From Ponzi Schemes to Strikes - Is This Really The Current State of Social Housing?
In recent weeks, concerns have surfaced regarding the financial health of certain housing associations, my own landlord included, prompting discussions about their management practices and the implications for residents and communities.
Housing associations find themselves navigating choppy financial waters, grappling with rising maintenance costs, dwindling revenue streams, and mounting debt. To alleviate these pressures, many will inevitably have to turn to the sale of properties as a means of shoring up their finances.
While this strategy offers a short-term solution, the long-term sustainability of relying heavily on property sales remains questionable. The risk of being unable to offload properties quickly or at desired prices looms large, potentially exacerbating financial woes and compromising the organisations' ability to fulfill their core mission of providing affordable housing.
Did You Say Ponzi?
The parallels between the financial struggles of housing associations and the unsustainable nature of Ponzi schemes are striking. Like Ponzi schemes, housing associations depend on a continuous influx of funds to sustain operations. These funds come in various forms, including but not limited to the money generated from new builds. Challenges inevitably surface when they fail to meet their planned quota of new builds, hindered by multiple reasons. The failure to build new developments has created a precarious financial situation akin to a house of cards. The excess of ageing housing stock in need of extensive repairs mirrors the collapse of a Ponzi scheme when new investors dry up, revealing the underlying fragility of the system.
While Ponzi schemes are unequivocally illegal and designed to defraud investors, the ethical implications of housing associations' financial struggles are more nuanced. While financial mismanagement may not constitute deliberate fraud, it raises questions about transparency, accountability, and the duty of care owed to residents. Striking the balance between financial viability and ethical responsibility is essential for ensuring the integrity of the sector and safeguarding the interests of residents.
Behind the balance sheets and profit margins lie human costs, with a growing number of stories regarding displacement, disruption, and despair. The sale of properties by housing associations comes at a steep cost for residents and communities. Families are uprooted from their homes, longstanding ties to neighbourhoods are severed, and vulnerable individuals are left in limbo. The closure of care homes operated by some housing associations further compounds the human toll, leaving residents and employees in precarious situations and underscoring the far-reaching consequences of financial mismanagement.
And then, what of the Service Charge strike?
While many housing associations struggle to make ends meet, they are, of course, unable to provide an acceptable level of service. However, they have needed to increase service charges to maintain their ageing stock, which they often fail to do. As a resident, I myself have felt the anger from paying an escalating service charge when the service has consistently fallen woefully short of satisfactory. This isn’t an angry post about systemic failures with my own landlord; you can find that here.
With few options left open, the right to refuse to pay said charge becomes more appealing as I type, and I am certainly not alone. The Social Housing Action Campaign (SHAC) is spearheading a grassroots movement aimed at empowering tenants and residents in the social housing sector to address issues of unfair service charges and landlord abuses.
SHAC is actively supporting tenants in taking strike action as a form of protest against unfair service charges and landlord misconduct. By organising strikes and providing resources and guidance, SHAC offers practical guidance and support to tenants considering strike action, including templates for letters to landlords, information on legal rights, and strategies for collective organising. They emphasise the importance of building solidarity among tenants and residents to strengthen their bargaining power and hold landlords accountable.
As SHAC members grow, they gather more support from councillors and MPs wanting to be seen on the right side of justice and truth. As such, SHAC has been effectively engaging with elected officials, including Members of Parliament (MPs) and local councillors, to advocate for legislative changes and regulatory measures to address housing injustices. They call for greater oversight of service charges, expanded powers for Housing Ombudsmen, and reforms to the leasehold system to better protect tenants.
Support is growing. The Guardian article published on April 27th highlights Mayor Sadiq Khan's call for greater rights for leaseholders facing unjust service charges in London. Khan asserts that leaseholders hit with exorbitant and unjust service charges should have the right to refuse payment. He argues that this right should be embedded in the leasehold and freehold reform bill currently under parliamentary review.
Through networking events, online platforms, and community outreach initiatives, SHAC connects individuals facing similar challenges, enabling them to share experiences, resources, and support. This need to galvanise us as a community, fostering solidarity among tenants and residents affected by unfair service charges and landlord abuses, is something I strongly advocate for.
But are we not piling on financial misery?
