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It’s all about the appraisal Muthuraj Marimuthu November 30, 2022

It’s all about the appraisal

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In this webinar, Andrew Markham (Director of Development Consultancy, SDS), Paul Kristensen (Technical Manager, SDS) and John Stevens (Lead Consultant, SDS) discuss the latest news in affordable housing and how it relates to your appraisal.

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John Stevens begins the webinar by talking about inflation and sector rent setting. He acknowledges that nobody has all of the information on this at the moment.

We do currently know, though, that we should be setting rents at CPI+1%. However, based on September’s CPI, it looks like this would be at 10.1% + 1%, which is over 11% for rent setting come April 2023.

Obviously, these figures sparked concern, and this is what led to the DLUHC Consultation on Social Housing Rent Policy from 1 April 2023 earlier this year. The government assessed the possibility of a 3, 5 or 7% rent ceiling. After six weeks of consultation, the Autumn Statement announced a maximum rent ceiling of 7% for affordable rent April 23 – March 24, with further details to be confirmed. John cites a previous webinar on this topic as he explains that there has been speculation that this ceiling will only apply to existing tenancies. As yet, though, there has been no confirmation on this from the government.

So what else did we learn from the Autumn Statement? LHA (local housing allowance) is frozen at 2023 cash levels and stamp duty cuts will remain until 2025. Additionally, the day after the statement was released, the NHF responded that most of its members have agreed to a 7% rent ceiling for shared ownership inflation for the same period. John reiterates that no clarification on whether this is solely for existing tenancies has been given.

John also revisits a slide from a previous SDS webinar to distinguish between rent ceilings and rent caps. The current discussion in the sector relates to rent ceilings, but it is being widely confused for rent capping.

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What we are actually concerned about with regards to the Autumn Statement is annual rent inflation, and how much it should go up with CPI inflation around 10/11%. This would see a huge rent increase for HA and LA customer bases.

John also explains that many of these figures, such as LHA, which is based on the BRMA (broad rental market area), are coded into ProVal. SDS software mirrors government guidance and we have tables embedded in the background of ProVal. We inflate the social rent calculated inside ProVal with the approved government figures.

This means there is often a debate when we use ProVal – what is the target rent at handover? Of course, we can only go on future inflation predictions provided by the government.

John then breaks down the DLUHC Consultation of Social Housing Rent Policy from 1 April 2023: 

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John also mentions the introduction of new Housing Minister Lucy Frazer and her background, and Michael Gove’s reappointment as Sec. State Dept for Levelling Up, Housing and Communities. He states that he is seeing a growth in Private Registered Providers. He raises some key points from the Levelling Up and Regeneration Bill (Planning White Paper).

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John observes a political barrier between local authorities, RPs/HAs and PRPS/Devs. He concludes that joint ventures amongst all these entities, especially in the current borrowing climate, would benefit everybody involved.

Technical Manager Paul Kristensen presents the impacts of all of this in ProVal. He recommends that all customers ensure they are using the most recent version of the software so data such as the inflation rate is fully up-to-date.

He walks us through the inflation tab in ProVal, showing where you can calibrate specific rates for different product types and add step changes. Paul also points out that there is lots of concern around rising build costs whilst the rent conversation takes place.

Paul then displays a fictitious appraisal and shows the difference between social vs. affordable rent. He shares his top ProVal tips for customers, as well as appraisal pitfalls he sees most often. He also recommends exercising caution when appraising units to handover close to the April 23 trigger point.

Session Conclusion

The session concludes with a short Q&A session before host Andrew Markham makes attendees aware of SDS Development Consultancy workshops to help you with our systems and your appraisal. He also announces that the next SDS webinar will take place on 25 January, 2023, with more details to be announced soon. Webinars tend to be scheduled on the last Wednesday of every month at 10AM, so keep an eye on our website for updates. Finally, he wishes all attendees a good Christmas break.

If you are interested in joining our panel of industry speakers, please contact cassie@s-d-s.co.uk for more information.

Spearker:

John Stevens: Lead Consultant, SDS 
Paul Kristensen: Technical Manager, SDS

Host:

Andrew Markham: Director of Consultancy, SDS

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