Throughout my business life I have been using spreadsheets. Reviewing, and even morse so, building, robust spreadsheets takes time.

I have often wondered why there seems to have been very limited ability in software like Excel to use speech recognition to build spreadsheets and ask questions ( perhaps that’s a reflection on my knowledge of features!).

So with the advent of AI I have been trying to find out how AI can help in building, reviewing, forecasting , benchmarking and monitoring data. I’m at an early stage of doing this  and of course the output has to be checked but from what I have seen AI generated data and features like producing graphics is very impressive and templates can apparently be created for data outputs.

What has been your experience? Are there any practical insights that you are willing to share?

In the meantime below is a poem , generated by AI from my request, about some aspects of  “Inside the mind of AI and financial data” and working with humans that you may enjoy. The poetry is far more impressive than anything I could produce!

AI generated poem below

When Numbers Meet the Mind of AI

When numbers meet the mind of AI,

The time for guesswork waves goodbye.

No more late nights on spreadsheet rows,

When forecasts bloom and insight grows.

You feed it a template, clear and neat,

And out pours data, crisp and sweet.

With charts that rise, and graphs that gleam,

It brings to life each balance sheet dream.

It benchmarks peers with silent speed,

Finds outliers where trends may lead.

From EBITDA to ROCE grace,

It maps your standing in the race.

Complex formulae once a chore,

=IF(AND(A1>0,B1<10),…) and more.

Now checked and tested in a blink,

No broken links or #REF to sink.

It models risks and simulates fate,

Predicts your cash flow, early or late.

With rolling forecasts finely tuned,

And audit trails securely hewn.

Yet in this world of code and steel,

The human mind must shape the wheel.

For AI’s might, though swift and vast,

Needs guiding hands to make it last.

Together they refine the art,

Each plays a vital, clever part.

The insight, judgment, common sense,

That keeps all figures in past tense.

So build your model, bold and true,

Let AI crunch what it must do.

Then read, review, interpret deep—

For wisdom’s harvest is what we reap.

In teams that share, across the cloud,

With graphs that speak and numbers loud,

The power grows with each new chart—

Where humans lead and AI takes part.

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Like many people I have been impressed by the growth of  AI, and its potential use for not only reviewing and analysing data, but also as a basis for developing solutions to improve delivery  and control of projects.

So, I asked Chat GPT 4.o for some analysis of the future of Project Finance based on some images of projects. The unedited reply  ( produced in seconds not minutes !!) is shown below. I am not making this post with a view to critiquing the AI response to a simple chat enquiry, but to illustrate the output and I’d welcome any comments on how you believe AI can be used to analyse and propose solutions for projects and to minimise risks , as well as the current limitations of AI.

I’d be very interested in your views !

AI Text below

Based on the provided PowerPoint presentation, here is a summary of the projects and how the changing business environment will affect them:

Project Summaries

1. Travel Sector (Pre and During COVID-19)

• Industry: Transportation and Tourism
• Specific Projects: Development of smart transportation systems, expansion of public transportation networks, and enhancement of travel safety protocols.
• Business Environment Impact:

• Pre-COVID: Focus on increasing capacity and efficiency to cater to growing tourism and business travel.
• During COVID: Shift to improving health and safety measures, implementing contactless technologies, and adapting to reduced travel demand.

1. Energy Sector (Power Creation, Storage, and Transmission)

• Industry: Renewable Energy
• Specific Projects: Offshore wind farms (e.g., Dudgeon Wind), solar power installations, and energy storage systems.
• Business Environment Impact:

• Renewable Integration: Increased investment due to policies promoting green energy and reducing carbon footprints.
• Technological Advances: Development in battery storage technology and grid management systems.
• Regulatory Changes: Enhanced support and subsidies for renewable projects, but also increased scrutiny on environmental impacts.

1. Social Infrastructure

• Industry: Public Infrastructure and Urban Development
• Specific Projects: Construction of hospitals, schools, community centers, and affordable housing projects.
• Business Environment Impact:

• Government Funding: Increased public investment in essential services and infrastructure.
• Community Needs: Greater emphasis on resilient and adaptable infrastructure to support public health and safety.
• Sustainability Goals: Projects must align with sustainability and green building standards.

