b2: rent setting and housing association business plans

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Housing Treasury – Financing Risk B2: Rent setting and housing association business plans Speakers: Derek Joseph Director Altair Consultancy and Advisory Services Susan Kane Partner Altair Consultancy and Advisory Services Chair: Deepak Chandra Head of Treasury bpha

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B2: Rent setting and housing association business plans. Speakers:Derek Joseph Director Altair Consultancy and Advisory Services Susan Kane Partner Altair Consultancy and Advisory Services Chair:Deepak Chandra Head of Treasury bpha. - PowerPoint PPT Presentation

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Page 1: B2: Rent setting and housing association business plans

Housing Treasury – Financing Risk

B2: Rent setting and housing association business plansSpeakers: Derek Joseph

Director Altair Consultancy and Advisory Services

Susan KanePartnerAltair Consultancy and Advisory Services

Chair: Deepak ChandraHead of Treasury

bpha

Page 2: B2: Rent setting and housing association business plans

NHF Conference – 23rd October 2013Treasury – Financing Risk

Session B2Rent Setting and HA Business Planning

Speakers:Derek Joseph and Susan KaneDirectors, Altair Ltd

Page 3: B2: Rent setting and housing association business plans

Rents - Overview

Grant Planning No Subsidy

Social X X

Target X X

Affordable X (?%) X (?%) X (?%)

Market X

Residual Equity X X X

Increase Cap [CPI+1%} Market

Page 4: B2: Rent setting and housing association business plans

CPI and RPI rates over time

Page 5: B2: Rent setting and housing association business plans

CPI +1% and RPI + 0.5% rates over time

Page 6: B2: Rent setting and housing association business plans

Scheme Appraisal - Capital£m

Land 0.7Build 3.0 12 affordable rent

3 shared ownership5 outright sale2 commercial units

Fees 0.3

Overheads 0.1Finance Charges 0.1Contingency 0.3

4.5Outright sale (1.8) Net of selling cost

First tranche (0.3) 40% of 3 @ £250k

Ground rents (0.0) 10 @ £200 p.a. @ 10%

Commercial leases (0.2) 2 @ £10k p.a. @ 10%

To be funded 2.2

Page 7: B2: Rent setting and housing association business plans

Scheme Appraisal - Funding£m

To be funded 2.2Grant (0.7) 12 @ £50k and 3 @ £25k

Cross Subsidy (0.6) 12 @ £40k and 3 @ £20k

Debt to be Supported 0.9

Note: Cross-Subsidy Options Fixed sum Residual computation Loan to scheme (interest rate)?

Page 8: B2: Rent setting and housing association business plans

Scheme Appraisal – Revenue Summary

£kYear 1

£kYear 2

£kYear 3

Affordable rents - 12 @ £90 pw = 56.0

Shared ownership - 3 @ 2.5% of £150k = 11.0

Losses = (2.0)

Management = (8.0)

Repairs = (8.0)

Depreciation = (15.0)

Reinvest = (5.0)

Revenue (net) 29.0

Cash flow

Supportable debt @ 6%

Revenue = £483kCash flow = £733k

44.0

Page 9: B2: Rent setting and housing association business plans

Viability Graph

Page 10: B2: Rent setting and housing association business plans

Security Requirements

Page 11: B2: Rent setting and housing association business plans

Interest Cover Requirements

Page 12: B2: Rent setting and housing association business plans

Gearing Requirements

Page 13: B2: Rent setting and housing association business plans

The Crucial Debate

• What is the limiting constraint?• Set the constraint to allow for target programme

including risk buffers• Models to measure long term sustainability e.g. Brixx• Needed for submissions to HCA, lenders, board etc.• Complex scenario planning

Page 14: B2: Rent setting and housing association business plans

1 - £900k @ 3% (Libor 1%) all variable2 - £900k (50% variable, 50% fixed)3 - £900k @ 6% all fixed

Strategic Treasury Overview 1

Page 15: B2: Rent setting and housing association business plans

Inflation doubles at year 5 to year 3% and Libor doubles so variable cost is 5%

Strategic Treasury Overview 2

Page 16: B2: Rent setting and housing association business plans

Leadership, quality, insight

www.altairltd.co.uk