We are an independent consultancy providing high quality advice and support to housing providers, charities, commercial businesses and higher education establishments across the UK. Our mission is to help businesses improve and deliver better services to their customers – by offering a different perspective.
We have been trusted by some of the UK housing sector’s biggest names to provide innovative and refreshing approaches to the way they run and finance their organisations. We believe this differentiates us from our competitors and gives us a unique insight into the market. We recognise the need to provide practical, innovative solutions and to support their implementation. At its core, our approach is simple: we use knowledge and innovation to deliver excellent results. In short, we can provide a fresh approach to the challenges you face.
DTP is authorised and regulated by the Financial Conduct Authority.
Our key people are:
Andy has more than 30 years’ experience in housing, both as a finance professional in the housing sector and as a strategic advisor to housing associations and local authorities. Andy was a partner at EC Harris LLP and previously he was a director with Tribal Group’s housing consultancy team. Andy took on the role of Managing Director in January 2017.
Andy is experienced in financial and business planning, strategic planning, due diligence, business efficiency and improvement, project management, mergers and partnerships, housing stock transfers and governance and organisational structures. Andy has brokered and project managed several mergers and he has led on the establishment of a number of new group structures and housing stock transfers.
07977 464 459
Angela has more than 25 years’ experience in housing within the public and private sector, including three years in a regulatory role. Angela’s work has addressed wide ranging issues affecting strategy and performance, including stock rationalisation and transfer, merger,regulatory recovery, governance and asset management. Angela was a director in Savills Housing Consultancy and previously she was a Director with Tribal Group’s housing consultancy team.
Angela worked with the CIH to develop the resident-led self-regulation methodology and to publish research into low cost home ownership products. Angela also wrote the board members’ guide to asset management and maintenance with the NHF and contributed to HouseMark’s publication, “Social Hearts, Business Heads”.
07702 213 809
David started DTP in 2006. He was previously the Managing Director – Housing, Local Government and Regeneration for the Tribal Group Plc, where he led a team of 150 consultants and associates.
Prior to that, David was the Group Director (Finance) for what is now the Places for People Group, one of the largest housing groups in the UK. He was also a board member of Barnardo’s for six years, where he chaired their audit and risk committee.
David has extensive consultancy experience and specialises in governance, strategy development, financial management, organisational reviews, group structures and mergers, business planning and social enterprise.
07775 745 747
Sam has more than 28 years’ experience in the social housing sector. Prior to joining DTP, she was HouseMark’s Deputy Chief Executive for nine years. At DTP Sam specialises in strategy development, regulatory compliance, value for money and efficiency, governance and project management. She has helped many clients prepare successfully for regulatory In-Depth Assessment. Sam has held a variety of senior level interim management roles, turning around failing housing organisations, and before that worked for a range of social housing landlords in housing management.
Sam has an excellent knowledge and understanding of the operating and regulatory environment, and is well connected with a wide range of sector bodies and groups. Sam is currently a member of the Regulator of Social Housing’s Advisers’ Panel and the CIH Policy Advisory Committee. Sam leads on DTP’s external communications and profile.
07961 204 771
Andy is a Chartered Accountant and has over 15 years of experience within the social housing sector working as a finance director within a large national registered provider. Prior to being drawn towards social housing Andy worked for over a decade in a variety of finance roles at Marks and Spencer including corporate finance and M&S’s international businesses.
Andy has expansive experience of treasury, financial accounting, business planning, investment appraisal, risk analysis, due diligence, merger and acquisitions and group restructuring as well as providing interim financial support for clients.
Andy has worked with housing associations and local authorities for more than 20 years. Prior to joining DTP in 2010, he gained experience with Deloitte and Touche, PWC and Beha Williams Norman.
Andy is a specialist in financial planning and modelling. He is an expert in the use of the Brixx financial planning tool and provides support to retained clients using this. He has developed many bespoke spreadsheet models for areas such as rent setting and asset management, through to full business planning models.
Andy also has expertise in local authority housing finance and in new approaches for local authorities in the development of affordable housing. Andy has worked on more than 50 housing stock transfers, as well as numerous options appraisals.
07974 766 723
Clive has worked in financial services for 38 years. Since 1989 Clive has been involved in the social housing arena, initially as a lender and since 1999 as advisor.
Clive’s experience in Treasury, Finance and Business Planning is far reaching, ranging from training, mentoring, treasury strategies and polices, business planning (including Brixx), funding options and capacity reviews, through to fund raising (both capital market and traditional bank).
Over the last 3 years alone Clive has been involved in the raising and refinancing of over £1bn of housing finance. Clive is experienced in raising traditional bank debt through to accessing the capital markets for longer term fixed interest rate funding.
Clive is registered with the Financial Conduct Authority as a Corporate Finance Advisor.
07977 050 858
Sue is an experienced senior finance manager, having worked in social housing for more than 18 years. Her roles have included the head of financial planning and development finance and the treasury manager at two large North West housing organisations. Her specialisms are financial planning and treasury management and providing interim support. She has also been the internal financial lead on numerous project appraisals, including PFI and PPP contracts for both local authority and healthauthority partners.
Sue has had responsibility for managing large group loan portfolios. She has experience in the implementation and update of both individual and consolidated business plans of complex group structures using either Brixx or Excel. Sue has also undertaken several interim finance roles for clients.
Sue is a Fellow of the Association of the Chartered Certified Accountants. Sue is authorised and regulated by the Financial Conduct Authority and is a registered Corporate Finance Advisor.
07525 910 102
Paul Hackett has more than 22 years’ experience of social housing finance with a background that encompasses both Local Authorities and Registered Providers. Prior to joining DTP, Paul was a director at BWNL and before that was a Principal Accountant in Walsall MBC Financial Services Department.
His main specialism is financial analysis, in particular, supporting organisations that are building or developing their future plans. He has undertaken several interim senior finance positions to director level in Registered Providers.
Based in the Midlands, Paul has extensive experience in long term financial planning, financial modelling, capital scheme appraisals, housing transfers, compiling bids and risk analysis. He has expertise in both Excel and Brixx based models and can also provide training for Brixx users and custom courses for advanced Excel functionality.
Sarah specialises in housing, health and social care with over 25 years experience in the sector, having been a successful Executive Director and Consultant for a number of years.
Sarah was most recently Executive Director for Health, Care and Support with the Calico Group and was responsible for a number of successful charities and companies delivering a wide range of specialist support services, housing and care as well as a newly formed ‘Common Board’. In addition, she was previously Deputy Director for Extra Care and Services with Hanover Housing Association and holds an array of expertise around older people’s services, retirement and extra care housing.
As a consultant, Sarah has supported a range of Local Authorities, Housing and Healthcare organisations and charities. Her expertise is both diverse and widespread and includes strategy development and implementation, governance and regulation (including Care Quality Commission regulation), development and project commissioning, cultural transformation and change management, business turnaround and staff engagement.
Equity Housing Group manages more than 4.,800 homes across the North-West, South Yorkshire and Staffordshire.
To undertake full financial due diligence on behalf of Equity, on Great Places Housing Group. The work was to provide advice to the Board and Executive Team, as part of a process that would see Equity preparing to join Great Places as a subsidiary.
What we did
We agreed a scope for financial due diligence with Equity and we then sought information and disclosures in relation to the scope from Great Places. Great Places populated a data room with all that we required, and our due diligence team examined this in forensic detail. We examined a wide range of information, including the business plan, the funding arrangements, historical financial statements and many
other areas, as part of a conventional financial due diligence exercise. We produced a substantive and detailed report, with observations, opinions and recommendations for Equity’s Board and we presented this report to the Board in December 2019. Our report highlighted recommended actions for Equity to take and it categorised these into Red, Amber and Green issues. It defined these between matters to be addressed before completion of the transaction and matters which could be addressed after the transaction. The Board accepted the
report and agreed to progress the recommendations with Great Places.
What we achieved
A detailed and comprehensive assessment of Great Places, which helped Equity in the development of the joint proposals with Great Places. The report enabled Equity to understand its prospective partner in more detail than it previously had done. It enabled the partners to develop plans to make a range of improvements which would enable the new partnership to establish a sound platform for the future.
We were very happy with the financial due diligence work that Andy Roskell and Clive Eccleston undertook on behalf of Equity. DTP did a really thorough and professional piece of work within a tight timescale. The Board particularly appreciated the clarity of the report they produced and I wouldn’t hesitate to use DTP again and recommend them to others.
Andy Oldale, Deputy Chief Executive
Magenta Living owns and manages just under 13,000 properties on The Wirral.
To undertake a comprehensive, independent review of all governance arrangements at Magenta Living, to assess compliance with the Regulator for Social Housing’s Governance and Financial Viability Standard and the chosen Code of Governance, and to make recommendations for strengthening and improving governance across the organisation.
What we did
We undertook a wide-ranging desktop review of key governance documentation to assess its fitness for purpose, identify any gaps and areas for improvement.
In undertaking the document review, we made a comparison with industry best practice. We also undertook some decision-tracking of two key decisions, to give us a view on the effectiveness of decisions made by Magenta Living’s board based on the information received, debate held and conclusions reached.
Each board/committee member across the group was requested to complete a questionnaire, to gain views of the structure and governance effectiveness.
This exercise was followed by one-to-one conversations with each non-executive member and a joint discussion with the executive team. The aim of these discussions was to gain further insight into operation and effectiveness of governance across Magenta Living, along with members’ experience and knowledge.
We observed a meeting of each of Magenta Living’s boards and committees, and undertook a structured evaluation to assess board behaviours and standards, challenge and contribution, the approach to strategy, performance, risk and assurance, tenant voice, officer contributions, transparency and openness and the flow of business across the group, and between committees and the boards. This stage also included a critical review of the papers for each of the meetings.
What we achieved
We produced a comprehensive report of findings including recommendations for improving and strengthening governance, as well as the
identification of good practice at Magenta Living.
DTP provided Magenta Living with a bespoke service tailored to assess the effectiveness of the governance arrangements in place. The review, professionally undertaken by Sam and Angela, has assisted the Board in strengthening our existing practices and provided insight into options for the future.
Brian Simpson, CEO
Incommunities owns and manages around 21,300 rented and 1,000 leasehold properties in West Yorkshire.
To ensure Incommunities complied with the reporting requirements of the Value for Money (VFM) Standard.
What we did
Our VFM expert, Sam McGrady, reviewed Incommunities’ reporting of VFM in its statutory accounts, to advise on compliance with the Regulator for Social Housing (RSH)’s VFM Standard.This involved analysing the reporting and associated narrative of both the RSH’s VFM metrics as well as Incommunities’ own VFM metrics and targets. Sam provided ‘tracked changes’ and suggestions on Incommunities’ draft VFM report, which were then adopted and incorporated by Incommunities.
What we achieved
Incommunities was compliant with the VFM Standard’s reporting requirements.
“Sam reviewed both our self-Assessment and strategic report which sets out our VFM position in the financial statements. The quality of the review was impressive, ensuring our report met the expectations of the regulator and her turnaround time was remarkable, giving me enough time to address the areas in time for the completion of the accounts. Her review of the self assessment was economic, efficient and effective – perfect for a VFM review. She was thorough, resulting in a significant improvement in our most recent VFM Self-Assessment.”
Greg Robinson, Assistant Chief Executive Resources
Abertay Housing Association (AHA) is a Registered Social Landlord formed in 1997 through a Large Scale Voluntary Transfer (LSVT) from Scottish Homes. AHA provides housing in Dundee and Forfar, managing more than 1,800 properties, including around 275 retirement housing accommodation.
AHA has a 30-year business plan that is built on Castleton’s HousingBrixx system. They required an independent review of their business plan model to give assurance that it fairly represents AHA’s business and has been built in line with Castleton’s specifications.
What we did
We reviewed the major assumptions (inflation rates, voids, bad debts, rent increases, interest rates) to ensure that they are being applied correctly in the model. These assumptions drive the forecasts, the validity of these forecast outputs were checked using bespoke HousingBrixx reports to identify anomalies and give further assurance that there are no unexpected results or anomalies. A review of the structure of the Brixx model was undertaken to ensure the appropriate Brixx objects were being used and that the model was calculating the forecasts as should be expected.
What we achieved
We produced a report setting out the findings of the review with recommendations where appropriate to provide assurance to AHA that the Brixx model was constructed in accordance with the guidance provided by Castleton. We reviewed the financial covenants and were able to provide assurance that they are being calculated correctly. We also reviewed the Associations internal “cushion” and were able to provide comparative evidence to see how their business plan metrics compare to other organisations. The recommendations have allowed AHA to make appropriate adjustments to their model and then conclude that the model is as good as it can be.
DTP have provided us with advice on our Brixx model which has given us assurance that it is doing what we think it does. They recommended some more up to date objects to use and provided advice in relation to the structure which we will incorporate in future versions of our 30 year plan. They also checked our covenant calculation and provided comparative advice on an internal cushion, which, again we will take account of in future. The work was of high quality and to timescale and staff were available when required to discuss outcomes.”
Marjorie Sloan, Corporate Services Director
Maryhill Housing was created in 1977 in a tenement in the East Park area of Maryhill, Glasgow. Over the last 40 years Maryhill Housing Association has grown into a leading housing provider in the city.
(i) To increase Maryhill’s financial capacity and obtain maximum freedom over its future borrowing; (ii) increase the total available funding from £19.5m to £35.5m to fund a 350-unit development programme; and (iii) deal with the expiry of availability of the existing loan.
What we did
DTP Reviewed Maryhill’s existing borrowing arrangements totalling £19.5m and covenants with Royal Bank of Scotland, which dated back to the stock transfer in 2011. It included a wider review of the association’s treasury arrangements, including review of business plan assumptions, to ensure the association gave full consideration to the range of options available in respect of both its existing and future borrowing capability. Once the board had approved the funding plan, we then supported Maryhill throughout the period of the refinancing in order to complete the new loan prior to the financial year end.
What we achieved
We presented our report to the board in plain language and, supported by our analysis, explained how a renegotiation with an increase in the loan would be the best option. With our help, Maryhill elected to renegotiate with the existing lender and, at the same time, investigate alternative options to test value for money. The new loan would allow Maryhill to manage its business without either business plan consent or the constraints of LSVT-style financial covenants imposed by the original loan.
Working closely with Rebecca Wilson, Director of Resources, we achieved a large increase in Maryhill’s available funding, a lengthening of the availability period and freedom from the LSVT constraints of the old loan. With the benefit of a new revolving credit facility in a modern loan agreement, Maryhill is now able to exploit it’s full borrowing capacity and has the freedom to manage it’s own business.
“DTP provided both business planning and treasury support and advice throughout the refinancing project. We have now successfully moved away from the previous LSVT loan to a more appropriate arrangement which will enable Maryhill to continue with our ambitious development plans over the next few years.”
Rebecca Wilson, Director of Resources
Mid-Wales Housing Association was established in 1975 and has more than 1600 properties throughout Powys and Ceredigion, as well as a few properties in Shropshire.
DTP were asked to approach the capital markets to raise £30m of long-term funding.
What we did
Following a detailed assessment of funding requirements, including consideration to repaying some existing debt where covenants were going to prove to be challenging over coming years, a decision was made to approach the capital markets. A detailed funding memorandum was issued in September 2018 and the proposal was over-subscribed by 200%.
What we achieved
Given the uncertainties around Brexit, the client was keen to get the deal priced in 2018 with initial close and drawdown in early January 2019. Notwithstanding the market difficulties, an all-inclusive cost of funds of 3.76% was secured over an average duration of 30 years.
“Mid Wales identified a need to amend its funding structure to remove restrictive covenants and provide greater long term certainty over funding and interest rate risk. At the same time the funding needed to provide freedom and flexibility to deliver a diverse and active growth strategy. We found DTP and Clive Eccleston in particular, very proactive in securing the right deal for us. We now have a funding structure that provides certainty over a core amount of our funding at a very attractive long term interest rate. Overall we are very happy with the service provided by DTP.”
Charles Brotherton, Director of Finance, Mid-Wales Housing Association
Bolton at Home owns and manages just under 18,000 homes in Greater Manchester. Arcon Housing Group owns and manages around 1,200 homes in and around Manchester.
On 15 October 2018, the Boards of Bolton at Home and Arcon Housing Group (Arcon) signed a joint ‘Statement of Intent’ (SOI) setting out what each expected to be delivered when the two organisations agreed to form a constitutional partnership. The proposals would see Arcon join Bolton at Home as wholly owned subsidiary.
The objective for DTP was to establish a process, which would meet the objectives agreed by the boards, in order to enable the merger. DTP was appointed at an early stage of the process and one of the first outcomes was the development of the SOI. Once this had been agreed DTP was asked, in a joint appointment, to project manage the merger process.
What we did
DTP proposed a process for managing the merger, engaging with all key stakeholders, including the regulator, the local authority, residents and staff. DTP provided project management support and advice on governance and the selection of specialist legal and financial advisors. The process involved weekly project meetings, overseeing the project plan for merger, transitional planning and risk management. A Joint Board Steering Group, with board membership from Arcon and Bolton at Home oversaw the process, from a governance and risk perspective. The whole process was achieved against a quite tight deadline (six months) and with a number of challenges, not least the fact that consent (to merge) would be required from seven funders. With great teamwork however from all involved, the deadline was achieved and the costs of the process were contained well below the original budget.
What we achieved
The merger completed in March 2019 and the partnership looks set to deliver the objectives of both parties. The regulator has been closely involved throughout the process and the funders for the two organisations were all helpful, positive and supportive.
“Gelling together two very different Housing providers in terms of size, backgrounds and history required political skill and expertise which DTP in co-ordinating this project very ably provided. Completing the merger in such in a short time without compromising the robustness of the process was in no small part down to Andy Roskell driving our project team forward.”
Bernard Gallagher, Chief Executive, Arcon Housing Group
“DTP provided excellent support and guidance to both Bolton At Home and Arcon as they worked through the process of bringing the two organisations together. Andy Roskell’s role in providing advice and guidance was invaluable as we worked through each stage of the process, keeping us on track and on time. His positive working relationships with all the specialist advisors was incredibly helpful”.
Ian Ankers, Executive Director of Business Development, Bolton at Home
Grand Union Housing Group provides 12,000 homes for more than 27,000 people across Bedfordshire, Buckinghamshire, Northamptonshire and Hertfordshire.
GUHG commissioned DTP to work with its executive team and Board to undertake a stress testing workshop. GUHG’s Board regularly reviews its stress tests and mitigations, but wanted to have a focused, more intensive workshop following a number of recent internal changes (e.g. group consolidation) and ongoing rapid changes in the external operating environment.
What we did
DTP’s approach comprised the following:
• Onsite meeting with Executive to review and understand current stress tests etc.
• Preparation for Board session
• Delivery of Board and Exec workshop (we treated this as if the RSH were present, to focus minds and ensure all Board members fully engage)
• Production of a report after the session
The workshop involved a review of the Group’s current stress tests and how those impacted on the Business Plan, discussion on any additional or multivariate tests the Board wanted to see, consideration of proposed mitigations and an expansion of those to cover a wider set of scenarios.
The method included smaller group work as well as Board-wide discussions.
The workshop attained full Board member and executive attendance.
DTP also provided advice and assistance on the presentation of stress testing and mitigations, in the form of a resilience plan, which GUHG’s Board will discuss and approve at a future Board meeting.
The support was undertaking in a collaborative and iterative way, with a partnership approach.
