Housing associations (HAs) are crucial to achieving the government’s promise of delivering 1.5 million homes. Social housing currently accounts for 20% of all housing starts in the UK – but with these increased targets, this is set to rise over the next five years. Demand for HA involvement in new builds is already high, creating undersupply issues, as we have seen with the trend of developers transitioning into registered providers in an attempt to solve this themselves. Overcoming existing challenges HAs face is vital to addressing the long-standing undersupply in the UK housing market.
While plans for new finance routes for councils are yet to be announced, the grey belt planning reforms are anticipated to allow local authorities to benefit from increased land value. This renewed focus and the likelihood of increased funding presents HAs with significant opportunities. However, this growth opportunity is accompanied by ongoing complexities, such as contractor insolvencies, which can jeopardise projects, and the Building Safety Act imposing new responsibilities on HAs as developers.
As HAs strive to expand their operations to meet the rising need, the importance of securing the proper insurance, including compliant warranties, cannot be overstated. With expert guidance and tailored solutions from a specialist insurance broker, navigating these challenges becomes more manageable, enabling HAs to focus on their core mission of providing quality housing.
The problem: Challenging market and increased regulatory burden
- New regulator obligations
HAs face distinct challenges in securing appropriate insurance coverage due to the nature of their long-term property ownership, large-scale development projects, and the specific requirements of social housing schemes. The complexity of these projects demands insurance solutions that go beyond generic policies, particularly in light of recent changes brought in under the Building Safety Act. The BSA has introduced new duty-holder responsibilities that impact HAs when they function as developers. Compliance with the Act requires warranties that are specifically tailored to the unique risks associated with their projects, making it crucial for HAs to secure coverage that addresses these new obligations.
- Reliance on contractors
Historically, HAs have relied heavily on their contractors to source warranties. Rachel Bryant, Major Project Principal Consultant at LBB, notes, “HAs have in the past relied on their contractor to source their warranty. They might stipulate NHBC or similar, but is that right for what they’re building? If it is great – but it is vital to assess each project on an individual basis to put the right coverage in place.” This reliance often results in contractors defaulting to standard insurance policies, which may not fully meet the unique needs of HAs. This approach can lead to inadequate coverage, leaving HAs exposed to risks that could have been mitigated with a more tailored insurance solution.
Unfortunately, HAs are sometimes offered generic coverage, which can leave large or complex projects underinsured. “We’ve been asked to step in to help when issues arose because a multimillion-pound build had only secured minimal coverage. While LBB can help in this instance finding coverage for a part complete project, it is still a glaring example of how insufficient insurance can jeopardise a project’s success.” James McGloin, Director of Major Projects at LBB, shares. “Selecting the right coverage levels is essential to safeguarding these investments, and that’s where the expertise of specialist brokers like LBB comes into play.”
- What happens when a contractor goes out of business?
The collapse of a major contractor last year underscored the vulnerabilities HAs face when inadequately insured. James recalls, “One large housing association approached us recently. They had realised their risk exposure when one of the big contractors collapsed last year. Other HAs must take the same approach.” This event highlighted the misconceptions many HAs hold about contractor insolvency protection and the realities of these insurance policies.
When faced with such challenges, LBB provides HAs with essential support by offering comprehensive comparisons of market options. James adds, “The large housing association asked us to show them the differences among market providers. As brokers, we are agnostic and can leverage our strong relationships with a range of providers to support HAs in exploring the whole market.” LBB’s approach includes providing detailed comparisons, allowing HAs to make informed decisions about their insurance coverage, ultimately leading to better protection and reduced risk.
- Lack of resource and expertise for due diligence
Another significant issue is the lack of due diligence by HAs when it comes to their insurance coverage. Rachel emphasises, “It’s essential that HAs do their due diligence. In many cases, this is government money – taxpayers’ money – being spent. And in an increasingly complex market with new requirements from the Building Safety Act, they must be sure they’re fulfilling their responsibilities as duty holders.” Often, HAs may not realise they are classified as developers, particularly in private sales or shared ownership schemes. This oversight can lead to improper insurance coverage, putting both the projects and the funds at risk.
The solution: LBB’s tailored insurance brokerage services
- Acting as impartial advisors
Given the complexities of the insurance market, it’s understandable that HAs might lack the in-house expertise to source warranties themselves. James advises, “It is understandable that HAs may not have the in-house expertise to source warranty themselves. This is where, if you haven’t got the resources, get a broker to do it for you, to search the whole market properly.”
The value of working with a specialist insurance broker is their deep expertise in the construction and housing sectors. Their understanding of the unique needs of HAs and social housing developers positions them as a crucial partner in securing the right insurance solutions. By taking ownership of their insurance needs and involving brokers like LBB, HAs can ensure they secure the most appropriate and cost-effective policies for their projects.
- Education and market awareness
LBB plays a crucial role in educating HAs about the variety of options available in the market. Rachel highlights the importance of this process, “Brokers can help HAs ensure they’re getting the right insurance product for their build and that they are securing the most competitive price.” LBB’s approach includes helping HAs understand market dynamics, how these factors impact premiums, and the importance of considering long-term costs rather than just initial premiums. Their ability to access and compare various providers allows HAs to secure comprehensive coverage tailored to their specific needs.
- Custom solutions for specific needs
LBB’s tailored solutions are designed to meet the diverse needs of HAs, whether it’s for long-term property ownership, private rental schemes, or shared ownership projects. James explains, “If the HA is holding onto the property for a long period, maybe you want a larger excess and a smaller premium. However, if it is for private rental or shared ownership, there are different considerations. The warranty should be tailored to specific project requirements rather than simply going with what they’ve always secured in the past.”
LBB’s tailored approach ensures that HAs are not only compliant with legal requirements but also adequately protected against the specific risks inherent in their projects. LBB’s expertise ensures that each project receives the coverage it needs, reducing risk and aligning insurance policies with the HA’s long-term objectives.
Offering specialist support at every stage of the project journey
- End-to-end client support
LBB’s value extends beyond just policy selection. Rachel notes, “Our client service is there to manage the process, get you the best options, and handle the details that you might not have the resources for in-house.” Their expertise in managing the entire insurance process—from policy selection to ongoing risk management—ensures that HAs are well-supported throughout the lifespan of their projects.
- Proactive issue resolution
Proactivity is a hallmark of LBB’s service. Rachel explains, “As we’re connected with all parties – insurance provider, surveyor, contractor and HA we can raise a flag if there’s a problem. We’re happy to contact the contractor on the client’s behalf while keeping them in the loop and saying, ‘Here’s the issue. What do we need to put in place?'” This proactive approach helps HAs address issues before they escalate, ensuring that projects continue smoothly and that potential risks are mitigated early.
Working with LBB can ease the burden for Housing Associations
In an increasingly complex market that offers huge opportunities, the role of a specialist broker like LBB is indispensable for HAs. LBB’s tailored insurance solutions, comprehensive support, and proactive risk management strategies provide HAs with the security they need to focus on their mission of providing affordable housing. Engaging directly with insurance brokers like LBB ensures that HAs are adequately covered and can effectively manage their risks in an ever-changing landscape.
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