The Great Escape

My old man was in Glasgow’s first Flying Squad. He had a few tales to tell. One of his funniest was about a letter from a lawyer to a guy in prison that goes into all the ins and outs of the case.

great escape

Then it ends with this advice – “meanwhile proceed with the escape plan.” He should have called up the local housing association. They are experts at getting out of tight corners. Well at least they are supposed to be.

You’ve all done the stress testing. So you’ve built a prison of falling rents, crashing house prices, gas explosions and Uber running the wing. Can you break out of it? Will the HCA believe that your mitigations will work? Here’s how I think you should go about it.

This is the time for precision. When you’ve added up all the calamities that will befall you, ask a big question. How much is this going to cost? The one and only point of stress testing is to put a cash figure on the worst case scenario.

But what will you do about it? This is the tricky bit. Where are you going to get the cash from? The escape plan will need fine tuning. What if you get into a scrape at the same time as others? Will it be so easy to convert your homes for sale into market rents? And at what rents?

You could be fighting other associations in a race to the bottom. Lots of associations think they will sell their services to others if it all goes wrong. Is that really going to happen if everyone is in the same boat?

In any case you will have to pay the cost of running the service and hope that the fee you can pass on to others leaves enough scope for a profit. You won’t be the only one trying to sell your way out of trouble. In fact it might be a fire sale. Don’t fall into the same trap as Bros. Famously they lost a lot of money due to not knowing the difference between net and gross.

And you must be honest with yourself. In some of the plans I see there are more miracles than you find in the Gospels. Or you could say they comply with Newton’s Third Law. Every bad thing leads to an equal and opposite good thing. So if there is a big bill in year five guess what? Yep. All of a sudden you can get pots of cheap money and flog homes for top prices. So it all turns out well in the end. If you feel that lucky you might as well play the lottery.

You can’t rely on luck so you have to stay sharp. What if the Black Swan event you are planning for never happens? It’s just as likely to turn out to be a White Elephant.

After all every year the Bank of England tells the banks what stresses to look out for. And they never call it right do they? So much for the experts. The bullet that hits you will have your name on. But I doubt you will predict who fires it at you.

What’s my last point? Don’t duck tough questions. You know that the powers that be want to see mergers. Do look into the pros and cons of this. Don’t dismiss it out of hand. And saying that you will take over minnows but not face the same medicine yourself looks arrogant I’m afraid.

It’s time for facts and figures not boasting. That’s the way to keep the HCA jailors at bay.

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