Now let’s not get too carried away here. In many cases, bad management is at the heart of these housing associations who hope they are now too large to fail, their inability to forecast, oversight failures, inadequate risk assessments, due diligence lapses, and failure to anticipate financial challenges are the root cause of the spiralling issues, and the public outcry! I do not believe they should be given a free pass, a ‘get out of jail free’ card. They must be held accountable.
But what do we risk?
Withholding service charges will further exacerbate their financial woes, potentially pushing them closer to insolvency. The escalation of tenant strikes may intensify calls for regulatory intervention and reform within the housing sector, and this is certainly needed. This would lead to greater oversight and accountability measures being implemented to ensure that housing associations operate ethically and transparently, and not before time.
Struggling housing associations may seek collaboration with stakeholders, including government bodies, financial institutions, and community organisations, to explore viable solutions for financial restructuring and sustainability, such as Thames Water, etc.
In extreme cases, housing associations facing insolvency may undergo closure or restructuring processes to mitigate financial losses and protect the interests of tenants and creditors. One potential outcome could entail mergers with financially solvent organisation (making even larger powerhouses even further from reproach) or the transfer of assets to smaller, localised housing associations.
The transition to smaller, localised housing associations can bring about positive changes for communities. By moving away from faceless, large providers, these associations can re-establish connections with the communities they serve. This shift allows for greater responsiveness to local needs and preferences, fostering stronger relationships between housing providers and residents.
Moreover, residents who have lost faith in the larger, impersonal housing associations may regain trust and confidence in the new, smaller entities. The increased proximity and engagement between residents and housing providers can lead to more effective communication, transparency, and collaboration in decision-making processes.
Overall, the restructuring of housing associations and the emergence of smaller, localised entities signify a step towards empowering communities and restoring control over housing services. By prioritising community engagement and responsiveness, these associations can better address the diverse needs and aspirations of residents, ultimately fostering a more supportive and inclusive housing environment. Surely, we won’t let them become too big again!
But what of the strikers?
What of the strikers indeed! Tenants withholding service charges may face legal action from housing associations seeking to recover unpaid fees. This could result in court proceedings, judgments, and potential enforcement actions such as wage garnishment or asset seizure.
In some cases, non-payment of service charges could lead to eviction proceedings initiated by housing associations. Tenants may be at risk of losing their homes if they fail to resolve outstanding debts or reach an agreement with their landlords.
Despite the risks involved, strike action can prompt housing associations to address legitimate grievances and engage in constructive dialogue with tenants. Negotiated settlements may involve debt repayment plans, service improvements, or policy changes to address systemic issues. SHAC is clear that strikers should keep the money separately so they can pay if ordered to do so, but in a cost-of-living crisis, how many of us will use this stashed cash to pay for that unforeseen car expense, or the simple need to put food on our tables?
What side of the fence should we be on?
The issue of service charge strikes within housing associations presents a dilemma with significant implications for both tenants and the associations themselves. On one hand, tenants withholding service charges are demanding accountability and fair treatment from housing providers, advocating for their rights and pushing for much-needed reforms within the sector. The Social Housing Action Campaign (SHAC) and similar grassroots movements are playing a crucial role in empowering tenants and residents to address issues of unfair service charges and landlord abuses while also advocating for legislative changes and regulatory measures to ensure greater oversight and transparency.
However, there are legitimate concerns about the potential financial repercussions of service charge strikes on housing associations already facing financial strain. Withholding service charges will exacerbate their financial woes, potentially pushing them closer to insolvency and jeopardising the continuity of essential services for tenants. Moreover, tenants engaging in strike action may face legal consequences, including court proceedings and eviction threats, further exacerbating their housing insecurity.
Ultimately, finding a resolution requires striking (pun intended) a delicate balance between holding housing associations accountable for their actions and ensuring the sustainability of the sector. It calls for collaborative efforts from all stakeholders involved, including tenants, housing associations, government bodies, and regulatory authorities, to address systemic issues, promote transparency, and uphold ethical standards in financial practices. By fostering open dialogue, greater accountability, and working towards solutions that prioritise the well-being of residents and communities, we can move towards a more equitable and sustainable future for social housing.
Having witnessed firsthand the actions some providers will take to silence those who dare to speak out, it can be tricky to find sympathy for many of these housing associations, my own landlord certainly included.
However, one thing should be clear to us all, regardless of which side we take; the movement is growing, the strikes are inevitable, the revolution will be televised, and housing associations need to respond before they collapse. The end could very well be near...