh just over a hundred million across three loans. So we've learned from that. Uh the main uh incentive in there was that it was a discounted uh margin, so cheaper costs, which kind of the idea hopefully that will encourage uh housing associations that are planning to retrofit to maybe do a bit more than they were gonna do, or maybe do it a bit quicker than they were gonna do. Yeah. And so we're just working on um the next stage of that and the permanent kind of retrofit solutions are excited about that, and we should have some some out on that um over the coming month or two. Um the other bit that we have been working on uh is with Place for People, so kind of a large housing association and and uh pineapple, um uh Centrico, British Gas, around the mass-scale retrofit project. Yeah. Uh how can you, in a particular location, uh retrofit at scale uh to get benefits from that? And then also how can you um in some way use the savings um that are achieved via lower energy bills? How could you maybe use those to help fund the the the retrofit card and bring that down because it can be substantial? Uh and I think the final thing is just um we talked about discussions on sustainability, net zero are on our agendas. We're we're we're doing a bit more now to um just understand um the the degrees of preparedness and thoughts on sustainability and and retrofit and gather information on so we're really informed about that. Um and I think at some point we'll start to use that to inform how we lend. Um and so I think there are there are a number of things that funders can do, but you know, I I think funding is um is a vital part of what we do, but I've and no doubt that it's not um it's not one of the big obstacles in in my view anyway. You know, it's there. Um the bigger challenges are kind of actually how you undertake this.

SPEAKER_00 12:02

Absolutely. I mean I totally agree, but I mean Paul's point there about you know funding being available, I think is a really good one. Um the challenge for most housing associations, of course, is how do we pay for the funding? Um and at the moment our residents are enjoying the benefits through lower energy bills um from the work that we're doing. And what we need to do is move to a situation where either we can get an income stream that will support additional borrowing, or we share in the upside of doing the works. And I think some innovation and clever thinking is required um to get us to that point.

SPEAKER_02 12:43

Absolutely. And it feels like sharing that across the sector as well is really important because it's for sector-wide problems. So I guess um thinking about what Paul said, is there anything differently that you'd like to see from funders?

SPEAKER_00 12:56

Um so I think you know, uh what Paul mentioned, you know, funders getting engaged with our business, understanding the challenges that we are facing. You know, there was a very kind of high-level top um summary of the financial challenges that the sector faces at the moment. We you know, we were all in a slightly different position, but Paul's summary was pretty accurate. Um it's a tough time for a lot of housing associations at the moment. And of course, you know, we want to be thinking long term, we want to be investing in our assets, but some of us have particular challenges. And I would say, you know, those who operate in London in particular, because it's a lot of high-rise buildings, are finding that the building safety challenge is is quite extreme for some providers. And you always have to balance things as a housing association. You balance the amount of investment you can put in your new homes, which is largely dictated by the rental income that we have, against the appetite to build new. And of course, building new is the answer to many of the problems that we have in our existing stock of overcrowding and maybe, you know, conditions that are not ideal for today. Um but building new requires debt. Yeah. And debt needs servicing, and that of course is the challenge.

SPEAKER_02 14:19

There's a fine balance. It's almost like you've seen my next question as well. So I think if I if I bring us back to into the future, so I think when you're build building a new stock, you're very focused on sustainability. Last year I think you did 50% outside of balance, for example. You're experimenting in Essex and Hertfordshire. Uh what else can you do to help drive continuous improvement with your new build stock?

SPEAKER_00 14:42

So I think for us it's about testing new technology at the moment. That is the primary thing that we've been trying to do. Um, we've done some experimental work in Hertfordshire around future home standards, have built a series of bungalows, each of which are slightly different. We have monitoring equipment in them, and our residents are working with us so that we can test out which technologies work best. Um, and that then gives us the basis on which to invest in the future. We've also done some really interesting work with Octopus Energy and with Hill Group. Um to some extent, building new is easier than where we started, talking about, you know, homes that were built a hundred years ago and trying to retrofit new technology into them. That is much more challenging and at the moment much more expensive. Building new, um by and large, you have the freedom to be able to choose which technologies you are going to test out. And uh the octopus energy work is really interesting because if if homes in the future are able to produce more energy than the household needs, then that might result in the household not having bills that they currently have today. So testing that out for our residents is really important.

SPEAKER_02 16:05

And that net zero uh bill homes are a bit of a gold standard, aren't they?

SPEAKER_00 16:09

Oh, well that I mean that would be transformative. But you know, we we have some very poor households um and not having um that energy bill, you know, to have to pay would really transform the household finances of many of our residents.

SPEAKER_01 16:26

Absolutely. And it's in Gosh. I guess I think there's a point also about because we we talk about cheaper energy and using technology to deliver that and and often people come think, oh that's great, that means the family that lives there has got that extra amount of money. Um but often it just it's a it that saving or making it true will probably mean they can actually heat the house rather than kind of you know save the money. So it's so I you I remember I went to one of the um one of my first funders days with with Claire and the T McLaren when I joined the sector and and I think there was a slide and it was about the average household income across um your your your your business and and it was something like 11,000 pounds or so. And I was just I was shocked really I should have known that but I didn't. But it's just if you think about some of the challenges that families kind of face uh and the Claire and the team try and support and many other all the other housing associations, it's um it is a it is a real challenge.

SPEAKER_02 17:23

Yeah, absolutely. And the testing is really important, isn't it? Because you can have a technology that should work well, but actually if it's not used in the way it was necessary and intended in real life, then you know you you don't have to affect it.

SPEAKER_00 17:35

When we put technology into homes, um to get the most out of it, our residents need to be able to use it. Um and you know, some of these things are not always that intuitive. Right.