GUHG undertook a feedback exercise of those attending the workshop, which was then shared with DTP.
Some of the comments received included:
“Consultants were knowledgeable. Breakout sessions worked well.”
“Very good debate about stress testing – I think the Board is clear where we are going.”
“Good, structure, summary and input from DTP that kept us focused on relevant aspects. Good participation and degree of openness.
Clear way forward agreed for most things.”
“Well facilitated with useful insights from experiences gained elsewhere in sector.”
“DTP worked with us to plan the event and ensured that it was tailored to our particular circumstances. There was great engagement from all involved throughout the day and the DTP team facilitated a lively and absorbing event.”
Aileen Evans, Group CEO
Mosscare St Vincent’s (MSV) is a North West-based housing association with more than 8,000 homes stretching from West Yorkshire to Warrington.
MSV commissioned DTP to help them prepare for an In-Depth Assessment (IDA) from the Regulator of Social Housing. MSV had carried out considerable preparation and felt in good shape, but asked DTP for professional support and advice.
What we did
Our support included the following activities:
• Document review, feedback on ‘fitness’ of documents, gaps in assurance and highlighting of potential areas of focus in an IDA
• Board and Executive briefing on IDA
• Creation of ‘storyboards’ and corporate information
• Interview preparation and coaching for Chairs and Executive
• Regular client liaison and feedback, to ensure learning was understood and incorporated into preparation for the actual IDA.
DTP also provided advice and assistance on the presentation of stress testing and mitigations, in the form of a resilience plan. The support was undertaking in a collaborative and iterative way, with a partnership approach.
What we achieved
MSV underwent its IDA immediately following the period of our support. The assessment went very well from MSV’s perspective, and as a result MSV retained its G1 V1 status. MSV felt that both Board and Executive were very well prepared, and that as a result of DTP’s support, were able to present the organisation in the best possible way to the regulator.
“MSV had a successful first year post-merger, and we had prepared for an IDA one year on. We asked DTP to provide feedback on our documents, having worked with them on other projects leading up to and following the merger. As always, we received a first class professional service, with excellent support and advice from Sam McGrady.”
Charlie Norman, Group Chief Executive, MSV
Progress Housing Group own and manage nearly 11,000 homes and have been delivering housing related services to communities for more than 24 years. The Group operates mainly in Lancashire but offer supported living services nationwide, as well as delivering key worker accommodation in Lincolnshire.
Objective: The Group board has several new board members with a variety of backgrounds, not all of them finance. The Group has a large and complex loan portfolio and were looking for a training session to bring all the board members up to the same level of understanding about treasury matters.
We proposed a training session that referenced the existing borrowing arrangements with a dual purpose: (i) to train the board about certain key aspects of treasury risk, and (ii) relate those risks to the specifics of the Group’s current loan portfolio.
What we did: Using information supplied by the Group we created a bespoke training session that covered the specifics of the Group’s treasury operations. We were able to cover Financing Risk; Interest Rate Risk; Fixed rates and Break Costs; loan contracts; Credit Rating; Future Funding Options and borrowing capacity. The presentation included charts and diagrams to bring the presentation to life. The specific details related to the current treasury management position of the Group and allowed considerably more time for answering detailed questions than would be possible in a board meeting.
What we achieved: We designed the presentation to be interactive. There was plenty of time for questions and discussion amongst the board about how the training related to the specific current and future borrowing requirements of the Progress Group.
“Adrian did a great job of explaining complex treasury information to the Group’s board members, and tailored the training to our current treasury position and to the right level of detail. He was also able to respond effectively to the questions being asked making the session interactive and informative.”
Debbie Atherton, Deputy Executive Director and Company Secretary
Arches Housing are a housing association providing more than 1,200 quality affordable homes for rent and shared ownership in Sheffield and Rotherham.
To arrange a new flexible £6m loan facility with a new lender. The previous loan Arches arranged was in 2013. This new facility would become its biggest ever loan. The new loan completed on 17 December 2018.
What we did
We initially undertook a capacity and funding options review which demonstrated to Arches’ board how much capacity they have to borrow within the constraints of their existing loan covenants. We then went on to help them develop a treasury strategy to work out the best way to arrange the next new funding. Once a strategy had been adopted, a variety of lenders were invited to put in proposals to fit with Arches’ business plan and its future ambitions. Arches selected Yorkshire Building Society for a 10 year £6m loan because they produced a loan offer with the best combination of terms and conditions that most suited Arches’ requirements.
What we achieved
This new loan represents a big milestone for Arches. It has enabled them to commit to a planned investment programme in new housing as a springboard to build much needed homes in and around Sheffield in the coming years.
“Adrian’s experience and insight in relation to potential funders and the current market place ensured that Arches Housing was offered a real choice of competitive funding options.”
Bill Truin, Finance Director
The Sovini Group comprises both not-for-profit and commercial enterprises in Liverpool and the North West (including One Vision Housing which owns and manages more than 13,000 homes).
We were asked to arrange a £30m Private Placement loan from an existing lender within a 14-day period.
What we did
Sovini expressed an interest in adding a further £30m for a 25 year term to their portfolio of Private Placement loans and decided that they wanted to act swiftly to put this new tranche into place. They contacted Clive Eccleston in our team who orchestrated the arrangement and delivery of a Private Placement in 14 days from start to finish. We also worked with legal teams from Weightmans LLP (Kieran Donovan) and Devonshires LLP (Gary Grigor).
What we achieved
The Private Place was priced on 7 December 2018 which was the last possible day this could be done for a completion before Christmas.
This placement was an incredibly quick move into the market to raise funding. From initial enquiry to pricing took a total of 14 days. We would like to thank DTP and the financial services and real estate teams at Weightmans Liverpool.
Operations Director, Finance – Gaynor Robinson
Liverpool Mutual Homes (LMH) owns and manages over 15,000 quality homes across the Liverpool City Region. Torus is a North West-based housing group with 22,000 homes and made up of Golden Gates Housing Trust and Helena Partnerships.
LMH and Torus jointly commissioned DTP to undertake an Operational Review, which was to inform the final decision on the proposal to
amalgamate Torus and LMH, as well as to inform integration plans post amalgamation. DTP was required to provide suitable independent advice to Torus, LMH and Shadow Boards on any risks and issues that arose from this exercise.
What we did
The review covered the following:
• Strategies, Policies and Operational Delivery
• Tenant Engagement
• Organisational development
• Culture, values and working practices
We undertook a desktop review of a very wide range of documentation from both organisations, along with telephone interviews covering specifically culture, values and HR issues.
What we achieved
We produced interim findings followed by a final report, which we presented to both LMH and Torus boards. Our reports focused on highlighting areas of risk and difference, areas of overlap and duplications, potential areas for efficiency savings, and some good practice examples from elsewhere in the sector.
This exercise was unusual, in that whilst mergers always include legal and financial due diligence, it is very rare (in the social housing sector) to include this type of cultural/operational due diligence. Both organisations said they found it extremely helpful and informative, and were very pleased they had undertaken the work. All the objectives of the project were met in full.
We felt that it was vital for an operational review to be carried out prior to our planned amalgamation so that we could shape a true Integration Programme, and have it in place from day one. We knew there was a great fit and synergy between both organisations but this review confirmed it and give us a true evidence base to move forward from.
Steve Coffey, Group Chief Executive, LMH
Thrive Homes, established in 2008, currently has over 5,000 homes in management and construction across Hertfordshire, Bedfordshire, Oxfordshire and Buckinghamshire.
To prepare a series of scenarios on development for a 10-year period using the current HousingBrixx plan, with the output presented to board members at their Away Day. This was both to assist in understanding the impacts of development and satisfy some training needs for board members.
What we did
Alongside the Resources Director, Andy Chapman of DTP, put together a matrix of scenario tests; these were then run through the HousingBrixx model to see the impact on debt and covenants. A covenant output report was also produced by DTP in HousingBrixx to easily review the result of each scenario.
The scenarios showed a need for further funding to develop additional units, therefore the covenants were based on current market standards to review the results in the context of a new loan. Once completed the results were summarised and then presented in PowerPoint. Andy attended the board Away Day and went through the presentation and offered the board the opportunity to create a couple of further test scenarios which he ran on the day and presented to board in the following session.
What we achieved
We were able to help the board to understand the impact and the risks that are associated with building different property tenures and changing the levels of each tenure. This will enable the board to make better informed decisions about their development programmes and targets.
Andy made the results very easy for the board to understand and was very engaging in his presentation. His significant experience of housing also gave the board further confidence. Importantly, he was able to make adjustments to the HousingBrixx model and present the further scenarios that the board requested very quickly so the appropriate discussions could take place at the away day.
Shaun McLean, Resources Director
Calico Homes own and manage approximately 4,600 homes in Lancashire
To increase Calico’s financial capacity and have greater freedom over it’s future borrowing; increase the total available funding from £115m to £142.5m; and deal with an emerging refinancing risk.
What we did
We undertook a review of capacity and funding options in September 2017. Calico has big plans and our review identified that Calico’s existing LSVT style syndicated loan arrangements were no longer suitable because were restricting Calico’s borrowing capacity. To maximise capacity and increase it’s loan facilities Calico would have to either refinance completely or renegotiate with the existing lenders to refinance the syndicated loan into two conventional bilateral arrangements. We supported the executive on all aspects of the refinance through to completion.
What we achieved
Our report to the board explained that a refinance would allow Calico to manage its business without the business plan consent or the constraints of LSVT-style financial covenants imposed by the original loan. Calico elected to renegotiate with the existing lenders; one of the lenders wanted to reduce the loan and the other was happy to increase it’s exposure.
Working closely with the executive team we achieved a large increase in its available funding, a lengthening of the loan term to deal with an emerging refinancing risk and freedom from the LSVT constraints of the old loan. Calico is now able to exploit it’s full borrowing capacity and has the freedom to manage it’s own business.
“DTP provided support and advice throughout the refinancing project which saw us move from the previous LSVT syndicate to a more appropriate arrangement which will enable Calico to continue with our ambitious development plans over the next few years.”
Steve Aggett, Group Director of Finance
Longhurst Group is a housing group and developer, providing homes and support services across the Midlands and the East of England.
Having recently introduced a new board/committee paper template and guidelines, Longhurst was keen to have external expertise to work through these with key report authors in the organisation.
The workshops therefore centred around the Longhurst templates, but incorporated other key elements of good report writing, such as:
• Purpose of reports
• Knowing your audience
• Making your case and ‘getting what you want’
• Presentation, use of colour, visuals etc.
• Plain English and clarity of language
• Appendices and attachments
Attendees also looked at examples of good reports (anonymised) from other providers, and discussed how they would change the way they write reports looking ahead.
What we did
Delivered two workshops for board report authors (see above for detail)
What we achieved
At the end of the workshop, participants understood:
• Purpose of and reason for board reports
• The Longhurst report writing guidelines and template
• The audience, and how to address their needs
• Elements of a good report
• Importance of plain English, clarity, etc.
• How to make a report interesting
• How to frame options and recommendations
• The importance of consistency
• The paramount importance of the process,
interdependencies and team work
• A number of personal ‘take aways’ they can apply to their own report writing going forward.
Longhurst also benefitted from a significant amount of feedback from report authors which may otherwise not have been forthcoming, which it is now using to improve its process and template.
Sam brought significant expertise and knowledge from her extensive work with boards and on governance in the sector. She imparted best practice alongside working through the Longhurst approach with attendees in an interesting and lively way. I would recommend similar workshops to any organisation struggling to achieve the quality it desires in its board reports.
Rachel Challinor, Director of Governance, Performance and Compliance
Grand Union Housing Group is a provider and developer of affordable housing and related services in Bedfordshire, Buckinghamshire and Northamptonshire, managing almost 12,000 properties.
Grand Union Housing Group introduced Brixx and in the following year we were asked to give support, training and advice.
What we did
We initially reviewed the previous year’s plan and made recommendations for changes to the structure and the objects used. Thereafter we worked with the team on how to set up a plan, as well as report writing training. We also assisted with some training around the production of the FFR from the Brixx reports.
What we achieved
We were able to get the Grand Union Housing Group into a position where they felt comfortable producing a new plan and were able to understand how to write reports in Brixx. We also have made ourselves available whenever any issues are raised to provide practical solutions and support.
DTP have provided excellent support with the Group’s long term financial planning processes. They have provided training and advice on managing our Brixx plans, as well as offering guidance on assumptions, stress testing scenarios and mitigation strategies. The report writing training has enabled users to create bespoke reports around covenant reporting and development programme monitoring. The service provided has been superb. DTP have always provided timely responses to issues and have been available for on-site support whenever requested. There is no doubt that the retainer service represents value for money for the Group.
Chris Bellamy, Head of Treasury and Financial Planning
Suffolk Housing Society had been working with Brixx for a few years, but due to staffing changes there had been no handover of the plan. They required a mini review of the existing plan, followed by on-site training.
What we did
We reviewed the original plan for any issues and made some recommendations for changes to the plan prior to a two-day visit. During the visit it was decided to start afresh with a new plan which we jointly developed with the two members of staff; an effective practical way of training people on Brixx.
What we achieved
We were able to get the new plan to a position where the two members of staff were confident of finalising and updating with some ongoing support from ourselves. The support was given via a retainer for the year, which resulted from the Suffolk Housing Society’s satisfaction with the training received.
DTP delivered concise and practical training on what, at first glance, can be appear to be a very daunting task. It was a huge benefit to have training focussed on our particular business rather than the generic guidance available elsewhere. The continued support allows us to contact DTP with any issues as they arise, with responses received in a very timely manner. Overall, an excellent service.
Anna Casbolt, Finance Director
Impact operates primarily in Cumbria with around 2,700 homes.
To secure a long term, compliant future for Impact Housing Association, its tenants and residents.
What we did
Impact Housing Association was downgraded to a G3:V3 non-compliant rating by the Homes and Communities Agency, (the then regulator of social housing) in May 2017. The downgrade followed an In-Depth Assessment which identified concerns with the financial viability and governance oversight of the Association.
DTP were appointed to support Impact in addressing these concerns, including undertaking a governance review, assisting in the implementation of associated recommendations, drafting and agreeing a Voluntary Undertaking with the Regulator and supporting its implementation and delivery.
The recovery process included a strategic review which resulted in Impact’s Board making the decision to secure the organisation’s long-term future through a partnership with a financially stronger organisation. DTP supported Impact in the process of identifying a preferred partner, through a robust and independent exercise. This resulted in Impact selecting The Riverside Group Limited. DTP also supported Impact’s due diligence process and provided guidance and support in relation to the governance arrangements required to allow Impact to join Riverside as a subsidiary.
What we achieved
In exploring a future partnership, Impact sought a partner that shared the organisation’s values, had a strong sense of social purpose, was seeking to grow in Cumbria and had the financial strength to ensure Impact’s future resilience. In particular, Impact was keen to work with a housing association which would secure their legacy of developing community focused housing and support services for the region.
The offer from Riverside aligned with these objectives and on 20 August 2018, the formal partnership was completed. This triggered a much-needed £25m investment programme with support from Riverside to repair, modernise and improve Impact’s homes across Cumbria.
DTP were appointed to support the Board and Executive Team at Impact following an In Depth Assessment by the RSH and subsequent downgrade to G3 V3. DTP’s approach was a professional and honest appraisal of our governance framework and practices, they quickly identified the required actions and decisions needed to achieve the outcomes to comply successfully with the regulatory framework. DTP supported the Board, as a critical friend, through the process of agreeing and meeting the requirements of a Voluntary Undertaking, identifying a preferred partner and making informed choices on the future of the association. Angela Lomax, supported by the team at DTP was extremely supportive through the whole process ensuring our governance decisions were of a high standard.
Bryonie Shaw, Impact Managing Director
Rochdale Boroughwide Housing (RBH) is the UK’s first tenant and employee co-owned mutual housing society, with over 13,500 homes throughout the local area.
Analysis undertaken by DTP as part of the annual treasury strategy report showed that RBH was over hedged in the three years ended March 2021. It therefore had potential to save money by reducing the amount currently fixed and extending the term of some of the existing fixed rate loans to 2025.
What we did
We prepared a report for the board that provided a range of alternative scenarios based on the hedging capacity of the business plan for the client to select the most appropriate solution. The analysis was undertaken in Brixx based on the results of interest rate swap calculations that DTP extracted from Reuters FIPA.
We presented a report for the board with a firm recommendation using plain English to explain a complex subject. The board agreed to proceed and delegated the execution of the transaction to a specified person to transact with the bank by phone. DTP joined the call and was able to benchmark the rates offered by the bank.
What we achieved
RBH was able to lock in significant interest savings in the short term by breaking a fixed rate loan and, by restructuring another loan, also lowered the cost of borrowing on 50% of its remaining fixed rate debt for an extended period.
This re-structuring has significantly lowered RBH’s interest costs. This puts the society in a much stronger position to deliver regeneration in Rochdale town centre over the next 10 years.
Nickie Hallard, Director of Resources and Deputy Chief Executive
Loreburn Housing Association owns and manages around 2,500 properties in the Dumfries and Galloway area. In 2017 DTP were appointed to advise and support LHA in the arrangement of £20m of new funding.
Loreburn was looking to arrange £20m of new loans to ensure they have sufficient resources to meet the growth ambitions of the association. At the same time the opportunity was taken to deal with some of the issues with the existing loan portfolio that were now becoming a constraint on their growth ambitions. This involved renegotiating the terms of some existing loan facilities.
What we did
DTP undertook a review of the funding capacity. This clearly indicated that capacity existed to borrow and service additional debt although due to restrictions in the Loreburn Housing Association existing loans it meant that existing loans either had to be renegotiated or repaid in order to maximise capacity. A strategy was formulated to deal with the restrictive covenants in the existing loan agreements alongside the arrangement of the new funding and a tender process was organised to identify new funders to provide the required £20m.
What we achieved
Loreburn increased their capacity by re-negotiating covenants with existing funders at the same time as agreeing a new £20m revolving credit facility with RBS. This ensured that the Association now has access to facilities to support its aspiration of delivering 226 units in the period between now and 2020.
DTP were pivotal in providing expert advice and support before and during the tender stage, in particular Sue and Adrian were on hand to ensure the process was dealt with efficiently, whilst delivering value for money. The Management Committee were reassured that by having DTP on board, that key issues would be highlighted and risks assessed appropriately.
Alison Anderson, Director of Finance and Corporate Services
Progress Housing Group own and manage nearly 11,000 homes. The group mainly operate in Lancashire but offer supported living services nationwide as well as delivering key worker accommodation in Lincolnshire.
With the support of DTP, the Group researched and identified considerable savings and efficiencies from combining all the charitable Registered Providers in the Group into a single RP entity. DTP helped develop a clear and compelling financial business case that generated financial savings and improved resilience. This was brought together in a comprehensive report that covered the benefits, costs, mechanics and risks of a very complex project.
What we did
Following approval of the business case by the board, DTP provided guidance and support to the Project Team on financial and treasury aspects in order that the Group Progress Housing Group could successfully deliver the Project. The project included negotiating new terms and conditions with existing lenders and obtaining consent for the combination at an acceptable cost. It also included negotiating new loan agreements with all the existing lenders.
What we achieved
The terms for consent were negotiated with all funders to make the project possible. The Group now has a much simpler corporate structure with considerably improved flexibility and headroom in its financial covenants. This project has considerably improved financial resilience and will enable the Group to use its increased financial capacity to expand its investment aspirations.