1. Technology Sector (Data Travel and Connectivity)

• Industry: Information Technology and Telecommunications
• Specific Projects: Expansion of 5G networks, development of data centers, and enhancement of cybersecurity measures.
• Business Environment Impact:

• Digital Transformation: Accelerated by remote working trends and increased online activities.
• Security Concerns: Higher investments in cybersecurity due to growing threats and data breaches.
• Innovation Drive: Continuous advancements in AI, IoT, and big data analytics shaping project priorities.

Voice Recording Script

Hello, and welcome to our overview of current projects and the evolving business environment.

First, let’s talk about the travel sector. Before COVID-19, the focus was on increasing capacity and efficiency to meet the demands of growing tourism and business travel. However, during the pandemic, the priorities shifted towards enhancing health and safety measures, implementing contactless technologies, and adapting to a reduced travel demand. This means projects in smart transportation systems and expanding public transport networks are now more centered around safety and technological integration.

Moving on to the energy sector, particularly renewable energy. Projects such as offshore wind farms like Dudgeon Wind, solar power installations, and energy storage systems are gaining momentum. The business environment here is influenced by a stronger push towards renewable energy due to favorable policies and the global aim to reduce carbon footprints. Technological advancements in battery storage and grid management are also playing a crucial role, along with supportive regulatory changes that encourage renewable energy projects.

In the realm of social infrastructure, we see significant developments in the construction of hospitals, schools, community centers, and affordable housing. These projects are increasingly funded by government investments aimed at enhancing public health and safety. The focus is also on creating resilient and adaptable infrastructure to meet community needs, all while adhering to sustainability goals and green building standards.

Lastly, the technology sector is rapidly evolving, especially in terms of data travel and connectivity. The expansion of 5G networks, development of data centers, and enhancement of cybersecurity measures are key projects in this area. The digital transformation has been accelerated by the shift to remote working and increased online activities, necessitating higher investments in cybersecurity to combat growing threats. Innovations in AI, IoT, and big data analytics continue to shape the future of these projects.

In conclusion, the changing business environment is significantly impacting these sectors, driving them towards more sustainable, technologically advanced, and safety-focused solutions.

Thank you for your attention.

The post The future of projects and Project Finance – what’s the assessment of AI ? appeared first on M-TRAINING.

Increasingly, in many major cities and towns across the world, housing, whether for sale or rent, has become increasingly unaffordable. See link below

How and where we work is changing substantially and governments . housing developers and investors can create opportunities to reduce the imbalance between supply and demand and types of housing, and therefore cost, of housing.

The role of , and opportunities relating to, the financing of social and affordable housing

There is tremendous scope to assist in the objective to improve housing availability and cost through financing. There are numerous ways in which financing for affordable and social housing can be provided, including

1. PPP related financing with Central and Local government authorities entering into rental agreements of varying durations
2. Single asset and portfolio financings
3. Financing across the capital stack from senior secured debt to mezzanine finance, hybrid instruments and equity
4. Financings for both developments and income producing properties
5. Development of the market for Housing REIT focussed on social and affordable housing
6. Credit enhanced debt financings so that financings  can be structured to meet the risk and return requirements of debt providers
7. Equity financings in which renters of affordable / social housing are given shares based on the amount of rent paid on time and duration of tenancy

There is also the scope to structure transactions as “green” and / or sustainable financings.

Why is there not a larger market for the financing of social and affordable housing? What are your views? What are the obstacles?

Perhaps I am missing something obvious, but I am puzzled why the financing of social and affordable housing has not been growing very quickly and become a distinct Asset Class. As mentioned above there are various ways in which financing of social and affordable housing can be provided, with the scope for transactions to be structured to meet the risk and return requirements of a range of finance providers, differing  debt maturity profiles and financings tied to “green financing” and “Sustainable Financing” performance targets.

Would be interested in your views on obstacles that need to be overcome to develop a more vibrant finance market for social / affordable housing.

Property Prices Index by Country 2024 (numbeo.com)

The post Financing Affordable and Social Housing – what is needed to develop this market? appeared first on M-TRAINING.

The current upheaval in the energy markets is, of course, worrying. Particularly for those people who are most vulnerable to increases in energy costs.

Like all shocks, the immediate impact is severe . Like all changes the shock can be a catalyst for positive change. Only my opinion of course but the current energy crisis is likely to accelerate investment in renewable energy sources. Also individuals , businesses and governments will be considering, and hopefully implementing, measures to conserve energy.

During the early phases of the COVID pandemic there was much more information provided by governments and supranational organisations, like the WHO, on the dreadful impact of the pandemic. Although many didn’t agree with the measures taken, governments implemented measures that they believed would mitigate the impact of the pandemic.