SPEAKER_02 17:45

Yes, no, absolutely. Uh so Paul, you you cover both the private residential and housing association sectors. So just thinking about some of the challenges Kai was talking about and you were talking about across housing associations, is there anything that the private sector can bring in or the two sectors can learn from each other?

SPEAKER_01 18:00

I think look, so ultimately at heart, they are homes for families, be they apartments or or houses, and and kind of built at various kind of times. Um I think we've certainly seen in the private sector some some of the house builders doing a similar thing around uh so Taylor Wimpy have got one out in in Sudbury, kind of where they've built a number of different ha homes testing kind of uh and and will be kind of gathering and learning information from from that. The the private sector faces the same challenge as Claire alluded to, is that they're responsible for all the capex, but actually don't don't get any benefit from the savings as it currently stands, you know. And there's there's I think that's something that kind of needs to be needs to be looked at. Um but broadly it's it's the same. Probably in the private sector I would say the average private rental sector, probably the average age of the stock is probably a bit newer, I I would imagine. Uh and certainly in our um uh our sort of loan book probably is because that's kind of um uh the way that that our appetite kind of moves us moves us on. Um but yeah, but similar challenges. Um but when you get down into it's interesting to get down into the private buy to let landlord you know who owns an apartment or a flat, but but they let I'm not quite sure, you know. We're trying to do a lot to educate on that, about what what needs to happen and support uh and one would hope that what we will see is the lessons that we learn, you know, the technologies we understand through the work that Claire and the team are doing and and and other kind of like sort of the national house builders, etc., can really inform and help us then be a conduit through to th that that kind of um group of you know smaller buyer landlords, which is a shrinking group.

SPEAKER_02 19:41

Yeah, absolutely. Um Claire, if I could bring you back to your making the difference report. So I think it was clear to me that social purpose forms a big part of that. So I'd just like to hear from you on what social purpose means for you, and I guess the big things that you and Clarine are doing to deliver that on O through to 2050.

SPEAKER_00 19:58

Okay, so it's I mean it's part of our DNA and is the lifeblood of the organization to make a difference for the families that we house. Um so for many years we've had a social value program running, and it has been predominantly about providing money and opportunity um for our residents to be able to live in a home, put down roots in a community, and to be able to better their standard of living. So our key priorities are to provide routing into work or training for anyone who lives in a clarion home. If they wish to get into work, we will provide them with a route and the support to enable them to do that. There's benefit for the household, obviously, and being in work and having um income. There's also benefit from the landlord because they are more able to pay their rent. Um so that's a big priority. The second priority is around um investment in communities. Um so we work in communities across the country and we invest in things like after school clubs, in um adventure playgrounds, in all sorts of things, and we talk to our residents about what's needed in the place where they live, and we try and provide seed corn funding for that. And then finally, we provide a series of small grants um for lots of agencies who work in our communities, who work with our residents, and that provides benefit for the community as a whole. And we've been doing that for many years. We provide about 10 million pounds of our own money every year, and our team boosts that money by um looking for partnerships, um, looking for other funders who are also interested in doing things, and it has been hugely successful. Um, and the social value that we get from that we measure every year. Um and you know it's it's enormous the difference that it makes.

SPEAKER_02 22:04

So correct me if I'm wrong. I think it's a billion pounds over the last decade. Maybe you're targeting three billion dollars.

SPEAKER_00 22:09

Very good.

SPEAKER_02 22:10

All of these small things do add up to numbers, which is great.

SPEAKER_01 22:13

So I think I think there is something on that as well around. So Claren Futures, anyone that needs to kind of look at the work that that that they do. I think housing associations aren't down the country in some ways have stepped in to do some of the things in communities that would normally be uh the remit of local authorities and councils. And and that's purely because their budgets are so tight, etc. etc. So I think the work that's that's done is fantastic. I've got a real concern that as budgets from housing associations are tighter, there are decisions that are made that maybe lose some of those bits would which which which would be um which would be a real shame. But I think the stuff that the which leads me on to the other point around I say this, I we've had this conversation with my I really don't understand why um housing associations don't have better PR. Because the things that they do, you know, the the for communities that they operate in are fantastic. And and you only ever read about them when something goes wrong. So I just kind of wish that people would understand what they do and the value they bring to communities much more.

SPEAKER_02 23:14

No, absolutely. I mean maybe we could just touch on there, I guess, the the the challenge you have around some uh big bringing homeless into your portfolio and and the grant split. Maybe if we could go into that a bit, Claire.

SPEAKER_00 23:25

Okay, so I mean the funding arrangements for housing associations um over many years have remained the same. Um we rely upon government grant um to support the capital build um of building new homes. Until relatively recently, um rented homes were let on social rents, and those are the lowest discounted rents that the homes you saw um in central London are probably at a discount of about, you know, there'll be 30% of the equivalent market rate. Um so they are heavily, heavily discounted, and it is government grant that enables us to deliver those things. Grant over the last few years has reduced significantly, and so we've been building more affordable rented homes. Affordable rented homes are at a lesser discount. So in London, typically a discount of 60%. So they're more expensive for the residents to live in, but they're economically all that we can deliver with reduced levels of grant. If we were to move to a situation in the future where more social rented homes were built, then we would need an uptick in the grant, a substantial uptick in the grant, to give you an idea. Our grant rates are currently about 12% of the capital bill of a home. They would need to be much more like 80% if we were to deliver social rents.

SPEAKER_02 24:58

Thank you, Claire. Thank you, Paul. That's been Property Perspectives for another episode. Please, if you like the episode, click like and subscribe.