Working with Adrian Jolliffe at DTP enabled Progress to successfully achieve its objectives agreed by our Board in the approved business case to simplify the Group structure. Adrian was on hand to provide effective guidance on our loan terms and agreements and worked well with the Group’s dedicated project team. The Group’s financial capacity to deliver our business plan objectives has been strengthened as a result.
Debbie Atherton, Operations Director and Company Secretary
Leeds and Yorkshire Housing Association (LYHA) manages more than 1,400 homes located across Leeds, Whitby, Scarborough, Barnsley, Mirfield, Barnoldswick, Earby and Settle; ranging from studio apartments to four bedroom houses suitable for single people, couples and families.
We had previously worked with LYHA to arrange new funding in 2014 and 2015 totalling £13m. The 2017 Annual Treasury Strategy identified that further funding in the region of £10m would be required in order to support the Association’s development aspirations.
LYHA were keen to maintain the existing strong relationship with their main funder, Santander. It was agreed therefore, that Santander should be approached in the first instance to provide terms for the new funding. Once these terms were received we were able to benchmark them anonymously against offers received by DTP for similar arrangements and subsequently negotiated improved terms that were acceptable to the Association.
The project ran smoothly from start to finish and completed in line with the dates set in the initial timetable.
DTP provided expert advice and support, showing a good awareness of the market. Their expertise enabled us to agree improved terms with our current main lender, Santander, making the process quicker and easier, whilst delivering value for money. The project supports our ambition to provide more affordable homes for people across Yorkshire. We worked to an initial plan and reviewed progress through short, regular phone calls which kept all parties informed of progress in an efficient way. The reporting to board was also well-received, identifying the main points of the deal and highlighting points to note.
Adam Hutchinson, Director of Finance and Performance
Karin Housing Association is located in London and provides affordable accommodation and bespoke services mainly to black, Asian and minority ethic (BAME) communities.
The objective was raise £2m of loan funding for Karin’s first large property purchase comprising 37 units in Tower Hamlets, Hackney, Islington and Newham. Karin held the option to purchase the properties, which were already managed by them.
DTP helped Karin Housing throughout the process of raising its first ever loan. This was an incredibly big step for Karin and included a wide range of activities and support. DTP helped draw up the their business plan cash flows to show that the purchase was affordable, we organised a tender to select a preferred lender and supported the process right through to completing the loan agreement and drawing down the funds for the purchase.
An information memorandum was issued to a small group of interested lenders and this resulted in competitive offers being received from four potential lenders. Karin selected RBS to provide a 10 year term loan at a competitive interest rate with standard market financial covenants.
Bernicia is based in the North East with two divisions, Bernicia Homes and Bernicia Commercial. It owns and manages 14,000 properties.
DTP was asked, following Bernicia’s merger with Four Housing Group in 2017, to support it to simplify its legal structure by collapsing each individual entity into one association and streamlining associated funding arrangements for the group.
We were able to make significant savings from simplifying the loan portfolio and using cash resources to reduce net debt. Loan facilities with all of Bernicia’s borrowers were renegotiated at minimal cost. This freed up capacity in financial covenants to give greater overall financial robustness, allowing the repayment of some loans and conversion of others to more flexible Revolving Credit facilities, and maximising the efficient use of loan security.
The overall result was a more robust business plan, (with improvements of around £25m) which showed considerable savings and greater freedom to exploit Bernicia’s financial strength and to deliver more of its corporate objectives. Alongside this, we have provided advice on governance arrangements, corporate strategy development and policy harmonisation. DTP’s continued advice and support has ensured that Bernicia is in an excellent position to achieve its future purpose.
“The team at DTP were always on hand to support us, providing advice and guidance that allowed us to navigate group simplification with relative ease. Their knowledge and expertise, on what can be a complex subject, was exceptional. Their further support on matters such as governance, policy and harmonisation has allowed us to challenge how we do things.”
Mike Axe, Executive Director, Finance and Corporate Services
Thirteen manages 34,000 properties from North Tyneside to York, with the majority of homes for rent and sale in Teesside.
DTP was asked to provide intensive treasury, funding and financial advice to Thirteen. They wanted to create a new group structure that separated its social housing from its commercial activities, simplify its governance and funding arrangements, and merge several quite different providers into a single entity.
We put in place new arrangements to free Thirteen from the constraints of its previous funding arrangements. This has allowed it to maximise use of financial capacity within its loan covenants, while at the same time banking significant Thirteen savings from changes to the funding structure. The consolidation of loans has also enabled considerable loan security to be freed up to secure future new loans.
DTP’s advice and support has ensured that Thirteen now has the freedom to take advantage of opportunities that it was unable to previously consider. DTP continues to work with Thirteen on its treasury and business planning for both its social and proposed commercial activities.
“Adrian and the team at DTP understand the sector and the funding market and use their skills and knowledge to map out the best route to achieve your organisation’s long term ambitions in a very comprehensive but pragmatic way – perfect! ”
Heather Ashton, Executive Director of Resources
Rochdale Boroughwide Housing (RBH) is the UK’s first tenant and employee co-owned mutual housing society, with over 13,500 homes throughout the local area.
The aim of the project was to provide external support and additional resources to RBH, in its development of a new 10 year corporate strategy.
DTP worked in partnership with organisation development consultancy Just Libra to provide a wider skill set and a people-focused approach to the commission.
The joint team worked closely with the RBH Steering Group to provide a wide range of consultation opportunities for the RBH management and executive teams to have input into the new strategy. This included facilitating creative away days, bringing ideas and suggestions from other similar projects we had delivered, and providing support to the Steering Group to drive the process through and deliver the desired outcomes.
Throughout the project, our aim was to pass on skills and expertise to the Steering Group to enable them to take the work forward alone without support, and to deliver similar projects in future without assistance.
The project achieved the ‘what’ in terms of the Corporate Strategy, but much more importantly, the whole of the leadership team is now all working together as a much more cohesive team, and is ‘getting things done’.
RBH launched the themes of the new Strategy at its staff conference recently and said the feedback was ‘amazing’ – 83% of employees said they understood the future direction of RBH and 70% of staff said they were now very positive about the future of RBH.
“The help and support from DTP and Just Libra was invaluable in getting us started on this project, giving us clarity of purpose and direction while also keeping the momentum going. They helped us with the thinking and planning which was critical to success, effectively facilitated the sessions, inputted data and insight from the sector and pushed our ambition through positive challenge.”
Elaine Johnson, Head of Business Excellence
bpha is a housing association with more than 18,000 homes in Cambridgeshire, Northamptonshire and beyond. It employs more than 350 staff.
bpha commissioned DTP to help it prepare for an In-Depth assessment (IDA) from the HCA (housing regulator).
The support included the following activities:
DTP also provided advice and assistance to its senior team in terms of its approach to the IDA, presentation of the Group’s activities, and the level of detail and weight which should be given to key issues. The support was undertaken in a collaborative and iterative way, with a partnership approach.
bpha underwent its IDA during July 2017. The assessment went very well from bpha’s perspective; positive feedback was received from the HCA, and as a result, bpha retained its G1 V1 status. bpha felt that both Board and Executive were very well prepared, and that as a result of DTP’s support, was able to present the organisation in the best possible way to the regulator.
“We believed bpha was in good shape for its IDA…but we had never had one before! Working with DTP helped build our confidence and ensured we understood the process so when it came to crunch, we just got on with meeting the requirements with a minimum of fuss. They were highly professional and a great group of people to work with.”
Kevin Bolt, Chief Executive, bpha
Ashton Pioneer Homes (APH) is an award-winning, not-for-profit organisation with almost 1,000 homes that it manages in Ashton-under-Lyne, Tameside.
DTP was asked to support the Association’s Board and Chief Executive in the process of recruiting a Director of Resources. Our objective was to involve board members, the Chief Executive and staff in a robust selection and recruitment process.
We started off by working with a sub-group of the board (the recruitment panel), where we gained a full understanding of the Association’s expectations and requirements. We also agreed the remuneration package and the associated terms and conditions of employment.
This was informed by benchmarking work that was undertaken by us. We agreed the overall process and the timetable, which would involve staff as well as the Board panel. Finally, we agreed the criteria for recruitment, based on what the panel felt an excellent appointment would look like, taking account of the Association’s culture, values and the challenges facing APH and the sector. The next stage saw us agreeing a marketing strategy and a budget for this. We developed a candidate information pack and a list of potential target candidates, so that we could, in addition to the advertising, make direct approaches to people to improve the potential candidate ‘long list’.
Advertisement were placed and expressions of interest were received. After the closing date we reviewed applicants’ CVs and we then held First Stage interviews with candidates that met the criteria. At this stage the panel also received a pack with all applications and candidate details enclosed. Following the First Stage interviews we made recommendations to the Chief Executive and the panel. The preferred candidates were then invited to Second (and final) Stage interviews, which now involved the panel and the Chief Executive, in a process that was facilitated by us.
Second stage interviews required candidates to make a 10-minute presentation on a relevant theme (provided to the candidates ahead of the day) to a staff group, also answering questions raised by that group. After this, the candidates gave a presentation to the Board panel, followed by a series of questions from that panel. The panel used an information pack, with pre-defined questions, prepared by us to record their views on each candidate.
This assisted the panel greatly in the debate and discussion which followed. Staff group views were also fed into the process of making a decision. The panel, assisted by us, made a unanimous decision and the preferred candidate was offered the post.
The process was delivered on time and on budget, with the appropriate calibre of candidates being attracted to the position. The process was successful in that the preferred candidate, unanimously chosen by the panel, accepted the offer of the post and following the receipt of written references, will now take up a position in due course.
“This was a key senior appointment for APH and I am really pleased with the support and professional advice provided by DTP throughout the recruitment process to both the Board and myself. A very successful outcome.”
Tony Berry, Chief Executive, Ashton Pioneer Homes
The aim of the project was to provide expert facilitation of a workshop for the management team of Worcester CC’s Strategic Housing Service. The purpose of the workshop was to work through a series of existing workstreams, review and prioritise them, and create a new action plan for delivery.
Prior to the workshop, our consultant reviewed a number of existing documents and provided ‘critical friend’ advice by way of a brief written report. We also met with the senior team the day before to run through the format. On the day, we delivered a comprehensive full day workshop, led by a strategic housing expert, which resulted in all the desired outcomes. An action plan was created on the day by the in-house team. We followed up on the workshop with a written report summarising the key issues being faced by the Strategic Housing Service at Worcester CC and our recommendations for addressing them.
The project achieved all of its outcomes, and Worcester CC commented that DTP had been a pleasure to work with, and our expertise and guidance in the workshop invaluable.
“The brief for this piece of work was to help our service team define and prioritise a number of overlapping projects, building on existing plans and strategies and taking into account emerging challenges. The consultant provided by DTP prepared well, engaged with our people, and was able to both facilitate discussion and provide challenge appropriately. DTP worked with us to scope out the day and then delivered an excellent piece of work including an insightful final report.”
David Sutton, Deputy Director (Commissioning and Transformation)
York Housing Association provides a range of housing and support services to approximately 1,000 households in York, North Yorkshire and East Riding.
The aim of the project was to undertake detailed financial due diligence on Karbon Homes which has been selected by York Housing Association as a potential merger partner.
A team of DTP specialists undertook a detailed and robust review of a wide range of key documents provided (upon request) by Karbon Homes. This included business and financial plans, stress testing, management and statutory accounts, funding arrangements, board papers, financial returns, pensions, IT and property information. The team analysed the documents intensively, looking in particular for evidence that Karbon’s planning assumptions were reasonable, and that any past financial performance issues have been dealt with and learnt from. Ultimately the test is whether enough business assurance can be gained to allow the York HA board to proceed with the merger with confidence.
A summary report, action plan and detailed appendix were then provided to first the Audit Committee and then York HA board. The Board was very pleased with the exercise and the quality of reporting, and felt it enabled them to move forward fully assured. York HA Board felt that our due diligence report gave them the confidence and assurance it needed to proceed with the merger process. All the objectives of the project were met in full.
“DTP provided a clear tender for this work and a reasonable fee given the complexity involved. In practice their work was thorough, delivered on time and within budget. Andy Roskell’s attendance at the Board meeting to answer questions provided further assistance and enabled us to make the decision to proceed with this merger. I wouldn’t hesitate to use DTP again for this type of work.”
Julia Histon, Chief Executive
Prima Group is a new housing group formed through the merger of Pierhead Housing Association and Leasowe Community Homes. The latter association was a subsidiary of Your Housing Group (YHG).
To establish a business case for Leasowe CommunityHomes to leave YHG, find a suitable partner and support the demerger and new merger.
We started the process off by advising the board of Leasowe Community Homes, with the support of YHG. The process saw DTP performing detailed financial modelling to determine how Leasowe Community Homes’ business plan might look were it to separate from YHG.
A number of significant challenges were found to present potential problems, but these were eventually overcome through detailed engagement with YHG itself, the association’s funders and The Pensions Trust. Having satisfied YHG that the association had a potentially viable future, with a partner, outside the group, through the provision of a viable business case, YHG agreed that Leasowe Community Homes could approach other organisations, with a view to finding a suitable merger partner, with whom to develop a detailed business case for merger.
A process was developed for this purpose and the board of Leasowe Community Homes was able to make an informed judgement about the most suitable partner, with DTP’s technical advice and support. Once the partner, Pierhead Housing Association, was selected, a process was established for managing the process, engaging with all key stakeholders, including YHG, the regulator, the local authority, residents and staff.
DTP provided project management support and detailed advice on governance, financial planning and on all funding related matters. The process involved project meetings, overseeing the project plan for merger, transitional planning and risk management.
The whole process was achieved against a tight deadline, but great teamwork from all involved (YHG, Leasowe Community Homes and Pierhead Housing Association) ensured that everything was achieved.
The merger took place on 1 April 2017 and the new organisation, Prima Group, has a sound footing, both in terms of governance and of financial viability. The regulator has been closely involved throughout the process and the funders for the new organisation have all been very helpful, positive and supportive.
“DTP were instrumental in ensuring the de-merger, re-merger happened within tight timescales, effectively managing the project on time and within agreed budgets and at times, successfully acted as problem solvers and mediators whenever an impasse was reached by all parties concerned. I wouldn’t hesitate to recommend DTP to other associations.”
John Ghader, Group Chief Executive
Derwent & Solway Housing Association (D&S) demerged from Your Housing Group before merging with Two Castles Housing Association (TCHA) to form a brand new housing association.
To establish a business case for D&S to leave YHG and support both organisations through the process.
We started the process off by advising the board of D&S, with the support of YHG. The process saw DTP performing detailed financial modelling to determine how D&S’ business plan might look were it to separate from YHG. A number of significant challenges were found to present potential problems, but these were eventually overcome through detailed engagement with YHG itself, the association’s funders and The Pensions Trust. Having satisfied YHG that the association had a potentially viable future, with a partner, outside the group, through the provision of a viable business case, YHG agreed that D&S could approach other organisations, with a view to finding a suitable merger partner, with whom to develop a detailed business case for merger.
A process was developed for this purpose and the board of D&S was able to make an informed judgement about the most suitable partner, with DTP’s technical advice and support. Once the partner was selected, YHG established a process for managing the changes, engaging with all key stakeholders, including the regulator, the local authority, residents and staff.
DTP provided project management support and detailed advice on governance, financial planning and on all funding related matters.
The process involved weekly project meetings, overseeing the project plan for merger, transitional planning and risk management. A Joint Steering Group, with membership from TCHA and D&S, oversaw the process, from a governance and risk perspective.
The whole process was achieved against a tight deadline, but great teamwork from all involved ensured that everything was achieved.
The demerger and subsequent merger took place on 31 July 2017 with all organisations concerned left on a sound footing, both in terms of governance and of financial viability.
“The regulator has been closely involved throughout the process and the funders for the organisations have all been very helpful, positive and supportive. Working with a number of stakeholders, which included YHG, the regulator, funders and other advisors, DTP provided overall project management and other support in what was a complex, but very successful process, which has worked out well for the group and also for D&S and its partner Two Castles. DTP’s support was crucial to the positive outcomes that we have achieved and I would be very happy to recommend them for similar projects.”
Brian Cronin, Chief Executive
Castles and Coasts Housing Association (CCHA) is a new housing association formed through the merger of Two Castles Housing Association (TCHA) and Derwent & Solway Housing Association (D&S). The latter association was a subsidiary of Your Housing Group (YHG).
To establish a business case for D&S to leave YHG, find a suitable partner and support the demerger and new merger.
We started the process off by advising the board of D&S, with the support of YHG. The process saw DTP performing detailed financial modelling to determine how D&S’ business plan might look were it to separate from YHG.
A number of significant challenges were found to present potential problems, but these were eventually overcome through detailed engagement with YHG itself, the association’s funders and The Pensions Trust. Having satisfied YHG that the association had a potentially viable future, with a partner, outside the group, through the provision of a viable business case, YHG agreed that D&S could approach other organisations, with a view to finding a suitable merger partner, with whom to develop a detailed business case for merger.
A process was developed for this purpose and the board of D&S was able to make an informed judgement about the most suitable partner, with DTP’s technical advice and support. Once the partner, TCHA, was selected, a process was established for managing the process, engaging with all key stakeholders, including YHG, the regulator, the local authority, residents and staff.
DTP provided project management support and detailed advice on governance, financial planning and on all funding related matters.
The process involved weekly project meetings, overseeing the project plan for merger, transitional planning and risk management.
A Joint Steering Group, with membership from TCHA and D&S, oversaw the process, from a governance and risk perspective. Eventually, a Shadow Board was established to oversee the latter part of the merger process and to take key decisions, all of which were subsequently ratified by the new board, following registration with the Financial Conduct Authority (FCA).
The whole process was achieved against a tight deadline, but great teamwork from all involved (YHG, D&S and TCHA) ensured that everything was achieved.
The merger took place on 31 July 2017 and the new organisation has a sound footing, both in terms of governance and of financial viability. The regulator has been closely involved throughout the process and the funders for the new organisation have all been very helpful, positive and supportive.
“The depth of knowledge and the approach provided by DTP throughout our merger process was absolutely invaluable. Ours was a more complex merger in that it was a de-merger and re-merger transacted simultaneously. We would not have achieved all of this in the timescale we did, without the support of Andy Roskell and Adrian Jolliffe, in particular. I would not hesitate to recommend DTP.”
Stephanie Murphy, Chief Executive
WCHG is a group comprising of two community based registered providers of social housing, both based in Wythenshawe, Manchester. They have their roots in local authority transfer of housing stock.
The Group had a total £150m of debt facilities available secured on more than 13,000 homes.
DTP was retained to consider a full strategic review of the loan facilities after having identified that the existing loan structure was providing unacceptable restrictions on the ability of the Group to grow and expand.
Through our work the Group has been able to secure £90m of capital market funding over an average 30-year term priced at 3.4% all inclusive. In addition, bank debt of £61m has been secured over varying durations between 5 and 19 years.
The Group now has the freedom to expand its growth ambitions to meet the Board’s ambitions as well as the freedom to secure additional funding in the future.
‘”The Refinancing puts WCHG on a solid platform to deliver its forward Strategy. We are really pleased with how the process went and the outcome achieved. Throughout the process we were supported by Clive Eccleston and the team at DTP whose knowledge and experience played an important role in delivering such a positive outcome.”