So this leads me to one suggestion for governments. Publish basic data on energy consumption in a public forum (only a few key figures) so that people and businesses can easily see how much energy is being consumed, and from what source, with some historical comparisons. Set targets for reductions in energy consumption and track progress.

Will this solve the energy crisis? No, but it would be a good start to change the mindset about energy use and efficiency.

What do you think?

The post Turning the energy crisis into an opportunity…one step that governments can implement quickly to change behaviour. appeared first on M-TRAINING.

 As a child I can remember (and also my parents!) being very anxious about the outcome of exams. The results tended to polarise the choices because there was often a vast divide between the academic and non academic routes, with consequences in terms of the world of work.

To be sure there are still differences, but a point to emphasise is that there are now far more choices and many more options to pursue an education route that will help young people develop skills that will help them meet their work aspirations. Of course, a commitment to invest time is essential to producing positive outcomes !

Each country of course has its own education system, but based on the situation in the UK, inspite, perhaps because, of the challenges of the pandemic below are some reasons to be hopeful for young people (and adults too!) about finding routes to achieve their potential, regardless of exam results. Of course, many of the points referred to below will be applicable outside the UK

Technology

• Technology is being used to provide more, and more accessible, information on careers and career educations
• Technology is creating the possibility that people have more choice on how and where to live and work
• Technology is driving down the cost of education as a mixture of classroom and remote learning is becoming more widespread
• There is more content available, including many free and low cost options

Study options

• There is a great range of study options, both academic and vocational, for people with varying levels of experience

Careers advice to help young people to explore possible options is continuously improving

• Careers advice in schools is improving…more information, more professional personnel
• Government, at central and local level, are working to expand choice and encourage engagement of volunteers to work with schools in providing practical insights into the world of work. In my case I have just started volunteering with #Welcome to West London Careers Hub – West London Careers Hub (wlcareershub.com). An organisation that is doing great work to ensure that young people have access to more information on the career choices available to them
• There is growing recognition that both academic and vocational skills are valuable, and that vocational courses offer a pathway to building relevant skills comparable to academic qualifications

Employment and education

• Employers are engaging more with schools
• Inspite of a challenging business environment there continue to be growth industries
• Disruption and the pandemic have created, and will create, work opportunities that didn’t previously exist and hybrid ways of working

 Interpersonal skills

It is easy to think of education in terms of technical skills development. There is now growing recognition that academic content needs to be supplemented by applied  technical and interpersonal skills so that education is increasingly about a person’s holistic development including communication skills and team work.

Of course, exam results create anxieties. Regardless of the results it’s however important to recognise there are an increasing number of routes and choices for young people to develop skills in areas that will be relevant to their working lives. As mentioned above plenty of options for adults seeking to develop their skills too!

Wishing all who are awaiting results of exams, and their families, an enjoyable summer and beyond.

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There has always been conflict, politically and in business activities. At this moment, the world is facing many challenges. How our political and business leaders and financial institutions deal with these challenges will profoundly affect the future of people in their business and personal lives. In the corporate sector there will certainly be corporate and debt restructurings. The outcome of any restructurings remains, of course, to be seen.

It is 50 years since the release of the film #EntertheDragon, featuring the renowned actor, Bruce Lee. What has this got to do with managing political, business and personal conflict? I am not a great follower of martial arts, but one sentence in the film is, for me, core to dealing with conflict. It is when Bruce Lee, when he is being provoked, is asked “what’s your style” and he replies “the art of fighting without fighting”. It raises the question of what can be done to avoid destructive conflict in the first place. Many of the conflicts we are witnessing could have been avoided by trying to develop an understanding of the objectives and concerns of parties to a potential conflict.

What we do know from history is that there will be economic cycles. These cycles are currently being exacerbated by deep disruptive changes in many business sectors, and heightened political tensions. So, where there are restructurings, there may be more extreme losses and loss of corporate value, and impact on employees, in the current economic cycle than in the past.

