The housing sector is facing unprecedented uncertainty – we need to innovate more not less

By Matt Leach - on 05/10/2015

HACT's Chief Executive Matt Leach comments that even with an uncertain future ahead, the UK housing sector must continue to seek innovative ways of working.

This blog was initially written for and published in Inside Housing.

The weather is changing fast for UK housing. As Chief Executives gathered last week for housing’s second big annual conference, the chill breeze blowing across Birmingham’s Chamberlain Square was like nothing compared to the hurricane of change tearing across every part of the sector.

The rent changes imposed in George Osborne’s July budget ripped holes in short term business plans and long term strategies.

Ahead of the forthcoming ONS ruling on classification, the relaxed way in which both Chancellor and PM casually asserted ownership over the housing association sector earlier this month sent a fresh blast of cold air through boardrooms.

Whilst the deal secured by David Orr last week provides a basis on which the sector can at least plan for the short to medium tem, it would be understandable if housing providers nevertheless continued to batten down the hatches, reduce spending on anything other than the existing core and draw back from anything that cannot show an immediate and obvious return. It would also be wrong.

In his classic guide to data analytics and future forecasting, The Signal and the Noise, legendary US pollster and statistician Nate Silver describes the difference between risk and uncertainty:

Risk is something that you can put a price on. Say that you’ll win a poker hand unless your opponent draws to an inside straight: the chances of that happening are exactly 1 chance in 11. This is risk. It is not pleasant when you take a “bad beat” in poker, but at least you know the odds of it and can account for it ahead of time. In the long run, you’ll make a profit.

Uncertainty, on the other hand, is risk that is hard to measure. You might have some vague awareness of the demons lurking out there. You might even be acutely concerned about them. But you have no real idea how many of them there are or when they might strike. Your back-of-the-envelope estimate might be off by a factor of 100 or 1,000; there is no good way to know. This is uncertainty. Risk greases the wheels of the economy; uncertainty grinds them to a halt.

The UK housing sector has always been good at managing risk and return. It is one of the reasons it has levered in staggering amounts of private finance to match public investment, and in the process grown into the UK’s most successful not-for-profit sector, both in terms of financial fundamentals and quality of service.

But the last 3–4 months have seen the introduction of uncertainty on a scale never before encountered. Key assumptions that have underpinned sector business models - including that the government will stick to any deal the sector strikes with it - have been swept away.

Whatever the autumn brings, it seems likely coming years will see a sector at the very least transformed. But in responding to a new era of uncertainty, Boards cannot afford to let their businesses grind to an absolute halt. 

Whilst efficiencies need to be found, and sector consolidation seems inevitable, one area it is vital providers don’t pull back from is their investment in continued business innovation.

This isn’t about advocating large scale expenditure on the introduction of new systems and processes. Rather providers should be looking to ensure that - where change is needed to meet current pressures - it is used as an opportunity for the sort of radical, agile, experiment-led innovation that increasingly characterises successful businesses in the private sector navigating permanently challenging markets.

It means having the confidence to explore the benefits that can be achieved through new ways of working, the deployment of new and innovative technologies, the development of new business models; to question established certainties, and embrace new approaches to performance management and customer engagement.  

We know that if we were starting out to create a housing sector afresh, and from scratch, it would be very different from what we have now.  Whilst housing faces unprecedented challenges this autumn and beyond, it also presents a not to be repeated opportunity to go beyond just coping with cuts and proactively start to do things in a radically different way. The scale of change approaching - and the disruption it may bring as it is implemented - means that there may not be another chance this decade.  Amidst the politicking, uncertainty and cuts, as we negotiate, accommodate and adjust to whatever becomes the “new normal”,  the next twelve months need also to be remembered as a year of innovation for UK housing.

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