St Vincent’s is a housing association based in Manchester, with housing across the North West.
St Vincent’s were in talks with Mosscare about a proposal to merge the two associations. We were asked to produce a due diligence report and to provide an independent opinion on our analysis of the financial aspects of Mosscare.
We started by agreeing the scope of the financial due diligence with the client. We then engaged directly with officers and advisors at Mosscare and provided them with a list of questions and data requirements. Mosscare provided data and responses to our due diligence questionnaire and our analysts performed a forensic assessment. During our analysis we prepared two sets of supplementary enquiries which Mosscare responded to. Partway through the analysis we met St Vincent’s Chief Executive and Director of Finance and IT to provide an update and discuss matters arising from the analysis. Towards the end of the process we met with St Vincent’s Board and provided a full update, drawing on the draft report that we had produced. This was followed with further engagement with Mosscare to gather responses to final questions and queries.
A final report was considered by the board and the matters arising from this enabled St Vincent’s to proceed with the merger with Mosscare.
St Vincent’s engaged Andy Roskell at DTP to undertake financial and treasury due diligence as part of our merger project with Mosscare Housing Group. We have a long standing successful relationship with DTP as part of our treasury work. The approach taken was excellent and rigorous – with a focus on detail but distilling the information into interesting and salient reports that helped us to understand any potentialthreats to the merger.
Longhurst Group operates in more than 45 local authority areas across the Midlands and East of England. It owns and manages more than 19,000 homes.
Longhurst Group commissioned DTP to help them prepare for an In-Depth Assessment (IDA) from the HCA (housing regulator).
The support included the following activities:
DTP also provided advice and assistance to the senior team in terms of their approach to the IDA, presentation of the Group’s activities, and the level of detail and weight which should be given to key issues.
Longhurst Group underwent its IDA over January/February 2017, and while no formal feedback has yet been received from the HCA, the Longhurst team felt it went very well, that both Board and Executive were very well prepared, and that as a result of the DTP support, were able to present the organisation in the best possible way to the regulator.
DTP supported Longhurst in their preparation for an IDA by working with us and the business, proportionately and methodically. They helped to focus the team on likely topics to be discussed and provided some useful insight and feedback. They were incredibly helpful, supportive and responsive and I would highly recommend using them.
The University has more than 27,000 students and has three campuses, including one in Scarborough, North Yorkshire, and one in London. The campus in Coventry is currently undergoing a significant redevelopment programme. The University comprises four faculties, and manages a number of commercial subsidiaries that provide business services to local and national organisations.
The University has a relatively complex operating model comprising a range of subsidiary companies delivering a diverse range of activities in support of the interests of the University. Governance oversight of the group of companies sits with the main board of governors of the University and its sub-committees. However, Coventry University wanted to put in place a clear framework for subsidiaries to work through, which provides assurance to the main board, effective use of governance resources, clarity on delegations and accountability and an appropriate risk and control framework. The project was focused on ensuring current arrangements are appropriate and future-proofing governance to provide for straightforward development and application to any further growth in the University’s structure and activity.
We undertook a desktop review of governance information to assess it against best practice requirements, including the requirements of governing bodies as set out in the HEFCE Memorandum of Assurance and Accountability, the Companies Act and the Charities Act where applicable. We tested the documentation against five elements which encapsulate these requirements:
We then held a number of workshops with subsidiary representatives to work through our recommendations for change, gain feedback on subsidiary views on the proposals, input in relation to practical application and practice and alignment in relation to a timeframe for implementation and adoption.
We provided a template for a new, coordinated and comprehensive Delegatory Framework and supported the University in the collation and implementation of the new documentation. The University actively and positively engaged in process and has implemented the new Delegatory Framework as the one point of reference for all its companies.
DTP played a pivotal role in supporting us in our endevour to strengthen the governance of the University Group, particularly our subsidiary companies. Their knowledge and expertise have enabled us to develop practical solutions to meet the governance challenges we faced as an organisation.
One Manchester was formed in 2015 when Eastlands Homes and City South Manchester Housing Trust joined together in partnership. Together they manage a wide range of neighbourhoods, and over 12,000 homes across central, south and east Manchester.
They required external support to undertake a review of financial regulations to ensure that:
We reviewed a range of relevant documentation in order to inform our understanding of the delegations structure at One Manchester. We tested the documentation for appropriate consistency, cross referencing and application in line with the requirements of the review. We fed back any opportunities to implement best practice from inside and outside the housing sector that we noted in the course of the review, which were supplementary to this project, but useful to One Manchester. We developed a revised format for the financial regulations as a template for population with updated financial regulations and delegations. This template was populated in detail and through an iterative approach we identified any additional information sources to ensure that One Manchester had a comprehensive document. Our project approach was tailored to One Manchester’s needs that included leading discussions at their Audit & Risk Committee of proposals and consultations with staff teams to ensure the alignment of the proposals to the business requirements.
One Manchester approved and formally adopted the new Delegatory Framework. It is available on their intranet and is being rolled out across the organisation through a structured programme of briefings and training.
DTP’s approach throughout the project was professional, flexible and tailored to meet our expectations. The lead consultant brought significant best practice sector knowledge and challenge that was drawn together to provide an accessible and thorough Delegatory Framework that seamlessly brings together our scheme of delegation and control environment. Beginning to end the project was excellent.
Luminus Group started in 2000, with the large-scale purchase of homes from Huntingdonshire District Council. Today it serves more than 45,000 people, in 7,500 homes throughout the east of England.
DTP was asked to undertake a review of Luminus’ Asset Management Strategy (AMS) and associated Action Plan. The purpose of the project was to provide external critical challenge to the AMS, to ensure it is ‘fit for purpose’, and to provide intelligence on best practice in this field from elsewhere in the sector. DTP consultants undertook a desktop review of the two documents, following a telephone briefing with the Executive Director (Operations), giving detailed feedback on where the documents could be improved, and examples of what other providers were doing. A particular focus was placed on regulatory compliance.
Luminus welcomed the challenge and feedback, and thanked DTP for their excellent work. The comments were judged to be very helpful. All the objectives of the project were met in full.
The service was fast, friendly, efficient and competitively priced. We were very pleased with the work of DTP and would be happy to commission them again on other projects.
Warwickshire Rural Housing Association is a small, rural housing association with almost 600 homes. We were asked to facilitate a board away day.
The Board wanted to discuss and assess impact and progress in a number of areas, including:
WRHA is unusual in that despite being small, it is an active developer. It also collaborates with other housing organisations to minimise costs.
However, like many in the sector, WRHA is facing challenges around how to continue to develop social rented housing in the absence of government grant; the key principles and values that would shape any merger considerations; and determining future strategic direction in the light of ongoing risk and uncertainty. DTP was able to provide information, analysis and assurance in a number of these areas as part of our role at the away day.
Both the Board members and staff found the event useful and informative. The approach used was conducive to stimulating debate, and gave focus to the issues the Association will need to address. Key considerations were openly discussed and these will shape the business plan moving forward. All who attended felt the process was worthwhile, engaging, and well facilitated.
Railway Housing Association (RHA) owns 1,500 rented homes in 24 local authority areas, mainly concentrated in the areas of Darlington, Doncaster, Durham, East Riding, Hull, Leeds, Newcastle and York.
RHA wanted to start the process of appointing a new Chair of the Board. The post holder was approaching the end of his term of office and RHA was keen to ensure that, for continuity reasons, there would be some overlap between the retirement of the existing Chair and the full installation of the new Chair. We recommended the appointment of the successful candidate as a “Chair Designate” to facilitate this hand over process We recommended RHA undertook a process which was open to both internal and external candidates in order to ensure a fair and accountable approach and to ensure RHA had access to a pool of skilled and experienced candidates.
RHA appointed a Chair Designate and a Board Member.
We received an excellent and professional service from DTP and achieved the desired outcome and would happily recommend DTP to other organisations looking to recruit to board positions.
Wythenshawe Community Housing Group (WCHG) provides homes to more than 20,000 people across Wythenshawe, Manchester.
WCHG made the decision to move to a common board governance structure where all entities within the group are governed by one co-terminus board. DTP were appointed to assist in the process of appointing members to the Common Board from the existing Group Board and two subsidiary boards of WCHG. DTP developed and agreed a process with WCHG which involved all existing members providing an expression of interest in roles within the common board, evaluating themselves against an updated skills, competency and experience matrix and then undertaking an interview with a panel comprising the three chairs, the Chief Executive and DTP as the independent advisor. This process was subsequently followed by a further recruitment process to appoint a new resident member to the board. DTP then provided advice and guidance to the new board on governance within a common board structure.
The new board was fully populated with members who met the required competencies for the new governance arrangements in the agreed timescale.
DTP provided a sensible and tailored approach which board members appreciated. It greatly assisted a smooth process and timely appointments, whilst meeting the demands of a robust and rigorous exercise to satisfy good governance principles.
Hanover is a national provider of housing and services for people in later life with around 19,000 properties for rent, sale and shared ownership in approximately 600 locations. We were appointed to undertake a review of their governance.
The aim of the review was to identify strengths and gaps in practice and make evidence based recommendations for improving governance. How we achieved this: Each Board Member and the Chief Executive completed a self-assessment questionnaire to assess their skills and views of the effectiveness of the Board. This was followed by one to one meetings and a joint meeting with the Executive Team. Board and Committee Meetings were observed using a structured evaluation and a critical review of the papers for each of the meetings was undertaken. We completed a desktop review of a range of governance documentation and benchmarked this against the National Housing Federation (NHF) Code of Governance.
The recommendations in our report were extensive, but Hanover embraced the changes and DTP were further commissioned to support the governance team in implementation. All the recommendations were implemented by November 2015. Feedback from the Chief Executive has indicated that the changes have had a positive impact. Members feel the structure provides clarity and makes better use of their skills and governance resources.
I can say without risk of contradiction that without you we would not have made anything like the progress that we have, so thank you for all your stirling work!
Byker Community Trust (BCT) owns and manages 1,800 plus homes in Newcastle-upon-Tyne. Working with our IT partner, 3C Consultants, we were asked to carry out a due diligence review into their service delivery.
The review focused on plans to take tenant and estate management services back in-house; and to run a number of business services, including repairs and maintenance, through a cost sharing partnership with a housing group. We needed to provide a review of long term financial plans; evaluate any difficulties in establishing the cost sharing partnership; provide an initial opinion on the terms of the cost sharing; and assess the capability of current ICT systems needed for the proposals. The process had to ensure that the right technology and systems were in place to support BCT in attaining its corporate objectives and service quality ambitions over the next five years.
We undertook a thorough review of all corporate plans and strategies, including IT. We also examined in detail the current arrangements and compared these to the arrangements likely to be provided in the future. A series of workshops with directors and key stakeholders were held, to consider the financial robustness and business credentials of the proposed housing group, commenting on the likely scenarios for improvements and highlighting key areas requiring attention before embarking upon the project. The results were presented to the BCT board.
In an agreement of this sort we want to be able to predict the outcome with some confidence and be able to offer our tenants a better deal. There are lots of things to think about and having independent experts look at the key areas of operation was beneficial for us and highlighted a number of things we were able to take forward into the new agreement.
Alpha Homes provides sheltered accommodation for older people and currently owns and manages 852 homes in 25 developments in the North of England, primarily in the Wirral area.
The objective of this project was to obtain the funds to enable Alpha to remodel some accommodation and generally improve its stock to an enhanced “Alpha Standard”. Alpha had already identified the need for additional loans but needed support and advice to identify and swiftly arrange the new funding. It was looking to develop a new supportive lender relationship with flexible financial covenants. The new lender would become the biggest lender to the Association.
Exactly one month after appointment a Funding memorandum was issued and this resulted in competitive offers being received from four potential lenders by the end of month two. After undertaking analysis and comparison between the offers. Alpha selected Lloyds bank to provide a 15 year term loan. Lloyds was selected because they offered a combination of financial covenants, pricing and flexibility. They were also able to modify their lending proposal to accommodate Alpha’s needs during the investment phase of this project. All the objectives of the project were met in full and the project completed within one week of the date set in the initial timetable.
Adrian became a full member of the delivery team; he was always available when needed and helped managed the whole process from start to finish. He provided guidance on the possible pitfalls, supported both the executive and the board’s decision making and providing challenge and proactive encouragement to Alpha throughout.
South Liverpool Homes (SLH) owns and manages just under 4,000 homes. We were appointed to provide treasury advice and facilitate a loan refinancing.
To completely refinance an existing syndicated loan facility to obtain maximum freedom for SLH. This would allow SLH to manage its business without the business plan consent or the constraints of LSVT-style financial covenants imposed by the original loan. How we achieved this: The project had to be completed within a short timescale. It involved a tender to replace the existing loan with a flexible 10-year loan facility and a 30-year fixed rate private placement loan. It also involved a bridging loan facility, completely recharging the whole of the property portfolio and negotiating new financial covenants.
South Liverpool Homes increased their capacity to invest by completing a £35million deal with two funders – M&G Investments and Yorkshire Building Society. It secured a 30-year fixed rate loan with M&G Investments, giving SLH long term certainty and lower interest rates; as well obtaining a flexible 10-year loan with Yorkshire Building Society.
The experience and expertise of DTP was invaluable. They gave us creative and practical support and delivered on the agreed objectives, giving us sound advice at every stage. They were a pleasure to work with and their strategic and considered approach was key in securing a positive outcome to the transaction.
Alliance Homes Group (AHG) owns and manages 6,000 homes in the West of England. Working with our IT partner, 3C Consultants, we were asked to provide a ‘fit for purpose’ review.
We were asked to identify efficiencies and ways to improve performance, as well as opportunities for growth and increased revenue. The review was required to challenge AHG to deliver some services differently by either ceasing them and/or outsourcing the delivery of others. We were also asked to look at the possibility of delivering services offering commercial returns.
We undertook a thorough review of all existing strategies and associated documentation, as well as the existing IT services along with care and support and repairs arrangements. A series of workshops with directors and key stakeholders were held to agree a menu of likely cost saving initiatives in order to produce operational recommendations for the next three years. The report presented to the AHG Board showed the potential efficiencies the benefits technology could provide in achieving corporate objectives.
Although the Executive Team and staff at AHG have worked very hard to identify efficiencies required in the current environment, we are always open to the possibility that there is a better way of doing it and accept that there might be things we have missed. Having independent experts review our proposals adds an extra dimension to the decision making process and gives further challenge to what is a very difficult process. DTP and 3C were able to critically examine our proposals and, in some circumstances, enhance our thinking and we are always grateful for that.
The Sovini Group comprises both not-for-profit (including One Vision Housing which owns and manages more than 13,000 homes), and commercial enterprises in Liverpool and the North West.
Our team, led by Clive Eccleston was tasked with providing support and advice to inform the strategic direction and decision making of the organisation. The work has included providing support and advice on:
Through our work with the group we were able to help them secure more than £170m in funding. As part of this, we were also able to agree flexible funding arrangements that support the Board’s corporate priorities and ambitions.
Clive has a wealth of experience in the housing. He is extremely approachable, always professional and has developed effective relationships with board members at Sovini and the executive team
Local Space is a housing association that delivers homes in east London, predominantly in the London Borough of Newham. We were asked to prepare a VfM Self-Assessment Statement for 2014/15.
The objective to prepare a VfM Self-Assessment Statement followed a Governance downgrade (from G1 to G2) as a result of submitting a Statement for the previous year 2013/14, deemed inadequate by HCA. Our brief was to develop a new Statement that would meet the regulatory requirements and secure a regrade from G2 to G1.
The client had limited resources to support us during the process. Our approach was to gather all the data and information in one simple process. After preparing a first draft, it was discussed with the executives and then went to the board for review. Minor amendments were made following the input from the board and the executives. The final draft was prepared for board approval.
The final draft was considered to meet the objectives of the executives and the board. This was submitted to the HCA and published on the association’s website. In due course the HCA considered the Statement and Local Space was upgraded to G1 status as a result of the submission.
DTP worked quickly and effectively in producing this work and was responsive to our demands as a client. They maintained good communication throughout. We would definitely commission similar work from DTP again.
DTP have teamed up with Musgrave Analytics with the aim of providing more analytical capability around our core services, in particular developing our capacity to deliver data audits and business intelligence engagements as well as developing dedicated analytical services, such as an early warning dashboard for risk monitoring or regulatory compliance.
Musgrave Analytics are a niche consultancy led by Simon Musgrave who has long-standing experience in data analytics and consulting, in academia, KPMG and Tribal Group. Their team of eight has enormous cross industry expertise having developed forecasting, modelling and reporting solutions for clients as diverse as Jaguar Land Rover, Glaxo Smith Kline, the NHS and the culture sector. They have worked with several housing clients but particularly with the Together Housing Group where they have built a performance monitoring dashboard system for the senior management and developed unique predictive analytics services such as forecasting the outturn of KPIs up to 12 months ahead.
Simon Musgrave commented: “We are very excited to be working more closely with the David Tolson Partnership bringing our expertise to support their services in particular around business planning, forecasting, and performance improvement. Their understanding of the key issues affecting the sector will help us to focus and develop our range of analytical services.”
Shaw is a group of specialist IT consultants leading the way in the housing and care sectors. With a clear understanding of the pressures faced, we deliver independent strategies, solutions and services that transform and future-proof your organisation.
Working as your trusted partner, we manage entire projects from appraisal and business development to procurement and review. Gaining insight into your daily operations, we’ll run initial workshops with everyone in your team – from the chief executive to your most junior member of staff.
Our approach looks at the bigger picture, factoring in audits and detailed reports, planning strategies for technology development and the review of all systems and operational costs to determine effective, future-proof solutions.
In short, it’s our job to remove the risk surrounding your IT investments. Providing you with peace of mind, Shaw will give you the time and confidence to focus on your organisation’s long-term objectives.
Our tailored services include:
Working with a diverse range of organisations, Just Libra has a successful track record in developing and facilitating leadership & development, organisational change, wellbeing, customer service and employee engagement programmes.
Just Libra have partnered with DTP on projects and are excited to work with a team who share its values in supporting organisations with leadership & development to deliver continuous improvement.
DTP has been established as a Certified HousingBrixx Partner by Castleton, the company having the appropriate levels of experience and expertise to provide HousingBrixx-based value-added services to the Housing sector.
Castleton’s Strategic Modelling solution (HousingBrixx) is a dynamic, time-based modelling solution developed specifically for business leaders in the Social Housing sector.
This powerful software lets you create a flexible model of your business to deliver an intimate understanding of how each decision can impact an organisation, immediately and over time.
We are equipped by Castleton to deliver the following product and services for their HousingBrixx solution:
Value added- service
DTP undertake an annual training and certification process to procure the appropriate annual partner license from HousingBrixx.
For more information visit https://www.castletonplc.com/
We are a collective of professionals who are experienced coaches, trainers, facilitators and researchers.
We work collaboratively with organisations, teams and individuals to create cultures in which we can all bring our best selves to work and flourish.
We help organisations, teams and leaders explore what’s really needed to transform and create lasting change and have extensive experience working across the private, public and third sectors.
One of our specialisms is around cultural integration where we work with organisations who are considering a merger or acquisition to take a whole spectrum perspective on the cultural due diligence process, ideally beforehand, but at least at the point of legal integration.
Similarly, we work with organisations who wish to transform their businesses and cultures – often following some form of growth, merger or acquisition.
