Unprecedented change
We are in a period of unprecedented change in social housing, bringing inevitable challenges and a requirement for:
- Robust business management
- Process efficiency
- Risk management
- Effective governance and delivering sustained results
The importance of operational efficiency
This change is set to continue, and Phil Morgan, our housing sector specialist investigates the current position, in particular two recent reports that have highlighted the importance of operational efficiency for Housing Associations.
First a report from the National Housing Federation and Housemark, “Housing Association Operational Efficiency“, reviews the past 6 years. The report highlights that the sector has made savings over the past few years, driving down costs and improving outputs:
- Overheads have reduced
- Rent arrears have gone down
- Relet times improved
- Cost of repairs and the cost per property have fallen.
- Tenant satisfaction has stayed stable.
This is a substantial achievement for the sector and not to be dismissed lightly. The report also acknowledges that whilst comparisons can be difficult there are variances in costs between Housing Associations. In part these can be explained by location. Interestingly medium sized Housing Associations have lower costs than large ones (and both have lower costs than small Housing Associations).
Secondly the Chair of the HCA Regulatory Committee, Julian Ashby, has written to Chairs of all Housing Associations with over 1,000 properties. The HCA have also issued a report snappily titled “Delivering Better Value for Money Understanding Differences in Unit Costs“. This sets out the differences in Unit Costs between Housing Associations. Like the NHF report it acknowledges that there are about 50% of explainable differences including supported housing, housing for older people, LSVT status and location. However it also identifies that 50% of differences are unexplained and that they now want Housing Associations to review as part of their value for money approach. In their view this may create efficiencies that could support things like new development or regeneration.
Ashby’s letter shares the headlines from the report and includes Unit Costs for that Housing Association along with the mean and quartiles for the sector. The intention is that Boards will now have to consider any differences as part of their Value for Money self assessment. The Regulator will review this during their In Depth Assessment visits and failure to consider Unit Costs would be seen as a sign of weaknesses in Governance.
There are three drivers for this. Two are obvious:
- Rent -1% for four years plus other reductions in income mean that Housing Associations have to find ways to save money.
- Best use of assets: Likewise the Government’s commitment to new house building means that attention is being paid to best use of assets (although the Regulator is really quite careful not to be directive on this point).
A third comes out from the related HCA report. Some Housing Associations have been ‘selective’ in using figures to demonstrate Value for Money. They have been somewhat creative in changing data sets without explanation and don’t always use the most up to date information.
So expect to see the Unit Costs feature prominently in forthcoming Value for Money Self Assessments later this year.
Meet the challenges head on
If you’re looking to meet these challenges head on then Judy Hart invites you to get in touch. “We bring the clarity, capacity and capability you need to face these challenging times” Judy continues “Bringing cross industry experience and a real stimulus to think differently and find innovative solutions we are here to assist, complete with a range of toolkits and approaches that will deliver practical, pragmatic and sustainable solutions.”
Our team of experts, focusing on “What Matters Most” will help you deliver on the business critical elements of operational efficiency and value for money, so prevalent in the news during this last week.