How conflict between the stakeholders in a restructuring is managed therefore becomes increasingly important. Constructive creative co-operative conflict to try find mutually acceptable solutions to all key stakeholders can often be healthy. Destructive conflict, by contrast, is toxic. Below are my thoughts on the principal issues to be considered to maximise the chances of reaching agreement in a restructuring that is mutually acceptable to the key stakeholders, and dealing with any restructurings in a humane and compassionate way

• Could the conflict have been avoided?
• Has there been adequate preparation for a possible conflict?
• How could the impact of any conflict be mitigated?
• What are their objectives?
• What are the areas for potential compromises and potential “non negotiable” issues?
• What is a realistic mutually acceptable outcome?
• What are the barriers to reach a mutually acceptable outcome?
• Are there potential tensions between people involved in the restructuring?
• What will be the human impact on people who are affected by the restructuring and can any adverse effects be mitigated?

Open, honest and constructive dialogue between key stakeholders is also vital to trying to finding acceptable solutions, even though there will be conflicting objectives in a restructuring.

What are your thoughts on avoiding, preparing and managing and mitigating potential conflicts?

The post Why is #brucelee and the film Enter the Dragon relevant to corporate restructuring and conflict management? appeared first on M-TRAINING.

This post focuses on the UK ( my home market). Affordable housing is however a global issue. As an illustration

A World Economic Forum report 10 ways cities are tackling the global affordable housing crisis | World Economic Forum (weforum.org) states

“…The unprecedented rate of urbanization across the world has led to increased demand for good, affordable housing. A recent survey revealed that of 200 cities polled around the globe, 90% were considered unaffordable when applying the widely-used standard of average house prices being more than three-times median income.

Affordability is not just about the ability to buy or rent a home, but also about being able to afford to live in it. ….”

Another global perspective ( on a country rather than regional basis) is shown in this link to the IMF Global Housing statistics IMF Global Housing Watch, and also in this report from the Demographia International Housing Affordability report , 2021 Edition   Demographia International Housing Affordability — 2021 Edition – Urban Reform Institute

The impact of the pandemic is likely to have increased the problem of unaffordable housing with house prices and rentals increasing much faster than incomes in many (already unaffordable) locations

Can the interests of the various parties be aligned in a sustainable way?

I strongly believe that investing in affordable housing can , with the right structure, produce benefits to all the key stakeholders

• Local authorities in more affordable locations benefit from increased economic activity whilst meeting social objectives
• Individuals have more choice on where and how they live and work
• Financial institutions can , with appropriate credit support for mortgagees / tenants who have weaker credit scores, benefit from expanded financial services opportunities in the housing sector. There are, of course, existing ways in which financial institutions can support affordable housing ( such as providing finance to Social Housing organisations) but the market can be expanded further if there are appropriate credit protections.
• Developers and contractors can benefit from increased activity in the housing sector. With an expanded range of housing finance schemes , some development risks can be mitigated.

Is the problem a lack of space for housing or not  maximising the utilisation of existing land and properties ?

Not just in the UK, but in many parts of the world attempts to increase the stock of affordable housing have focussed on “new builds”. In many cases what has been built has fallen short of targets , partly because developers feel that targets for affordable housing are not financially viable.  At the same time there are many vacant properties including commercial properties that could be used, at least partly, for affordable housing. In areas where there are significant number of vacant properties there is already existing essential infrastructure.

“Data revealed following a Freedom of Information request made to UK local councils showed that there were 617,527 empty and unused buildings in the UK up to September 2019.  Of these it was estimated that 172,217 of these were commercial premises….”     Comprehensive Guide To Empty Property Security – Farsight

As referred to in that article, there are security and social issues that are a consequence of vacant properties. There are also ongoing maintenance costs.

To put the number of vacant properties in context below is a chart showing UK quarterly housing starts.  In the period illustrated housing starts in any year have been below the estimates referred to above of vacant commercial property alone

Can more affordable housing be created in the UK through encouragement / incentivisation for people to move areas?

As would be expected there are significant major disparities in affordability by region. In the case of the UK this is illustrated in the statistics from the Office for National Statistics on house purchase and rental affordability. The chart below which relates to house purchase shows that , although there has been some decline in “affordability gaps” the gap between regions is very high. The impact of the pandemic will, based on recent reports of home prices, however increase the lack of affordability in many parts of England and Wales.

Affordability is also a problem for people trying to rent housing in England

This Table shows the highest rent quartile that a household at each income quartile can rent for less than 30% of income, by region, FYE 2020

Source: Office for National Statistics – Family Resources Survey, Private rental market statistics

Encouraging / incentivising people to move from their existing location can make a difference to the supply of affordable housing. Laws of supply and demand will of course mean that prices will rise in areas of higher demand but if the objective is to make housing more affordable some decrease in affordability in some areas will still help to improve the overall level of affordability.