Values are important to us and we always work in a values based way – our collective values which we bring to all of our clients are: Creativity, Partnership, Integrity, Expertise
For more information https://wholespectrum.co.uk/
The last few years have seen a continuation of the trend for housing associations to adopt group structures for operational and strategic reasons. For many registered providers this is a sensible move which is done for the right reasons. Often it takes account of the fact that a provider is going beyond its core housing functions to deliver everything from new homes for sale to care and support services.
Becoming a group may also arise as part of a growth strategy, where other providers are brought into an organisation to achieve economies of scale, share skills and expertise or to transform performance and service delivery.
However, despite the potential advantages, for a number of social housing landlords moving into a group has caused difficulties – sometimes of a regulatory nature.
So what should providers be mindful of when contemplating a group structure? How do you ensure groups are governed well? And how do you maintain compliance with the requirements of the regulator?
A crucial first question to answer is: what is and isn’t regulated once you have adopted a group structure? It’s this which I want to look at in the first of two blogs on group structures in the social housing sector.
Many groups do have registered provider parents, usually because their level of diverse activity is quite small. As such, the risks in terms of the provider’s social housing assets is deemed to be minimal. But it is important to point out that adopting a group structure which includes unregulated activity means that you must ensure that there is no distraction from maintaining compliance for your social housing assets. Your social housing business will always fall under the watchful eye of the Regulator of Social Housing who will want to know that you are viable, efficient and well-governed.
The Regulator is concerned with ensuring the sector is providing affordable, decent homes which meet a range of needs – and that doesn’t change if your registered provider business suddenly becomes part of a group which includes a new house builder and a property maintenance company.
However, there are subtle differences in how the Regulator approaches matters depending on the nature of your group structure.
For example, if you own more than 1,000 social housing units, and are part of a group which has an RP parent, then compliance is assessed at the group level.
If there is more than one RP in a group then each of them must comply with the Regulator’s standards. The regulator will then look at risks and exposure across the entire group as it makes an assessment of compliance in terms of the whole organisation.
If on the other hand, the parent company in a group is unregistered, then the Regulator will limit its attention to the RP within the group. However, that still means it will ask the same rigorous questions to gain assurance around governance, risk, and viability exposures.
The Regulator will also look at risk factors and stress testing in terms of cross group scenarios – even if not all the businesses in the group are registered providers of social housing.
Financial Forecast Return (FFR) submissions to the Regulator are again done at the group level. If the parent is unregistered and there are a number of registered providers in the group then the FFR is done as one consolidated return for all the providers.
So that’s the different approaches to regulation which the Regulator can take depending on which type of group structure you adopt.
In my next blog I will be looking at meeting the requirements of the Regulator and my tips for success.
So the era of dither and delay is over. No more gridlock, no more government defeats in the House of Commons, and almost certainly no more Brexit postponement.
Boris Johnson secured a comfortable majority for the Conservatives in the General Election. Overnight, Britain’s electoral landscape was transformed with victories in former Labour heartlands in the North and Midlands. But beyond getting Brexit done, and delivering “the people’s priorities”,what will this new administration do? And what will it all mean for social housing providers and those who live in affordable rented homes?
Here the DTP directors share their thoughts on the election result and what the sector can expect. What reasons, if any, do we have to be cheerful? And what reasons do we have to be fearful?
Reasons to be cheerful
Reasons to be fearful
Only time will tell what impact Johnson’s government will truly have on social housing in the UK. We suspect we will be revisiting and reflecting on the above over the coming year. One thing is certain 2020 will prove to be a year of change – look forward to discussing how we support you through this change.
Board diversity is an issue which many housing associations ask us about at DTP. Increasingly, it’s seen as a critical element of effective governance – and rightly so.
But what do we mean by diversity and how can it contribute to better organisational and governance effectiveness and performance?
The conversations we have with providers tend to revolve around boards and their relative homogeneity – especially compared to a landlord’s customer base or indeed wider society. Clients often ask us, “how can we be more diverse?”
Firstly, it’s important to note that social housing governing bodies are already more diverse than some other areas of society or business. But we certainly could do better. Attend any housing association board meeting and you are likely to find that white, middle aged men are over-represented. There may also be a lack of diverse thinking as well as faces.
In some respects, the root cause of this is not housing associations themselves: wider economic and social factors are at play here. And as providers increasingly look for board members with particular technical skill sets, necessary to manage complex and diverse businesses, this lack of diversity can often be reinforced rather than challenged.
RPs wanting to engage more in development, for example, may decide they want to recruit someone with experience in the housebuilding sector. Similarly, where a need for someone with financial expertise is identified, this will likely mean recruiting someone with a background in banking. The reality is, this may well push recruitment in a less diverse direction.
Putting together a diverse board which is up to the job is no easy undertaking. Firstly, there’s a lot of diversity within diversity! There were 10 protected characteristics at the last count, ranging from age and disability to race and sexual orientation. Providers should also consider their own particular characteristics including their cultural heritage – for some, there might be historic reasons for a customer base which skews in one direction: for example, associations set up to house miners and their families or railway workers.
But it doesn’t stop there. A provider which takes board diversity seriously should also ensure there is diversity of thought within its non-executives. In my experience this is one of the key ways of creating an organisational culture which is open to change and innovation.
In a recent blog on the importance of diverse thinking, journalist Matthew Syed observed: “Some people have the tendency to accept the world as it is. They stick with the status quo. Others see the world as changeable. They wonder if there are better ways of doing things.” (I also remember former US president Ronald Reagan once joking that ‘status quo’ was Latin for “the mess we’re in”.)
With this in mind, boards need to welcome those with a willingness to question and reinvent. You need innovators and disruptors, as well as those who are more traditional and risk averse.
Why? Well, there’s plenty of evidence that diverse groups perform better. A 2013 report by Deloitte found that diverse teams make decisions 60% faster than non-diverse ones. Meanwhile, a McKinsey study found US public companies with a diverse board delivered a higher return on equity.
Delivering on these aspirations needs to start with a dose of reality. If you only have a board of between eight and 12 people you have to recognise that there are limits on what can be achieved. Prioritise what’s important to you, while always remembering that you need in place a board with the skills and expertise needed to achieve your objectives. And don’t pay lip service to diversity, or you will reap none of the benefits.
We’ve found one option available to providers is to recruit ‘trainee’ board members from more diverse backgrounds, while taking responsibility for training and development. A buddy or coaching arrangement can also help with this.
But what about finding people? Modern digital communications channels now mean it’s far easier to cast the net widely. Make the most of social media, your own website as well as targeted advertising through specialist routes such as Women in Housing and the Housing Diversity Network.
There are other ways you can help potential applicants and diversify your recruitment efforts. Be clear in your descriptions of roles and responsibilities and honest about time commitments. Think about when you hold meetings, what payment/expenses will be paid, and what training and development you can offer. Above all, sell the role to applicants who might need persuading, stress what’s in it for them and be available to explain things to them. Just being there for an informal chat before someone applies can work wonders.
When it comes to selection, whittle down candidates first based on your key criteria. The equalities monitoring form can help as well as what people say on their application forms. In terms of bringing in divergent thinkers, psychometric testing can definitely be useful.
Finally, make sure your interview panel itself is representative and as diverse as it can be. And give plenty of thought to the questions you’ll ask, ensuring they draw out the kind of diversity you want – and help you identify people who will make good non-executives.
Don’t be daunted – this is not only possible, it also has the potential to help your business grow and develop, which will then ensure you help the people who matter most: your customers … whatever their background.
This DTP Views is from Chris Shaw of our partner, Shaw, the specialist IT consultants.
Effective asset management is a critical business function for all registered providers of social housing. Knowing the exact, current state of your entire property portfolio, whether individual properties, estates, communal areas or land, is essential.
Firstly, it’s crucial for the effective planning and delivery of investment decisions and improvement programmes. But asset management is also at the heart of key areas of legal and regulatory compliance, including areas such as gas, electrical and fire safety and asbestos and legionella.
The problem is most providers’ current asset management systems (and it is usually systems plural) are not fit for purpose. As we carry out more and more reviews on behalf of providers of their existing asset management set up, common weaknesses are apparent.
So what’s wrong with current approaches? Why have the majority of providers not got a full handle on their compliance activity? And what needs to change?
Firstly, approaches vary from provider to provider. Some carry out all compliance related asset management activity in-house. Others might outsource some or all to an external supplier.
Most providers either don’t have a single system to manage all aspects of compliance – or if they do, it is not being used effectively. In some instances we have found providers are using multiple systems and, for some elements of compliance, are resorting to using Excel spreadsheets. For example, one system might be used for stock condition information, while data on gas servicing might be kept in spreadsheets. This is fraught with difficulties.
If external providers are using their own separate asset management systems, or if providers are using separate ones internally, it becomes difficult, if not impossible, for organisations to build up a complete picture of their overall compliance performance. It comes down to one simple fact: it is difficult for organisations to ascertain if they are compliant or not.
In some instances there is also an issue with duplication: for example, staff having to input data once in the field on paper and then having to come back to the office to key in the information again. We’ve even found examples of triple data entry going on. There are, of course, cost implications to this. One review we recently carried out for a provider, estimated this was costing them more than £150,000 a year. However, it also has data quality and accuracy implications.
This is the problem many organisations face. But there is a solution. It starts with a comprehensive review of a providers’ asset management system or systems. When we work with providers on such reviews it’s about building up a complete picture of the strengths and weaknesses of that existing set-up, before making recommendations on possible solutions. We look at what the capabilities of the current asset management systems are, what systems are used for what purposes and what current asset management compliance processes are.
It’s about asking critical questions such as: how compliant are we as a business? What are the information sources around each of our assets? If we don’t have a complete picture of our compliance activity, what do we need to do to get that complete picture?
Solutions are never one size fits all, but effective asset management systems do have common denominators. Firstly, they involve bringing all compliance related data into one place and offering users a live view of what’s happening. That might be possible with your existing system, or switching to a new system might be required.
Crucially, an effective system must allow providers to set the parameters which matter to them, and it must be adaptable and customisable to meet the changing needs of the business.
In addition, a good asset management and compliance system should also help businesses to better plan and manage their responses to compliance issues as they arise. Augmented intelligence technology, for example, can now automate responses to compliance breaches, for example, generating and scheduling the appropriate work tasks required to put things right. Ultimately, that means better operational management and more effective service delivery.
Where we come in is being able to offer insight into what the capabilities of current technologies are. We can then help you define exactly what your requirements are, then support you to go to market and find the best supplier and solution based on your needs.
If you’re having doubts about your current asset management compliance systems, get in touch. Don’t despair, there is a solution.
My last blog examined the new round of In-Depth Assessments (IDA) being carried out by the Regulator of Social Housing (RSH). For most providers this is the second time they have faced the glare of the RSH spotlight.
While it’s important providers have a grasp of what’s changed since Round 1, in terms of tone and emphasis at least, it’s also critical to know how to be prepared.
It’s now time to get practical. So here’s my proposed ‘to do list’ for those of you about to start the preparation process:
For social housing providers there’s only one thing worse than being regulated, and that’s not being regulated (my apologies to Oscar Wilde).
So while few Registered Providers (RPs) would welcome the call from the Regulator of Social Housing (RSH) telling them their In-Depth Assessment (IDA) is due, not many would argue against the assessments in principle. And I suspect, deep down, many know it’s a worthwhile exercise.
DTP’s most recent Exchange Report, which takes a twice yearly snapshot of the social housing landscape, found almost universal support for the process and approach taken by the regulator to assessments.
They are a “force for good” one senior executive told me. The sector isn’t perfect, so there will always be (mercifully rare) examples of mismanagement and failure. But the crucial thing is that an IDA aims to prevent any failures or mismanagement impacting negatively on tenants.
In our interviews, chief executives shared with us their mostly positive experiences of going through the IDA process. While a few had minor gripes, most thought the process was rigorous, and gave them valuable opportunities to tell their stories.
From governance and compliance, to stress testing and treasury management, an IDA enables RPs to take a close look at how they do things and to identify ways to improve.
RPs are now entering the ‘second round’ of IDAs – with larger and more complex providers having to get used to even more frequent, biannual assessment. For most, IDAs will continue to take place every three to four years.
Much has changed, while many aspects of the process have stayed the same. More honed, more focused and more bespoke is how I would sum up the changes. Things are also a little more “light touch”; there are fewer documents required, for example.
The regulator is looking for evidence of what’s changed for you as a provider since your last IDA – both in terms of your own risk profile and the wider operating environment.
There are also signs of subtle shifts of emphasis. We are seeing a little more of a consumer focus, for example, with greater stress on the importance of the tenant voice in governance. I expect that to continue, though exactly what form it might take is uncertain. A separate regulator for the consumer standards has even been mooted – though the idea is not popular among providers. Might we see a set of ‘metrics’ around this area, similar to the ones on Value for Money? Possibly. Again, watch this space.
Value for money itself is now of much greater importance in IDA, as are the issues around asset health and safety. Assurance around stock condition survey data and long-term maintenance plans will also be required of providers as part of the IDA process. As with the issue of the ‘tenant voice’ Grenfell is of course a factor here.
Governance is also assuming even greater importance, so expect your board and committee papers to be put under the spotlight, as well as your meetings and key documentation.
So there’s a lot to think about and the process isn’t easy. External support might be a good idea, but if you decide to go down that route, it’s best to take that decision early.
That’s my take on round two of the IDA process. Next time, I’ll be running through some of the key things you need to consider and prepare for when the regulator comes calling …
August is traditionally dubbed the ‘silly season’ by newspaper editors. In normal times, politicians head off on their summer break leaving an absence of proper serious news. The gap is filled with stories which can best be described as frivolous. But as we know these are not normal times. This summer, there may well be an absence of frivolity in the news, although who would rule out something
truly silly from happening?
Which brings me to our new Prime Minister and the new housing team he has assembled in the Ministry of Housing, Communities & Local Government.
They do say a sign of getting older is police officers appearing younger. Perhaps we should now add cabinet ministers to the list – given the new Secretary of State for Housing, Communities and Local Government, Robert Jenrick, is just 37. He is the first cabinet minister born in the 1980s.
He will be joined at the cabinet table – though not in a cabinet job – by Esther McVey. The former Work and Pensions Secretary is now Mr Jenrick’s junior at the ministry, in the post of Housing Minister. She is one of a number of ministers who have been asked to attend cabinet by the new PM even though they are not in a cabinet role.
What the two new ministers, and Mr Johnson’s government, will mean for the social housing sector remains to be seen. Few have interpreted the new cabinet as anything other than a shift to the right. At the moment all we have are signals; a few vague indications of housing policy direction. We expect, for example, that there will be a renewed emphasis on home ownership – and a move away from Theresa May and Gavin Barwell’s generally more positive outlook on affordable and social housing.
That may involve a policy of ”reshaping” existing low cost home ownership products – possibly to the detriment of both the private and social rented sectors.
So far we have had silence on the issue of standards in the private rental sector. That is significant for both tenants and landlords. We could potentially also see an expansion of right to buy, which would be of significant concern to the social housing sector. Questions remain over how this would be funded and how it would impact on registered providers.
My view is that it is increasingly likely that the social housing Green Paper will effectively be kicked into the long grass under this administration. So those who were expecting increased consumer regulation and more focus on listening to tenants may well be disappointed.
What else we can expect will be determined in the coming months – and, unsurprisingly, a lot will depend on what happens with Brexit. Indeed, Mr Johnson’s premiership will itself stand or fall on the issue of leaving the EU. My view is the social housing sector should be greatly worried about the now increased prospects of a no deal Brexit.
There are too many possible scenarios which could play out in the coming weeks (general election, second referendum etc) to go through here. But whatever transpires, there will be significant consequences for the whole country, the economy, and our sector. The impact on community cohesion (a real concern since Brexit, and one which we know to be an increasing problem) could be severe, in my view.
There is of course a strong likelihood that not very much will happen between now and the end of October when it comes to housing, so preoccupied will the government be with Brexit. Any changes that do happen are more likely to occur the other side of Brexit. That may be a blessing.
So what of the other key personnel changes in government?
Another ‘one to watch’ is Dominic Cummings, the former head of the Vote Leave campaign, now Johnson’s chief strategist. Delivering Brexit will no doubt be his key focus in the next few months. But if the new government does manage to survive and deliver Brexit, what might his role be in government? He is very much a ‘great disruptor’ figure, so if he did ever get his hands on housing, expect the unexpected.
The new chancellor, and former housing secretary, Sajid Javid is also worth mentioning. We’ve had some indications he may be more keen on using the spending tools at his disposal to boost, among other things, infrastructure and housing. So far we have had lots of promises and spending pledges, including for those ‘left behind’ towns. It’s not clear how these commitments will square with other
looming priorities. Somehow, I can’t see him responding to George Clarke’s recently launched campaign for more council housing with a significant cheque.
On welfare reform and issues such as social exclusion and inequality, I’ve no initial reasons for optimism. Amber Rudd, who stays on as Secretary of State at DWP, has always been seen as a more centrist figure, although she is a recent convert to the idea of keeping ‘no deal’ on the table when it comes to Brexit.
So that’s the team we’ve got to work with. How long they last is anyone’s guess. In the absence of a crystal ball it would be foolish to predict anything.
How a prime minister will be remembered is usually a question asked in the dying days of their premiership or as they leave Downing Street for that final time. Often, our feelings towards them can change as time passes, with some even undergoing a rehabilitation years after leaving office. John Major, for example, has now established himself as something of an elder statesman, rather than the man responsible for the disastrous Back to Basics campaign or an administration dogged in its final days by accusations of ‘sleaze’.
Sometimes, the moment of departure can trigger unanticipated outpourings of sympathy, or in the case of Margaret Thatcher a “what have we done” moment, at least among some of her supporters.
As Theresa May prepares to hand over to her successor, her short-lived time as PM appears now to have been doomed from the start. Perhaps the question shouldn’t be how will she be remembered – but will she be remembered at all?
Brexit will almost certainly dominate any look back on her time in office. It has shaped and defined her time in Downing Street – and that will no doubt continue whoever succeeds her.
The government’s preoccupation with honouring the 2016 referendum result has been detrimental for many policy areas, social housing included. At the ministerial level we’ve seen an alarmingly swift turnover of personnel in the top post. Alok Sharma and then Dominic Raab only lasted six months, although we did at least see the job of Communities Secretary expanded to encompass housing, putting the issue at the cabinet table at last.
In housing policy terms at least, there was a marked shift away from the Cameron/Osborne years. Their obsession with private ownership, to the detriment of all else, gave way to a generally more supportive attitude. On the development front, grant was made available to build more social homes and local councils had borrowing caps lifted to allow them to, in theory at least, build new council homes.
Sector leaders I recently spoke to for our twice-yearly DTP Exchange Report, were generally prepared to give May’s government credit for the creation of a more “benign environment” for RPs. “We are now seen as part of the solution, not the problem” was one comment which summed up the feelings of many.
Deregulation, a rigorous refocus on value for money, and the reclassification of RPs as private were also broadly welcomed.
Some gave credit to the presence of Gavin Barwell in Downing Street, after he lost his seat as an MP in the June 2017 General Election and popped up as May’s new chief of staff. Having someone seen as cheerleader for the sector in No 10 was seen as at least helpful.
I found sector leaders were less likely to give May credit for her record on poverty reduction and welfare reform. Changes to Universal Credit aside, there is a real sense out there that vulnerable people in the communities served by social housing providers are suffering and struggling. Her hapless and poorly judged response to the Grenfell tragedy shortly after the June 2017 election was seen as symbolic of her failings in this area.
And as she leaves office, the jury remains out on Brexit. We appear no nearer to a deal than we did when she took office, and a ‘no deal’ Brexit remains a real possibility. RPs have been diligent in their preparations and stress testing, and in some respects have been able to demonstrate their strength and resilience. But that doesn’t take away from the fact that the failure to resolve Brexit leaves them facing doubt and uncertainty. The continuing impasse impacts adversely on their businesses and their tenants.
As I write this, Theresa May’s successor has still to be determined. My sense is that neither candidate has given the sector any reasons to be cheerful. And in the case of Boris Johnson at least, there have been on the record comments at party conference fringe meetings which have been pretty disparaging towards the very concept of social housing.
What lies ahead remains shrouded in the greatest uncertainty, however it’s entirely possible the sector could face having to deal with either a hard right or a hard left government, neither of which would be in its best interests. The right would almost certainly want to shift the focus to private home ownership, while the left is ideologically committed to local council provision.
The only certainty is that the sector will face further upheavals in the next few years. All we can do is continue to make the case for the sector – and the contribution it can make to tackling some of the big issues of our time. Housing associations have a role to play in providing decent homes for people to live in, in safe and secure communities, and tackling poverty and social exclusion. The sector should continue to remind itself of that as it faces the difficult road ahead.
‘Culture Eats Strategy For Breakfast’ (Peter Drucker) – I’ve read numerous articles using this quote over recent years, when leading or supporting organisations going through culture change.
Changing organisational culture isn’t easy and addressing an unhealthy culture is often something that leaders shy away from because it can be extremely challenging. However, as Peter Drucker’s famous adage suggests, having a positive culture is vital and should take centre stage in terms of an organisation’s priorities.
Organisations go through change and challenge constantly, particularly when operating in an uncertain or volatile economic landscape. Any kind of substantial change has the ability to negatively impact on culture; this could be due to mergers and acquisitions, a change in strategic direction, a change of CEO or leadership team, or an operational adjustment to the changing external landscape.
One of the critical elements to creating a positive organisational culture is having an engaged workforce. Research conducted by Gallup in 2016 suggests that today’s millennial workforce is not only the least engaged generation in the workplace but also the most likely generation to switch jobs – thus requiring a different approach to keep them committed to and inspired by their employer.
A lack of employee engagement within a workforce not only has negative impacts on individuals but also impacts detrimentally on business performance too.
Do any of these statistics from Gallup ring true or surprise you?
Have you considered how critical personal and organisational values are within this space?
Values run deep, guiding our decisions and behaviours. It’s important, therefore, to consider the imperative link between personal and organisational values and culture. The 2016 Gallup survey estimated that as few as 23% of employees felt that they could apply their organisational values to their work every day and only 27% actually believed in them! This indicates a worrying misalignment between personal and organisational values and culture.
Current organisational culture should be considered regularly. Staff surveys, whilst helpful, are only one indicator of current culture and engagement levels and can often mask some of the hidden issues which, if left unchallenged, have the potential to cause significant and negative impact.
To explore values – what they mean for us personally and as organisations – we work through a ‘Cultural Values Assessment’ that provides leaders with an invaluable opportunity to understand how to connect employees within their organisation, increase engagement, improve culture and draw out any hidden challenges which might ‘get in the way’ further down the line.
If you are planning or going through any form of cultural change or integration, why not get in touch to see how we can help and support you.
This DTP Views is from the founder, Georgia Parker, of our partner, Whole Spectrum.
‘Culture eats strategy for breakfast’, the famous maxim by Peter Drucker (pioneer of management thinking), has been on my mind a lot recently.
I’ve been talking with colleagues and clients about why culture takes so much work to get right and how often this critical piece of leadership work gets put to one side or simply forgotten.
All too often we come into an organisation to assist with culture and leadership development only to realise that the existing culture has been created unconsciously, without a collective approach to bringing to life the ‘way we do things round here’ that will be most beneficial in realising the organisation’s strategy.
There is little point in having a healthy culture if it is not aligned to delivery and strategy. Chances are a lot will get done, but will all that work be heading in the right direction? I’m not advocating a focus only on people and behaviour, but the potential outcome of ignoring these crucial areas is that, over time, performance and results begin to slide and strategies don’t get fully realised or delivered.
To help me think about why this is, I have adapted and use a model from Dr Mike Fisher. It’s called the ‘Four Dimensional Model for Excellent Performance’.
Fisher’s model shows that:
which in turn impacts on the team and on the execution of the task and so on . . .
Fisher stated that 80% of conversations at work are focused on ‘the task’ and yet that is only 25% of what makes up excellent performance. When we fail to pay sufficient attention to individuals, the team and the dynamic that exists between those elements and the task, we are missing a trick. A big one!
Fisher’s model also highlights the effort and time required to create and sustain a healthy culture that supports the organisation to deliver its strategic goals. If it takes 80% of our time to just get the tasks done, no wonder it’s so hard to create buy-in and momentum for change.
It is primarily leaders who initiate and role-model behavioural changes in line with the organisation’s vision and values. Many leaders find this almost impossible; it is a full-time job on top of a full-time job. But unless they can find the flexibility, capacity and capability to show their teams what is needed in terms of behaviour and culture, nothing much will change.
Using Fisher’s model helps me understand why culture eats strategy for breakfast and how difficult it can be to change our leadership or breakfasting habits! I default to a protein shake when I’m in a hurry and need to get going, as I can drink it in the car. It’s a habit I’ve had for years (and better than a can of coke and a Twix as it would have been in my student days).
Successful leaders have usually got to where they are because they are good at strategy and execution. They are measured on delivery and performance in terms of tangible results. This is their habit. This is what they are used to. They can rely on themselves to be effective as they know what they are doing and it’s familiar, habitual.
So unless there is to be a shift, one that is agreed and recognised as being valuable, towards measuring impact on culture and behaviour, it’s really hard to make something different for breakfast, especially when there never seems to be enough time.
We can help measure culture and create meaningful data that generates new and different conversations about who you are, how you work together and the kind of behavioural impact you create. We usually start this dialogue with leaders and almost always find ourselves involved in, or leading on, an organisational-wide engagement programme to take it forward. This is the way to create cultural change; by spending time with people, talking and – crucially – listening to what’s important to them and what they need to behave in new and more positive ways.
And very often, some bacon butties (or smashed avocado on toast) at a breakfast meeting is a great way to start. Culture and strategy for breakfast is, in my opinion, the healthiest option all round.
In a recent article in Inside Housing, interim chair of the Regulator of Social Housing Simon Dow set out the key issues currently exorcising his organisation. Value for Money may have come third in his list, behind service standards and Brexit, but it was the subject he devoted the majority of his article to. We would do well to take the hint I think: right now, the regulator still sees value for money as a critical means to an end.
His clarity will be welcomed by a sector still coming to terms with the new Standard which came into force in April 2018. The article’s timing was deliberate, landing in the month the majority of providers start to prepare their annual accounts for financial year end. And it carefully balanced useful reminders about the purpose of the standard, with one or two thinly veiled warnings.
Make no mistake, the “proportionate approach” of year one of the standard is a thing of the past. Back then there was a recognition that providers were still familiarising themselves with the new reality. Don’t expect such benefit of the doubt to be exercised in year two.
“Now that a year has passed, it is important that boards have assurance that they are meeting all of the requirements of the new standard,” he wrote.
The majority of providers were praised for reporting their performance against the regulator’s seven new financial metrics in their annual accounts. We know only too well through our work with providers that the new standard is all about transparency, and by providing an accurate picture of how they were doing these providers were helping meaningful comparisons to be made across the sector.
But some organisations had not calculated the metrics on the same basis as everyone else. The regulator couldn’t have been clearer – don’t expect leniency this year.
The first year of reporting against the new standard has also delivered some real insights. We now know, for example, that providers in the same groupings – LSVTs, London-based organisations, supported housing providers – have significantly different stories to tell when it comes to value for money. That underlies the critical importance of understanding your own context and cost drivers.
The data also revealed, not surprisingly, that overall costs were up, operating margins were down (a result of the rent cut) while reinvestment was up. Again, this will prove useful for the government, and for all of us, to have concrete data on these issues.
I don’t expect the second year of reporting to deliver 100% compliance from all providers. The sector has not universally got to grips with the new standard, and I’ve no doubt the regulator will again have to issue warning letters (or worse) to non-compliers.
To get there, we still need to see greater understanding of the full range of internal and external reporting requirements of the new standard. A culture shift is required to truly embed and apply the standard’s three Es – economy, efficiency and effectiveness – into all areas of activity.
At the operational and strategic level, all providers need to understand exactly how their resources and assets are used across the organisation. And ultimately, we need a consistent focus across the sector on optimising the financial return from our assets. And where we are not doing this we have to be constantly asking: why not?
We are working with providers to support them to comply with the requirements of the new standard. And we are telling them the RSH’s interim chair couldn’t have been clearer: we want you to grapple with these key questions; to demonstrate how you are deploying your assets and resources to deliver on your objectives. As organisations with sometimes intangible social purpose, that won’t always be straightforward. At least we now have a clear framework within which to do so.
As Oscar Wilde once said, “there’s only one thing worse than being talked about … and that’s not being talked about.” Right now, the social housing sector certainly can’t complain that it isn’t getting tongues wagging. In political circles at least we have a high profile, though of course everything takes a backseat to Brexit at present.
Not only that, the attention we are receiving is generally favourable. The government is keenly aware that registered providers have a part to play in its domestic agenda – whether it’s building more homes or delivering on its social justice objectives.
However, in a political landscape which can undergo tectonic shifts overnight, we would be wise not to take this for granted. Remember the 2015 rent cut? That unforeseen change in the operating landscape forced all of us to rethink our assumptions almost immediately. Such curve balls can come at us unexpectedly even in normal times – and these are far from normal times.
Sector leaders who we talk to for our bi-annual Exchange report recently gave us a nuanced view of this “fragile peace” between providers and the government.
“Make hay while the sun shines” quipped one, while being ever mindful that the government will expect a quid pro quo in return for its support. Many see opportunity rather than threat: “doing what has been asked of us can only enhance our reputation”, was the view of one CEO. If it means we can demonstrate what we can do, then that can only be to our advantage in my view.
Reputation aside, what are the opportunities and threats which we face? Brexit clearly remains an immense looming challenge which cannot be avoided. However, the government’s recent negotiation of a six month delay to leaving the EU doesn’t just give policymakers an opportunity to pause and reflect. It also, in my view, gives our sector the chance to take stock and think about where we are headed.
Our Exchange discussions certainly offer some reasons to be optimistic. Many leaders report improving relations at the local level with councils, MPs and devolved authorities. We also picked up on a growing sense that renting rather than owning a home was gaining in popularity, especially among young people. If we can offer people good quality, stable rented accommodation as an alternative to expensive home ownership, we could be onto something.
Being “part of the solution, not the problem” depends, in part at least, at getting better at telling our story. Explaining what we do and why we do it means communicating our wider role: as community anchors, care and support providers and developers of new homes. Get it right and there could be many opportunities for us.
Risks of course remain. What might a change of government mean? Would an ideologically left wing Labour administration be good or bad for the sector?
At least in terms of the current government’s thinking we now have a degree of clarity thanks to last year’s Green Paper. Admittedly, that has to be tempered by a recognition that the “current government” may not be in post in 12 months’ time (or less!).
Views on the Green Paper in our Exchange report were mixed. There was broad agreement on the key tenets but this was tempered by some cynicism and even disappointment.
That said, we do now have a clearer view of the potential direction of travel when it comes to tenant involvement, making homes decent and safe, complaints resolution and changes to the regulator. Sometimes you can tell a lot from a paper or a report from the amount of times a key word or phrase is used. In the Green Paper the word ‘tenant’ was used 121 times; the word ‘resident’ 306 times. By contrast the words ‘governance’, ‘board’, and ‘co-regulation’ each appeared just twice. I don’t think it’s too big a stretch to see this as a genuine change of emphasis. Of course the devil, as always will be in the detail. Where was the discussion in the paper of homelessness, welfare reform and social care? These subjects were conspicuous by their absence.
There was a similar mixed reception in DTP’s Exchange report to plans for league tables and for a new approach to regulation based around consumer standards. More common ground was notable when we talked to CEOs about the paper’s discussions around reducing the stigma associated with social housing. In fact, there was across the board support for improving the perception of social housing and those who live in it.
We would do well to remember this when considering how to improve perceptions of the sector itself. If many of the above risks are beyond our control there are others which are certainly not. A number of contributors to our Exchange initiative pointed to a collective failure at times to own up and admit mistakes when found guilty of “stupid things” such as excessive salaries, pay-offs, auctioning properties and abandoning inner cities. These “unforced errors” are made all the worse by not “owning them”. The recent Channel 4 Dispatches documentary about Sanctuary Housing Group saw the Chief Executive respond with a lengthy statement focusing on how the programme had misunderstood the group’s purpose, but admitted they could learn from the scrutiny and were now starting conversations with tenants about the quality of their homes.
So although Oscar was right, and being talked about is preferable to being ignored, we need to work hard as a sector to ensure the narrative is in our favour. We’ve got a great story to tell … and it’s time we talked ourselves up!
The English novelist and playwright John Galsworthy once said: “If you don’t think about the future, you cannot have one”. Thinking about the future, however, is not the same as trying to predict it – and if the last few years have taught us anything, it’s that it would be foolish to try to predict anything.
Giving serious thought to what things could happen, and planning for how you might respond, is of course a different matter. In fact, it’s entirely sensible. A ‘no deal’ Brexit, for example, may well never happen. But it would be madness not to prepare for it; to ‘stress test’ the impact it might have and to prepare appropriate mitigating strategies.
Stress testing and thinking about the future have become the new normal for registered providers of social housing in recent years. That can in part be traced back to the financial crisis of 2007/08. When the practice was brought in for banks to improve their resilience, it was perhaps inevitable others would soon be expected to follow suit.
When it became a regulatory requirement in 2015 the approach remained a bespoke one. The regulator took a relaxed approach and wisely resisted calls to provide more clarity on what it expected. Stress testing should reflect each RP’s individual circumstances – what was right for a large provider in the South East wasn’t necessarily right for a stock transfer association in the North.
The then chair of the HCA’s regulation committee even went as far as saying if providers were only carrying out stress testing to please the regulator they were “starting from the wrong place.” They should, in other words, be doing it for the benefit of their own business.
Recently, we have seen more specific guidance from the regulator, however, it still encourages a tailored approach. Where it has sought to encourage greater consistency, it is more to do with process: for example, there has been greater emphasis on the involvement of boards.
At DTP, our stress testing work with clients considers carefully their own unique circumstances and challenges. Even where factors may affect the whole sector – Brexit for example – it’s about looking at how it might impact on that particular organisation.
But there are a few universal principles which can be broadly applied to the process.
As a starting point, stress testing needs to deploy a deeper knowledge of your business and its potential challenges in the face of adversity. This means it has to be properly informed by the corporate plan (and its key objectives), the financial business plan, the risk register (which must be fully reflective of the real business risks) and the assets and liabilities register. It’s vital that these key documents and records are joined up – and that they project an up to date and coherent narrative about your business.
Then it’s about developing a series of practical tests which reflect all known internal and external risks. Brexit is of course high up the list right now – and, in practice, that means the likely economic impact of a no deal, from inflation and house prices to the cost of borrowing and the value of the pound. It is worth considering rising costs of materials (fall in Sterling) and labour (fewer European workers), and potential failure of (more) contractors (counterparty risks).
Stress testing is not just about identifying risks however – it’s also about putting together credible plans to address those risks, should the worst happen. Mitigations need to be relevant to your business, deployable and up to date. It’s also important to be aware how long specific actions will take to be deployed, so you can decide which should be prioritised.
Many RPs we talk to are finding it useful to combine all this information into a resilience statement document which is regularly updated and approved by the board.
Here, it’s essential to set out your golden rules and triggers – a list of adverse scenarios and what plans will be mobilised in the event of them occurring. These scenarios could include stopping development, cutting back on planned stock investment, bringing forward the refinancing of the loan portfolio, and cutting back on management costs (staff).
All of this sounds like a potential additional administrative burden for RPs. But it’s worth the effort in our view – and not just to please the regulator. Ultimately it will help you to be more resilient, and to prepare for adverse events should they occur.
Yes, predicting the future is impossible – but by taking stress testing seriously you will at least increase the likelihood of having one.
In my last blog I looked at some of the key themes which are emerging in recent Regulatory Judgements issued by the Regulator for Social Housing (RSH). From our detailed analysis of these judgements we have identified an increased focus on risk, control of non-social housing activity, stress testing and health and safety.
In most instances the majority of downgrades of registered providers (RPs) of social housing still arise as a result of In-Depth Assessments (IDA).
So what should providers do to ensure they are prepared for an IDA? And how can you ensure you come out of the process with your grading intact – or in certain circumstances improved?
The first thing to note is that evidence of good governance is critical to the IDA process. Concerns around financial viability, while important, are more likely to emerge through ongoing regulatory engagement, being identified via financial returns to the regulator. The first evidence the regulator has on governance meanwhile comes often from an IDA. If I could summarise my advice to providers in three words it would be: governance, governance and governance.
Providers need to fully understand what the RSH wants and expects when it comes to governance. Crucially, it is looking for evidence of a board which has a clear understanding of the expected culture, behaviours and standards of the organisation. That starts at the top and is built on probity, openness and transparency.
As increasing professionalism is required of boards, and it’s important that boards understand exactly what is expected of them. That demands a realisation of the time commitment involved and the requirement to get to grips with the complexity of the issues being faced. We have seen a big uplift in the skills of boards in recent years, so all the signs are that the regulator’s confidence in their ability is growing.
Board composition must balance continuity and renewal, experience and the need for a fresh outlook. Annual performance appraisal, both at the individual and collective level, needs to be robust and meaningful. If the role of political appointees to the board and tenants has diminished or disappeared, what are you doing to ensure those voices are still heard and listened to?
The IDA will also want to see evidence of a clear and considered approach to succession planning. Do you know what the terms of office of your different board members are? Do you have plans in place to ensure you effectively manage the process of renewal? It’s always about looking ahead – seeing who will be leaving in the short to medium term and who you might bring in as a replacement.
Your chair too will also face scrutiny. Do they provide strong and inclusive leadership? Are they a good ambassador for the organisation? Do they manage meetings effectively and facilitate good decisions? Do they have good relationships with the chief executive and other board members?
The role of the company secretary (often an underrated role in my view) is also important. This is about more than just coming to the meetings and taking the minutes. It’s about having a detailed understanding of the rules and constitution of the organisation – and being able to advise the chair accordingly. It’s essential this role is resourced properly, and given the attention it deserves, in my view.
On top of this, there is a requirement for clarity on an RP’s strategy, mission and values. That means having a clear answer when it comes to questions such as: what are we doing and why we are doing it. As challenges and opportunities arise, a credible and clearly understood response needs to be crafted in response to these questions. Remember, the regulator will observe a board meeting and interview the chair. Are you ready for this?
Other factors which should also be on your agenda before an IDA include: risk management, internal controls, stress testing, your approaches to partnerships and joint ventures and your assets and liabilities register. The IDA will place all of these under a glaring spotlight and you need to be ready to explain your activities and the rationale behind them.