Is this time different from the past in terms of increasing the supply of affordable housing?

We are at a point in time when a combination of factors can facilitate the supply of affordable housing. Principal amongst these are

• Impact of technology and broadband. There is less need for many people to travel to work on a daily basis
• Work from home. The pandemic has clearly illustrated that working from home, at least on a part time basis, is viable for many people
• The COVID pandemic is causing many people to re – assess their housing priorities. In particular more people want outside space.
• Better building methods which can reduce costs of construction and running costs (such as better energy efficiency)
• Better design can maximise the use of available space
• Greater availability of vacant / underutilised commercial space, particularly retail properties, as there are changes in how people work and shop

What are some of the barriers to increasing the supply of Affordable Housing?

• Planning: this barrier could be reduced by
  • introducing legislation that incentivises owners of longer term vacant properties to make the properties available for affordable housing
  • Reducing barriers to change of use to affordable housing
• Employment opportunities in a location: this barrier should become less of a problem as “remote working” becomes more feasible and also more acceptable to employers
• People not wishing to move areas: There are of course factors like being close to family and friends that are a major influence on people’s decisions whether to move. With improved transport infrastructure this can be partly mitigated
• Financing: Especially with affordable housing there has to be recognition that some occupiers may be in a vulnerable position in terms of their physical, mental and financial health. This will require the private sector to work closely with the public sector to ensure a balance between the need to protect vulnerable people and acceptable levels of financial risk for providers of capital

What can be done?

This link below outlines what has been done in several locations, globally, to improve the supply of affordable housing.

10 ways cities are tackling the global affordable housing crisis | World Economic Forum (weforum.org)

The following are some of my own thoughts. As mentioned above this article focuses on the UK, but the general principles will be applicable  to a greater or lesser extent elsewhere

• Relocation packages – help from local government with schools, fast and reliable internet, employment can reduce the cost and stress of moving
• Upgrade of existing infrastructure by local authorities. In many areas the essential utility and social infrastructure will already be in place
• Faster planning decisions
• Incentives to bring back vacant properties into use. This could be in the form of grants or loans to property owners and use of compulsory purchase orders
• Employment incentives: assistance with training and grants to employers in “more affordable” locations
• Relocation of public sector jobs to “more affordable” locations
• Credit support to purchasers / renters from local authorities in areas with higher levels of affordability to people relocating to the relevant area. The terms of any support should be a function of the level of affordability in the area, and should be for a limited period and also be subject to review based on an individual’s income
• Increased encouragement for the development of Affordable Housing Real Estate Investment Trusts: If credit support from local / Central Government is provided there is scope for the development of Affordable Housing REIT with a range of risk profiles

The level of any support can be based on an independently verified affordability index and should be evaluated annually based on an individual’s own affordability profile.

What not to do

• Help to buy schemes which provide support for low deposit mortgages should not be encouraged as they tend to push up prices. Direct , non mortgage related, support to people buying / renting properties who cannot meet traditional mortgage criteria or rental conditions is a better option for affordable housing

Particularly if you are involved in the provision of Affordable Housing and /or its financing I’d very much welcome your comments

I don’t make New Year’s resolutions but for 2022 I hope that it will be a year when major progress is made in increasing the supply of affordable housing on a sustainable basis.

As you will infer from this post, I believe the current disruptive environment means that  a combination of factors, and with commitment from government ( central and local) , developers and financiers there is  a favourable environment for improving the amount of affordable housing. I am not underestimating the challenges, but I believe that with a change in mindset the current disruptive environment is creating a positive environment to improve housing affordability.

I’d therefore welcome any practical suggestions on how you believe housing affordability can be improved  that will balance the needs of house owners, government ,  financial institutions and housing developers and contractors, and to comments highlighting barriers that need to be overcome.

The post 2022 – will there be good progress in Housing Affordability? appeared first on M-TRAINING.

The problem

Although experience varies from country to country and within countries, Statistics from the IMF IMF Global Housing Watch  and other organisations continue to show  an overall picture that  housing affordability has been declining over many years in many markets. Dealing with this should be a priority for governments.

On an individual level, the lack of affordability relates to an individual’s lack of  ongoing income to support rental or mortgage payments, and, in the case of housing purchases insufficient equity contributions to satisfy mortgage lenders’ requirements.