That aside, what can you do to prepare yourself for an IDA?
On a practical level have all your documents ready and reviewed. First things first, make sure you know where they all are! Identify any gaps and ensure they are properly referenced.
Have a trial run if you can of some of the key elements of the IDA including interviews – this is especially important for non-executives who might be less sure about what might come up.
Crucially, preparation must involve getting your story straight: making sure everyone is singing from the same hymn sheet. Anticipate what areas the regulator will want to delve deeper into – with these most likely to focus on areas of risk.
Ensure you have a good grasp of the facts and figures which the regulator will expect you to evidence.
And most importantly keep calm and carry on! An IDA is a great opportunity to tell your story and demonstrate to the regulator that your organisation is playing its part. Don’t waste it.
Romance may not be dead in the 21st century, but it has certainly embraced the digital age. If you’re looking for love this Valentine’s Day there is no end of internet dating sites or mobile phone apps designed to find you a perfect match. Yet on February 14th this year, millions of us will choose the old-fashioned method of expressing our feelings – by handwriting a message in a card filled with love hearts. Some things never go out of fashion.
Sadly no one has built an algorithm yet which can match registered providers of social housing with their true love. Many are out there looking for a partnership, but finding a mutually compatible organisation isn’t easy. Like all the best relationships, it takes hard work and commitment. And it’s vital you look beyond the head rush of a whirlwind romance and think of the long-term benefits of being together.
Providers certainly face lots of external pressure to get together right now. Government pressure on providers to build more homes and deliver value for money gains is relentless. And, like it or not, alternative structures, different operating models and mergers must be on your agenda.
But unlike the world of romance, the head needs to rule the heart when it comes to finding a partner organisation. The last thing you should trust is your feelings; what’s needed is a cool assessment of the facts.
So instead of rushing head long into an unsuitable relationship, first take a step back and ask yourself what your own priorities are as an organisation – around issues such as growth ambitions, development targets, community investment, financial resilience, and the type of homes you want to build and where you want to build them. You may have set those priorities a long time ago, but taking a fresh look at them from time to time is always worthwhile.
Next, ask yourself a simple question: are we better off alone, or would joining forces give us a better chance of meeting these objectives?
If the answer is yes to a partnership, start to think about what you are looking for in a partner, focusing first on essential criteria (the things which you can’t compromise on) and also desirable criteria (those which would be attractive but not necessarily essential).
If it’s essential a partner organisation operates in a particular geographical area, or if scale is important, then this can help you narrow down your target list.
While there’s no equivalent of match.com, finding information about potential mutually compatible partners is often easier than you might think. You might already know a fair bit about an organisation you are considering partnering with, but much more information is generally publicly available on websites (such as accounts, corporate plans etc).
Although the process should be led by your board, a smaller working party or steering group might be a good idea at this stage. An external adviser might also be helpful to lead and guide the board, to ensure focus, sticking to timescales and to advise on communications.
Start with a long list, from which you aim to choose a short list of organisations which are most likely to meet your agreed criteria. A desktop analysis is your starting point: looking at considerations such as stock location, organisational size, type of stock (eg general needs, housing for older people, supported housing), financial indicators, growth plans, community focus, regulatory judgement, values and culture, and appetite for partnership. There may be other considerations which might help the board to decide whether the partner can deliver its stated criteria.
Again, it’s about digging into those corporate plans, as well as statutory accounts, performance information, and tenants’ newsletters, and using what you already know, to establish the facts. Local knowledge and consultant expertise might also help you.
At this stage, it’s about eliminating those who don’t meet the grade. Does their corporate plan tell you they are actively seeking merger partners to enable growth? Do their development, new build and acquisition targets chime with yours? Do they have a G1 V1 rating from the regulator? Are they committed to investing in services above and beyond housing, such as community activities for residents? It’s personal to you, but these are the types of questions you might want answers to.
Having picked your shortlist, it’s time to invite them to respond in writing to a formal invitation to ‘express an interest’ in partnership. It’s important to provide information and context so that they fully understand the background to your organisation, your drivers for partnership and the criteria upon which a judgement will be made.
Set out a timeline for the process, which will usually involve some form of interview and presentation, and also submit a request for information regarding financial and other performance. Remember, it’s about them providing evidence that they meet your criteria. Delve into their accounts/business plan to look for evidence of strong financial status; look at their development plans to establish their growth criteria; and ask for case studies (on community investment activities, for example).
Next, make a formal assessment of these submissions, including the additional information, before setting tailored questions for exploration during the interview process. At interview, your prospective partners will be invited to present their submissions. Then it’s time for your board to make its assessment, based on its views of the potential partners’ ability to meet your criteria.
If, after all this, you decide you’re a match made in heaven then the next step is to establish a clear process for partnership, with gateways and milestones along the way. The first important step will be to jointly prepare a ‘statement of intent’, a (non-legal) document setting out your aspirations. This should reflect the views of both parties and any commitments that have been made so far. If both boards, having reflected on the statement, agree that it meets their expectations, then the process of formally bringing the partners together can begin in earnest.
If you’ve got this far think of it as an engagement – with the long road to the wedding day still to come. Happy Valentines!
Here at DTP we have been keeping a very close eye in recent years on changes to social housing regulation: what it means for the sector, what impact it’s having and how registered providers should best respond.
In previous blogs, we’ve reported that many organisations have been quick to downplay the significance of the changes. The government may have moved to a system based on ‘light touch’ regulation, but that isn’t to say registered providers (RPs) are under any less obligation to be viable, efficient and well run. The government still wants the sector to play its part in delivering the homes the country needs, and it wants to see evidence that providers are acting in the best interests of tenants and communities.
Take mergers, for example. There has been no ‘free for all’ just because the regulator now only requires notification after the event. The same applies to decisions around asset management and stock portfolios: you may only have to notify retrospectively, but due diligence, a sound business case and due regard to reputation are still required.
All of which isn’t to say there aren’t examples of poor performance when it comes to governance and viability. And in its Regulatory Judgements on these matters, the Regulator of Social Housing (RSH) has been no less willing to step in and downgrade if it sees evidence of shortcomings. We’re not necessarily seeing more downgrades – but I think we are seeing the regulator shift its focus slightly.
Not surprisingly, deregulation has meant an increased stress on governance – certainly from the evidence we have been gathering. Also worth noting: most of the downgrades to G2 or worse have come as a result of In-Depth Assessments (IDAs). There are cases of self-reporting of failure, and in some cases whistleblowing, but the IDA remains the main source of governance downgrades in particular.
The government’s new Value for Money standard may also start to have an impact in the near future. The replacement of annual self-assessment with seven new metrics common to all providers, means a new emphasis on this in an IDA. Failures in any one of these areas can result in a governance downgrade.
New themes are also emerging in the lists of Regulatory Judgements being published by the RSH. Again, some of this can be traced back to deregulation in my view.
Firstly, risk has assumed even greater importance. In one recent high profile example of a downgrade, a provider was downgraded for failing to develop a proper business case for transferring stock to a ‘for profit’ provider, and to fully assess the risks involved. Of course, prior to deregulation this would have required consent from the regulator before the decision was taken. Not any more, and we may well see more of these type of downgrades from the regulator.
Running in parallel to this is a renewed emphasis on reputational risk. When making an important strategic decision, boards need to be constantly asking themselves: how does this look to the outside world?
Another area which is seeing greater scrutiny is internal controls in relation to non-social housing activity. This might include commercial subsidiaries, development subsidiaries or joint ventures. The regulator is increasingly interested in where control lies for these activities in an organisation. And it wants evidence that a provider has understood and put in place measures to manage the risks involved.
Stress testing is emerging as another theme of growing importance. This might be of ‘bigger picture’ factors beyond an RP’s control – for example, Brexit, a further rent cut, economic recession, or falls in house prices. Or it might be of things which are unique to a particular provider: say an increase in its rent arrears or rising void levels.
The regulator wants to see clear evidence that RPs have credible plans in place to deal with these eventualities should they arise. And to reiterate: not having them can result in a downgrade.
The final theme which is emerging is around health and safety, which has gained significant profile as a consequence of the Grenfell tragedy. In short, greater demands are being placed on boards to demonstrate that they have the right policies and procedures in place to keep tenants safe. And it’s all about the data: do you have the information to back this up, whether its electrical testing or fire risk assessments?
All of this underlies the importance of improving our approach to governance and risk management, and for boards to assume greater responsibility and to up their game when it comes to skills and competence. The good news is we are seeing more evidence of collaboration and co-production in my view, with boards increasingly aware of what they are there to do. There’s less adversarialism between boards and executive teams. Yes boards are there to challenge the executive when required, but they are also there to support them.
Ultimately, the regulator is just looking for evidence of good business practice – that you are running a tight ship and an effective social business. That’s not unreasonable, and in some respects, despite the new themes which are emerging, the process remains a good opportunity to make improvements and to undertake a thorough analysis of your strengths and weaknesses.
Given the important part which IDAs play in all of this, I’ll be sharing some specific advice and guidance on these in my next blog.
When it comes to making the headlines, housing association chief executives aren’t ranked as highly by newspaper editors as the bosses of major car manufacturers. So if Toyota or Jaguar Land Rover go public with their concerns over Brexit you can be pretty sure they will have the attention of the nation’s newsdesks.
But the heads of the registered housing providers I talk to are as concerned as the captains of industry about what might happen after March 29 next year. And their voices too need to be heard.
Much of their anxiety stems from the uncertainty which Brexit is creating – for their businesses and for their customers. Theresa May crossed a significant hurdle last week when the first draft of the Brexit withdrawal agreement was finally published. But it’s hardly proving popular, and many more hurdles lie ahead, with the danger of ‘no deal’ remaining a real prospect.
If that worst case scenarios does materialise, then it will be the poorest in society who will end up being worst affected. And yes, that means people who live in social housing – something which hasn’t escaped the attention of those who collect their rent. Already hard hit by austerity and welfare reform, these are the very people who would suffer the most if the UK economy takes a post-Brexit downturn.
There is also a cruel irony, not lost on the chief executives I speak to, that many tenants voted for Brexit in the belief it might make life better for them. What effect might Brexit have on quality of life on our housing estates if anti-social behaviour, social unrest and hate crime take hold?
So it’s with good reason that Brexit remains top of many housing association risk registers. And the risks certainly don’t end with tenants.
Housebuilding is another major concern. We all know the country needs more homes and the government is expecting registered providers to do their bit. Brexit could act to thwart those ambitions – and housing associations could well find themselves under fire, unfairly so.
If Theresa May doesn’t get her deal through Parliament and we crash out of the EU next spring, then customs checks at Channel ports could well be a reality for importers and exporters. The impact this could have on raw materials vital to the house building industry, such as bricks and timber, coupled with higher prices as a result of the continually falling pound, could hit supply chains.
We also might find it harder to recruit the construction workers needed to build new homes (in London and the South East where EU nationals often make up as much as 25% of the construction workforce, this problem could be particularly acute).
Then what happens if the house market crashes (as the governor of the Bank of England has predicted in the event of no deal)? Providers’ cross subsidy strategies would be thrown into chaos if market sales took a nose dive, resulting in even fewer social rented homes being built.
Further uncertainty remains over how construction projects might be financed in the event of a macro-economic slowdown. In DTP’s latest Exchange report, our bi-annual survey of senior figures in social housing, we heard evidence of debt restructuring and early re-financing as part of Brexit preparations.
One in four of the survey respondents we spoke to said they were looking again at their loan book. The good news is that in many cases these organisations are getting good deals, with institutional investors, especially pension and insurance funds, willing to lend to registered providers. Competitive rates of 3.5 per cent are typical, with the sector being seen as a safe bet, well insulated from the vagaries of economic cycles.
This forward planning is sensible but it remains important not to panic. And in other areas it’s not as easy to forward plan.
Other organisations we spoke to said, refinancing aside, that robust business planning is becoming impossible given the opaque outlook on the economy. How can we plan anything with any certainty while there is so much uncertainty about everything from inflation to interest rates?
It’s easy to become disheartened in such circumstances. And while most are gloomy, our Exchange research did find some possible reasons to be cheerful. Might a labour shortage allow us to skill up local communities by, for example, promoting apprenticeships or creating new training and employment opportunities? If private house builders ‘down tools’ as happened after the last recession could social housing providers step in and be part of the solution? All possible, but they seem to me like small comforts.
So with this in mind, and weighing up the uncertainties we face, I believe action is needed to mitigate or potentially even stop Brexit if the economic consequences are deemed too severe. It’s not too late, and calls for a People’s Vote offer one possible way forward, certainly if Parliament cannot reach a consensus.
In the end, nothing we do may make a difference. We may leave the EU with no deal and the consequences could be catastrophic. I for one, however, do not want to look back in years to come and say I stood by and let it happen. Too much is at stake.
As the mandarins and ministers in the Department for Housing, Communities and Local Government look back on nearly 18 months of social housing deregulation, they can probably do so with a certain amount of satisfaction. On balance, it hasn’t caused major disruption to the social housing sector. At the same time it has achieved the policymakers’ aim of removing Registered Provider (RP) debt from the Treasury balance sheet: within six months of the new regulatory regime coming into force, the ONS had reversed its previous decision to classify social housing providers as public bodies.
Meanwhile, from conversations we have recently been having with sector leaders, the overall response seems to be: “what was all the fuss about?” We appear at no greater risk of poor strategic decisions being made; in fact I think we are seeing greater signs of improved accountability and transparency, particularly at board level. Decision making is, if anything (in most cases), getting better.
Most panel members we spoke to for our recent DTP Exchange Report said they had noticed little adverse impact from the reforms. Many said they have continued to appraise decisions such as stock disposals and mergers as if they were still having to jump through the regulators’ hoops. Proper due diligence is still seen as a business essential, even when advance sign off from the regulator is no longer needed.
Those who have charitable status also still face regulation from the Charities Commission, especially around disposals or constitutional changes. And there is a growing expectation that boards must do more to ensure sound strategic decision making.
Take stock disposal, where the onus is now on providers to give notification after the event, as opposed to securing advance approval. Most of the providers we spoke to said they are not disposing of that much stock anyway, certainly not out of the sector. Instead, many are focused on much more active and intelligent asset management. This might mean sophisticated methods of calculating a property or estate’s Net Present Value and beyond, which involves looking at all the costs and benefits of a property, beyond simple financial measurements.
Social or community value might, for example, be taken into account, and the net result can be a better understanding of what investment is required to improve the return on your assets. Most disposals that are taking place are between providers rather than out of the sector.
Constitutional changes are being approached in a similarly responsible way. Just because social housing organisations no longer have to obtain regulatory approval does not mean they are throwing caution to the wind.
At the same time, the reforms have reduced the paperwork and bureaucracy involved in making such decisions. This has to some extent enabled organisations to be more agile and responsive to opportunities. One provider, for example, said they were using deregulation to explore ways they might work with pension funds and ‘for profit’ providers to deliver new housing development. Another said setting up a commercial subsidiary had been made easier by no longer having to apply for consent beforehand. So there are some signs out there that deregulation might be facilitating innovation.
One noticeable impact of the reforms has been felt by a small number of former stock transfer providers. Here, we are seeing an acceleration of the move to more skills-based boards, with less local authority involvement in governance. To be fair this process predates deregulation, but it has noticeably accelerated as a result of the deregulatory measures.
I think we have largely seen the impact of the reforms play out and I don’t expect any significant major ramifications to emerge. In many respects the reforms represent the strengthening of the sector’s independent voice and that should be welcomed.
Where we might be headed in the future is less certain. Before the publication of the Housing Green Paper mid-August, one could perhaps have speculated about further deregulatory measures, not least assuming that Brexit happens and the UK removes itself from the rules and regulations of the EU. However, as is now well understood, the Green Paper proposals (and they are, after all only proposals) infer increased regulation in certain areas, or at least enhanced powers for the regulator. We’ll be looking to engage the thoughts of sector leaders on this for future Exchange reports. Watch this space.
In a previous blog I cautioned that the regulator’s new Value for Money Standard for the social housing sector could have unintended consequences – and that by their nature these are difficult to predict. Well a consequence is certainly starting to emerge – although to be fair to the regulator its intentions were not exactly hidden. Still, the reaction probably wasn’t expected.
The standard places a requirement on Registered Providers (RPs) to give, “regular and appropriate consideration by the board of potential value for money gains – this must include full consideration of costs and benefits of alternative commercial, organisational and delivery structures’. It doesn’t take much reading between the lines to see that this means mergers should be given serious air time by boards.
Given the first reporting against the standard isn’t due until autumn we may have to wait a while to see how this might play out. But already some of the smaller providers I’ve been talking to are worried. Their concern is that they could be bounced into mergers against their will. Often faced with higher operating costs – now publicly available for all to see – there could be pressure on them to consider joining forces with a larger provider as the answer to all their problems.
My view is some of the smaller housing associations might be worrying unnecessarily. And there are several reasons why.
The crucial thing to remember here is the government doesn’t simply want to see mergers for mergers’ sake. It wants to see fewer, larger RPs because it believes this will improve operational efficiency. And it thinks improved operational efficiency will free up more resources for development. More homes is the aim, how we get there is up for grabs.
Firstly, all RPs are independent and can’t be forced to merge. Concerned smaller providers should remember this – although it’s true pressure can be applied.
I think the key defence against unwanted mergers may come from the government’s own arguments about efficiency. Put simply: merging a small RP of say less than 1,000 properties into a larger organisation probably won’t deliver significant cost savings for either party. And when you remember that providers with less than 1,000 homes account for just 5% of all social housing provision, it isn’t going to have a big impact on the government’s overall aim to increase the amount of development.
It can be argued that the sector would be better off if merger efforts were focused on medium and larger organisations. Here, the benefits are still there for the taking: staff/management reductions, procurement wins from economies of scale and cheaper office and accommodation, lower overheads including HR, finance and legal. We’ve worked with a number of RPs in recent years which have gone down this route and are able to demonstrate very significant, quantifiable savings in the first few years, alongside increased development capacity. The key is to make sure you set targets for efficiencies and measure how you are performing against these over an agreed period of time. And if you go off course, get back on quickly!
Of course, other options are available to smaller providers – without necessarily going down the full merger route.
They may be able to tap into some of the benefits enjoyed by larger organisations by nature of their size. For example, a small provider might not be able to justify having its own legal team, but it could procure the services of a lawyer from a larger provider which can. This is likely to be cheaper than hiring a lawyer from the commercial sector, plus it keeps things ‘in-sector’. Cost sharing vehicles to pay for services such as repairs and gas servicing are also an option, and there are some good examples of these working well. Collaboration and partnerships may therefore be the best route to improved efficiency for some.
Reviewing current organisational structures could also offer some providers another reasonable defence against merger. Are those subsidiaries you set up to a few years ago still the best way to deliver your objectives? Are they largely creating another layer of management and bureaucracy? Could your organisation achieve cost savings from a simpler, more flatter structure? Probably. It’s certainly worth looking into and taking some expert advice.
Ultimately, the regulator is not fixated on mergers but wants to see a continued emphasis on efficiency. Whatever works should be the approach.
The Value for Money Standard should itself help with this. It has been broadly welcomed and offers a clearer and simpler system of reporting. No system of regulation will ever be perfect, however. And I certainly can’t guarantee there will be no further unintended consequences in the future. We await the first reporting of figures in the autumn with anticipation.