 Factors that will impact affordability

Key factors that will influence  housing affordability are the capital cost of housing, household income, rents , operating and financing costs, and expected returns.

How governments can assist in the financing of Affordable Housing

There are a range of approaches to the wholesale  financing of housing , as opposed to financing of individual properties for owner occupiers. There are also different models for financial social housing.

As governments will have financing costs that are lower than individuals , the lower cost can be used to enhance credit quality, as well as passing on benefits from lower cost of funding to occupiers of “affordable housing” e.g. lower rents/ mortgage financing costs/matching a borrower’s savings towards a housing purchase

Some general principles in providing government support for the financing of wholesale Housing Finance transactions

In general, support measures that enable borrowers to purchase housing  on higher than normal income multiples/ minimal equity contributions ( e.g., help to buy mortgages requiring small owner equity contributions) will reduce affordability to as it means more borrowers competing for available supply and therefore most likely increase prices.  Financing support for government should therefore focus on individuals currently unable to obtain mortgages from private sector lenders on “normal mortgage terms” or to afford a “market rent” in a location for housing appropriate to their needs.

Support should also focus on those most in need….more support for fewer people rather than a broader approach . Also, if an individual’s income rises any credit support should reduce.

What financing support from government  for Housing Finance transactions can help to improve housing affordability?

Some of the support mechanisms include

1. Variable levels of credit support for wholesale Housing Finance transactions, so that lenders have access to housing finance related debt instruments with a range of credit ratings.

Guarantees of the entire amount of a debt issue should be avoided, as the aim of any credit support is to maximise the benefits of any credit support. As a generalisation , credit support should be of an amount that would cover expected losses in a default based on stressed historic experience plus a margin e.g. . if an expected loss would be 2% of a portfolio for a transaction with a low investment grade rating, a 5% guarantee would leave significant room for “unusually high losses”

2. Subordinated debt provided by government agencies

3. Contingent subordinated debt and / or equity

4. Take equity in housing investment vehicles, so that government will benefit from any rise in housing values . That benefit can be potentially used to support the provision of affordable housing, and / or shared with housing occupiers so that they can build deposits needed for mortgages from private sector lenders

5.Credit support that reduces over time based on the credit performance of the relevant financing

6.Credit pricing to reflect risk

7. Use of PPP and sharing of benefits of re- financing gains

What are your suggestions?

For me, as would guess, rising levels of unaffordability of even “basic housing” is a problem that needs to be solved . With a positive mindset I believe that the needs of governments, home occupiers and private sector investors ( debt and equity) can be met to a large extent whilst reducing housing unaffordability.

Above are my thoughts on how governments can assist through the support of wholesale Housing Finance transactions. What are your suggestions? I’d very much like to receive your comments.

The post What should governments be doing to support financing of wholesale Affordable Housing? appeared first on M-TRAINING.

Housing affordability has been a growing problem for an increasing number of people in recent years

At a time when technology is disrupting many industries leading to declining prices for a wide range of consumer goods and services, housing has become increasingly unaffordable for a growing number of people. Improving affordability should be a major priority for governments.

Although this post focuses on the UK, housing affordability, both for rent and sale, has been an increasing problem in many locations globally. This link to IMF data shows recent house price  data IMF Global Housing Watch

Is house price affordability in the UK low by historic standards?

Very interesting article on house price affordability in the UK from # Schroders accessible via this link. What does centuries of UK housing data tell us? – Schroders global – Schroders

The graph at the top of this article from the #Schroders article illustrates the historical affordability of UK housing in terms of the multiple of house prices in relation to average earnings.

As with all data it is inappropriate to draw general conclusions but for me the key drivers referred to in the article that led to a multi decade reduction in the ratio of house prices to earnings starting in the second half of the 19^th century are not likely to be repeated in the current environment, specifically

1. More houses: unlikely to a significant extent in areas that already have high population densities and strong resistance from residents to build on “green belt” sites
2. Smaller houses: the trend towards smaller house sizes has been in place for many decades. If anything, there is a shortage of family homes rather than miniscule “starter homes”
3. Rising incomes: at least in the short term it is difficult to imagine real increases in incomes across the whole of the UK working population

What might change the situation?

If my observations are accurate , at least the short term outlook for affordable housing is not encouraging. What might change the situation is a combination of

1. If there are significant decreases in population following Brexit
2. Significant increases in interest rates which depress house prices as a result
3. Major relaxation in planning rules
4. Potential impact of working from home. This might have the impact of reducing relative prices as how people work, shop and live change
5. Government stimulus to the affordable housing sector. In my opinion this has to be something other than “help to buy” which, more likely than not, has served to boost housing prices . Any future schemes need to be more tailored to the needs of people who are currently unable to raise mortgage finance
6. Developing financing schemes which balance the needs of providers of capital, house builders, the social housing sector and tenants. This might involve setting up specific housing funds where long term tenants are given / can purchase equity stakes based on the length of their tenancies and meeting their obligations as tenants

As will be seen from the graph lack of unaffordability is not at an “all time high” . However, inspite of the increasing unaffordability of UK housing for sale / rent, trends in housing prices based on the past suggest that a significant increase in affordability will not occur quickly absent major changes in government policy, new approaches to the financing of affordable housing, and a sustained rise in interest rates.

As always I very much welcome comments and suggestions on how to tackle the problem of affordability of housing.

The post Will and when will housing become more affordable? appeared first on M-TRAINING.

As we all continue to hope that the adverse impact of COVID-19 on people’s physical health becomes sufficiently manageable that it is safe to continue to reduce the restrictions on our daily activities, governments will need to develop sustainable solutions on an ongoing basis to stimulate economic activity.

PPP will be one of the tools that can be used. We can only speculate about how and to what extent PPP can be part of the solution to rebuild economies, but there are a number of issues that will have to be considered

1. Government support following the onset of COVID – 19 has been massive, placing strains on government finance. Governments will need to be more cost conscious and pay more attention to obtaining Value for Money and measuring the potential impact of PPP.

The cost of support to limit the economic damage as a result of the Global Financial Crisis and COVID-19 has been huge.  This is illustrated in the graphics below showing the rise in Government Debt

Source for Government debt figures above: Bank for International Settlements

2.Interest rates are at historically low levels – cutting interest rates to stimulate economic activity is far more restricted now than was the case following the Global Financial Crisis.

The development of interest rates historically is shown below ( not sure about the reliability of any sources for interest rates before about 1700!)

Source: https://dailyreckoning.com/5000-years-of-interest-rates/

3.Large infrastructure projects often result in huge cost overruns – more focus needed on smaller scale projects and urban regeneration?

There are a number of very interesting and insightful articles written by Professor Bent Flyvberg on the subject of cost overruns and large infrastructure projects.

At a time of strained government finances, large projects may need to be scrapped, or at least deferred and definitely should be re- evaluated.

The impact of COVID-19 and disruption in some sectors is likely to have a particularly negative affect on some communities leading to a need for local urban regeneration projects.

4. Governments need to be more rigorous in assessing Value for Money

Strained government finances mean that there needs to be increased attention to measuring costs and benefits.  Quantitative methodologies to assess the viability of PPP projects will need further standardisation and independent evaluation free of political influence.

5. Risk and return allocation on projects needs to be re – examined

Traditional PPP financings have, in a number of cases, resulted in either excessive returns for the Private Sector investors or termination of Concessions. Neither are desirable. COVID- 19 has clearly presented , and will present, challenges for both investors and users, both during construction and when operational. Competitive bidding for projects is of course desirable, but it can produce a “win – lose” outcome. Sharing of returns above minimum thresholds with the public sector in return for additional protection to investors would result in a better alignment of interests of key stakeholders.

6.Financing structures will need to be re- evaluated

COVID-19 will result in a re- evaluation of risk in a number of sectors where PPP is used, such as transportation. Some of the consequences for the financing of PPP transactions might be

• Lower levels of leverage
• Need for additional credit support to improve access to and terms of finance. Especially in weaker countries credit pricing is likely to increase and therefore impact the cost of services to Public Sector users of PPP projects
• Financing pools of PPP projects, with project substitution options, rather than single purpose Project Finance transactions. This can provide additional flexibility for the public sector and provide a financing vehicle (private or publicly quoted) that can support smaller scale projects

7.Increased emphasis on “social” issues in evaluating potential PPP

Environmental issues have already been an important consideration. COVID-19 can be expected to lead to increased emphasis on social impact issues, such as employment generation and urban regeneration.

Conclusions

As at any time of change there will be risks and opportunities. Governments around the world are now facing strains on their finances making it increasingly essential that PPP transactions are structured to align the interests of all key stakeholders, meet environmental and social objectives, and with extra scrutiny of measuring costs and benefits of any PPP.

As always, I would very much welcome your comments.

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