In my last blog on the Regulator for Social Housing (RSH)’s overhaul of the Value for Money (VFM) standard, I concluded by suggesting the devil would be in the detail. So, the consultation is now over and we have had a month of life under the new regime. The details have been confirmed and we have a much better understanding of what the new regulatory approach looks like. There’s still much to get to grips with –but we no longer have the excuse of ignorance.
It’s all there in black and white, most notably in the seven ‘compulsory’ metrics which all Registered Providers (RPs) must report on annually in their statutory accounts, starting now. The era of lengthy, narrative self assessment is over; welcome to the brave new world of economy, efficiency and effectiveness. These ‘three Es’ are fast adopting the status of a mantra. In reality, the changes between the old approach and the new are not many: reporting has changed, yes, and there is an enhanced focus on the role of boards, in delivering VFM across the whole organisation (not just social housing), and – perhaps most pleasing – tenants re-enter the world of VFM regulation, with reference to ‘investment in services to tenants’.
In terms of the metrics, these are in large part the ones that the social housing sector itself wanted, being a subset of the ‘Sector Scorecard’ – a sector-led initiative which successfully concluded its pilot last year, and is already ‘live’ for data entries this year. So it’s not surprising that most noises from sector leaders on the Standard have been upbeat.
My view is the VFM standard, and its accompanying Code of Practice, should be broadly welcomed. It provides the foundation on which the sector can achieve its key objectives of building more homes, improving existing properties and delivering better services for tenants. It should give the government, the RSH and providers a more informed, evidence-based picture of how the sector as a whole is performing, and how organisations compare to their peers. And it makes a good starting point for addressing some of the wide cost variations within the sector.
The devil is now in another detail – how well RPs will rise to the challenge implicitly set by the new Standard. This challenge is complex but ultimately rests on creating a new VFM culture, one which is embedded throughout every organisation’s structure and within its key objectives.
It starts with the board, which has to take a strategic lead in VFM, ensuring you have an effective reporting framework and targets for both the RSH metrics and your own VFM measures – targets which reflect your individual story. In many cases, more will be required of boards to make sure this happens.
Crucial first decisions include whether your VFM approach should be a standalone strategy, or something embedded in your existing corporate objectives. And don’t take your eye off the In Depth Assessment ball – as this will remain the key assessment method for VFM. Everything needs to be better: decision making, options appraisals, performance reviews. And a deep and broad analysis of assets across your whole organisation – not just social housing – will be needed. Are you optimising the financial returns from those assets – and if not why not?
It’s about constantly asking questions – and making sure you can answer them. What are your costs and what are driving them? How do those costs compare with others and how are they changing over time? Are you regularly and pro-actively considering structural changes which can help you address VFM challenges: e.g. mergers, diversification, partnerships and changes to your geographical reach? Have you weighed up the risks and rewards of your non-social housing activity? Is your board equipped to hold your executive to account? From now on, VFM has to permeate everything you do: from corporate governance to contracts, procurement, cost sharing/partnerships, from non-social housing diversification to consideration of mergers and acquisitions.
And as for the three Es, a mantra is one thing, but you also need a deep understanding of what they mean. Economy is all about inputs, how you minimise the cost of resources while having regard to quality. Efficiency, meanwhile, is about outputs: the relationship between the resources needed to produce goods/services and what you get out of them. Finally, effectiveness is about outcomes: are you achieving your objectives and do your intended and actual impacts match up?
While I’m optimistic, it’s important we are cautious until we see how the new system works in practice. Unintended consequences by their nature are unpredictable and no-one can rule them out. We need to certainly make sure we don’t just tick the boxes required for reporting – but also focus on actually improving performance. I’d also urge providers to watch out for evidence that complying with the Standard is skewing behaviour. Here it’s important that we don’t become exclusively focused only on the things which have to be reported on.
And finally, I’d urge providers not to let others tell your story: make sure you do it. Don’t forget that amidst the strictly defined metrics there remain opportunities – indeed, a compulsion – to craft your own unique narrative around those numbers. Yes, the VFM Standard is about providing an assessment of the performance of the social housing sector as a whole. But it also provides opportunities for the broad range of social housing providers to explain what’s different about their circumstances, their approach and the value they bring. In the rush to comply, that’s something we should all remember.
We have talked a lot in recent blogs about the changing nature of governance in the social housing sector. As always it’s a complicated picture and it’s important to make a few caveats before sharing our thoughts on the specific areas of audit and risk.
We can, of course, tell you our experience of working with Registered Providers. And we can share with you the conclusions we’ve drawn and the general observations we’ve made. But in doing so, we’re not making any universal claims which apply to all organisations; and we can never offer a complete picture which tells the whole story of the sector and its approach to governance, audit and risk.
So, that aside, we are all probably familiar with the general trends at play. The government has stepped back from regulating the sector in recent years (and we don’t need to dwell on its motivations for doing so again here). In doing so, this has placed growing pressure on boards to step up to the plate and ensure their organisations are effective and fit for purpose. There’s an increasing expectation of professionalism on boards and a growing demand that they have the skills and expertise in place to get the job done.
To add to this context, the sector itself has thrown up numerous examples of why a more rigorous approach to risk is needed. These range from concern over executive payouts to the health and safety issues raised by events such as the Grenfell tragedy. Valuable “lessons learned” have also been forthcoming from outside the sector, not least from the recent collapse of private sector contractor Carillion and the recent safeguarding issues at Oxfam.
So those are the general trends at least, but how about some specifics? Where I’ve noticed some interesting developments playing out recently is in the work of audit and risk committees, the way RPs approach risk and its overall place in the governance landscape.
This may seem arcane, but in many respects it cuts to the heart of what social landlords are there to do. Boards, and the governance structures that underpin them, are there to make sure the right strategy is in place and that the organisation’s executive team are delivering on that strategy. And audit has a crucial role in ensuring that happens.
We know the requirement which is expected of RPs: it’s there in black and white in the National Housing Federation Code of Governance. But just to reiterate: “all but small non-developing organisations must have a committee primarily responsible for audit, and arrangements for an effective internal audit function”. Knowing what you have got to do and doing it effectively are of course two entirely different things.
The team at DTP works closely with boards on these issues – helping them to get the right structures and team in place. And if there’s a general theme I can share with you it’s that many audit and risk committees are raising the bar in terms of what they do.
One way in which this manifests itself is in the dialogue between officers and board members. I have sat in many audit and risk committee meetings where officers have been quick to reassure the board that shortcomings raised in an internal audit are something they don’t need to worry about, everything is in hand and progress is good.
I don’t know about you, but there’s nothing makes me worry more than someone telling me not to worry about something. With all organisations there’s room for improvement, so when boards are being told everything is fine it’s usually a reason to question further (or be cynical). Audit and risk committees rightly are no longer taking things at face value; verbal reassurance isn’t enough and assurance in the form of evidence is increasingly required to back up claims that everything is going to plan. That’s progress in my view.
I’ve also noticed a greater focus on asset and liabilities registers, which are being used more to inform assurance frameworks. Doing this properly requires a deep understanding of where risk lies in an organisation, whether it’s in your structure, your contractual arrangements, partnerships or joint ventures.
Getting internal audit right is critical here. Specific areas of the business have to be put under the spotlight and the audit and risk committee needs to make sure that light is illuminating. It requires great skill and a good chair to set the tone and encourage members to look into the detail and apply that at the strategic level. Strong, mutually respectful relationships will be needed with internal and external auditors. And your procedural documents governing all of this will need to be clear and robust – your audit and risk committee terms of reference, standing orders and delegation frameworks.
At the same time, tough questions need to be asked, such as what is our organisation for?; how are we performing? and are we well placed to deliver what will be required of us in the future? Above all audit and risk committees must be prepared to accept the onerous pecuniary and legal responsibilities their organisation has. It’s about being consistently sure you are in a position to meet these responsibilities. And if you’re not: what are you doing to put this right?
In some respects this is part of the natural evolution of the sector; the increasing maturity of approaches to governance, and an overall improvement in board level competence and effectiveness. It isn’t always easy and sometimes it can lead organisations into uncomfortable places where difficult questions must be asked. But if providers are to survive and thrive in the increasingly challenging world of ‘light touch’ regulation it will be an essential requirement of all boards.
It’s nearly nine months since social housing’s very own ‘Big Bang’ – the introduction of a series of deregulation measures aimed at, well, let’s be honest, removing housing association debt from the government balance sheet.
The reforms were billed by some as the biggest change to the regulatory system in many years. But has it been more of a ‘Big Whimper’? In one sense, yes: the new rules haven’t ushered in a new era of unfettered, deregulated, completely freed up social housing. However, that isn’t to say there haven’t been implications – not least for decision making, governance and risk.
As I suggested in a blog just before the changes were introduced in April 2017, the removal of the requirement to gain the consent of the regulator for disposals and mergers didn’t mean that such decisions could now be taken lightly. Careful consideration of such proposals would still be essential even if the requirement in future would only be to notify the Regulator of Social Housing (RSH) – not to get its permission.
In one sense the reforms worked: the government got the ONS to reverse its public body decision in November last year. But in reality, only about 10 per cent of social housing regulation had been suddenly ‘deregulated’ – and the then HCA (and now the RSH) carefully retained enough power to prevent ‘train crash’ decisions. The requirement to notify also ensures the regulator can maintain its register, understand trends and identify any unusual behaviour.
Every quarter it will want to know the following: vacant disposals out of the sector; tenanted disposals within the sector; any disposals from a non-profit RP to a for-profit RP and guarantees and indemnities. It will want more immediate notification (within three weeks) of any tenanted disposals out of the sector and any sales which represent the last of a provider’s social housing. For smaller RPs it will also require similarly quick notification of the disposal of more than 5% of stock and any finance disposals.
The rule changes also tighten tenant involvement and empowerment, with a greater requirement on RPs to meaningfully consult on any disposals of tenanted stock. This reflects the fact the disposal of tenanted stock out of the sector remains the RSH’s biggest concern when it comes to the deregulatory measures.
On the one hand, the changes give RPs greater freedom and flexibility, and for smaller RPs in particular contact with the RSH is now even more limited. The most obvious positive implications are for active asset management. Providers of social housing are, in theory, now better able to make quicker decisions about their stock which make the most sense from a business point of view.
But with new freedoms comes new responsibilities. Key strategic decisions now lie in the hands of boards. The buck stops there and it gives a new dynamic to the board / executive team relationship. It is vital boards have the skills and expertise to make good decisions and are ready to take on the risks involved. You might have to fill in less forms but the RSH safety net has, if not disappeared, been made smaller. In some respects you are on your own (though lenders will still have a view, of course!)
This may have taken boards out of their comfort zone, but it may also present new opportunities. Many are rising to the challenge: taking responsibility, robustly challenging proposals, exercising control and managing risk.
Checks remain, including adherence to codes of governance (now arguably more important) as well as the RSH’s Governance Standard and the scrutiny In-Depth Assessments bring.
Internally, audit trails have assumed a new importance, as well as a renewed focus on robust long-term business planning, strategic direction, fraud prevention and reputation protection. Joining the dots between appetite for risk, business planning and stress testing is now essential.
Ultimately, what we’ve seen is a shift away from the HCA and now the RSH, external assurance to internal assurance. Just because you don’t have to assure the RSH you’re making the right decision, it doesn’t mean you don’t have to assure yourself. It’s increasingly about self assessment and self knowledge.
Questions remain: are boards ready to take on these new responsibilities, manage the risks and become better asset managers? How will lenders respond? Will we see more and faster mergers? When will an RP do something really stupid? (And that probably is ‘when’ not ‘if’).
The jury remains still out and we’ll be watching closely in the coming months to see how things develop. Whether deregulation turns out to be a ‘Big Bang or a ‘Big Whimper’ will eventually be revealed.
Many things in the housing sector are by nature cyclical. This is particularly true in relation to regulation of the sector. Looking back over the years, we have had a number of regulatory incarnations, which include the Housing Corporation (abolished in 2008), the Tenant Services Authority (TSA, abolished in 2012), the Home and Communities Agency (HCA, established at the same time as the TSA in 2008 and taking over regulation in 2012) and of course the latest changes which will see the HCA rebranded as Homes England. The names are different and each of the bodies have had a certain degree of consistency in approach, but we have also seen a different emphasis on the outcomes that are expected, from one body to the next. Some of the changes in emphasis have emerged from ‘events’ which have required action of some sort, others have emanated from the evolvement of the views of the sector itself, and still more have been due to pressure from political leaders, the precise changes often being linked to the reputation of the sector associated with the government of the day.
One thing that has been notable is the emphasis and importance placed on what might be described as ‘the tenants’ voice’. During the period when the TSA was in charge of regulation, the tenants’ voice was brought to the fore. Housing providers were required, through a variety of methods, to show how tenants were being involved and engaged, and measures were brought in to require the impact of social investment to be recorded and demonstrated (in particular within the annual Value for Money self-assessment).
With the establishment of the 2010 coalition government, the emphasis changed again. The TSA was abolished by the (then) Housing Minister Grant Shapps, and many of the drivers for improving tenant involvement and engagement appeared to fall away at this point. Regulation after this, for sound reasons, placed emphasis on more tangible outcomes such as financial resilience, governance and value for money. Economic regulation, as it is called, became the clear remit (via legislation) of the HCA, and consumer regulation was relegated to a reactive activity only, triggered by the ‘serious detriment’ test. Inevitably, with these moves, the tenants’ voice became considerably less distinctive.
Most recently, in terms of ‘events’, the Grenfell disaster has obviously highlighted in many peoples’ minds that the pendulum may have swung too far away from proactive and genuinely effective tenant engagement and away from the balanced place where such engagement should sit in a landlord’s priorities. At this early stage, there are suggestions that concerns raised by tenants were not properly acted upon, but clearly the various ongoing enquiries will provide greater detail about this particular distressing case. As with compliance matters, which may well see changes in law, changes in regulatory emphasis in relation to tenant engagement remain to be seen, but changes do seem to be inevitable.
However, in the light of the tragic events around the Grenfell tower fire in June 2017, there does seem to be evidence that housing providers are already reviewing their approach to tenant engagement, and looking to provide a genuine voice and opportunity for customers to shape and improve the services that they receive, as well as to inform ongoing discussions on the management and maintenance of housing stock. Landlords need coherent assurance that customers are satisfied with services, with clear messages where this is not the case, but also first-hand dialogue with tenants to ensure that all matters which could compromise health and safety (and effective statutory compliance) are also understood and effectively managed.
Our own work in the sector leads us to the view that many existing methods of achieving tenant engagement, however well meaning and well resourced, do not really achieve the level of engagement and representative involvement that associations aspire to and which should be the case in 2018. One can’t help but think that with the technologies and resources now at our disposal, a broader more effective engagement should be possible. There are many challenges for landlords seeking to improve in these matters. It is clear that customers are all very different, with varied interests and very different motivations. Some are comfortable with social media and digital platforms (also many and varied) and some are not. This is not just related to age; some older customers are extremely literate in these matters.
Throughout the history of tenant engagement, a key challenge for landlords has been securing and then sustaining engagement and involvement, but maybe this needs to be looked at differently. During a housing stock transfer, for example, it is often relatively easy to gain the interest of customers in shaping the offer document and in the consultation throughout the transfer process. This is because such a process has a beginning and an end and a ‘prize’ (property refurbishment etc). All of this is a great motivation for active involvement. Sustaining this beyond the completion of the transfer is, quite naturally, a much greater challenge. Similarly, members of residents’ groups have told us that they are only interested in being involved and actively engaged when they have a problem that needs solving. Once the matter is resolved they prefer not to engage with the landlord. When things are running smoothly the motivation for most customers, beyond the smaller numbers of committed members of such groups, is simply not there.
Some clients of ours are now looking at these matters in a different way, preferring to focus on a more tailored engagement with customers (in addition to traditional methods), seeking contributions in specific, time-limited ways, all of which inform and help the association to deliver defined corporate objectives. A good example is the development of annual corporate or business plans. As the plans are being ‘planned’ (as it were), the required engagement with customers for the various aspects of the plans are also tailored and defined. The methods of engagement are set out, and the beginning and the end of the involvement (and resources required) are also clearly defined. The impact of this type of clearly defined engagement is fresher and more effective because the objectives and outcomes (as well as the extent of the commitment) are more clearly defined, and the need to sustain the engagement beyond the delivery of the objectives is no longer a factor. Each year requires a new approach, and in this way the latest and most effective methods of engagement can be explored and agreed, with lessons learned from the previous year considered and the benefits of hindsight properly secured.
None of this needs to challenge or upset constructive and effective processes, such as the widespread use of Tenant Scrutiny Panels, which do seem to generally work well, but it can help to bring engagement and involvement into the 21st century, bringing real value to the overall understanding of business improvement, whilst utilising genuinely effective contributions from our most important stakeholders.
For obvious reasons, looking back on the year that’s passed is a little easier than looking forward to the year ahead. And whilst none of the team at DTP is in possession of a crystal ball or tea-leaf reading skills, we do have reasonably informed sense of what might be the big issues in 2018 for the social housing sector. Of course, these aren’t firm predictions, but they should give all of us who work in the sector food for thought. So, here’s our forward look for what it’s worth …
The UK economic outlook remains challenging, with the very real possibility that we could be heading for a recession. For Registered Providers (RPs) the impact will be most keenly felt in terms of costs – of the things we buy but also the money we borrow. The impact on social housing customers may also be significant.
Rising inflation, brought on by the Brexit-induced fall in the pound, fed through to an interest rate rise in November. Expect a further rise – or even rises – next year, even though all the signs are that inflation may have peaked.
The sector may now have greater certainty, and an improved ability to borrow, as a result of the government’s policy switch on rent cuts; however these won’t feed through into balance sheets until 2020 as the 1% rent cut continues. On the plus side, the sector may benefit from a small recovery in pension deficits, brought on by recent higher inflation and fixed interest rates.
Much, of course, hangs on the Brexit negotiations – not least whether we will see a downturn. Whether it’s “deal or no deal” will determine much of the economic outlook. How that impacts on financial markets and exchange rates will be closely followed by all those in the social housing sector responsible for ensuring balance sheets are in order.
All of the above means stress testing work on business plans must be a vital part of the mix for RPs during the year.
Poverty and benefits
Expect the poor to get poorer in 2018, and that of course means many RPs’ customers. The benefits freeze and the impact of Universal Credit will hit the most vulnerable in society hardest – and the knock-on effect will be felt by social landlords, not least from rising rent arrears and increased costs of collection. Expect debt problems also to worsen among tenants.
We will be closely watching the impact of the government’s mitigation measures around Universal Credit as they feed through over the year.
Watch this space on how the government will approach regulation during 2018. The splitting of the HCA into two bodies, with one focusing on housing development and the other on regulation, won’t in itself make much of an impact. And in many respects, some of the key changes happened last year (reclassification of RPs as private and the corresponding move to lighter touch regulation in some areas).
However, one area to watch is Value for Money – the consultation on a proposed new approach ended just before Christmas. This will give us some insight into how the government will approach regulation in the year ahead – particularly around addressing the stark differences in operating costs between providers. Don’t expect any let up in the focus on ‘value for money’ during the year – and indeed, expect it to become a bigger element of IDA. The emphasis will be on supply, numbers and efficiency – but RPs may not roll over and submit passively. Now the regulator is changing providers fees for the privilege, it may lead some to feel they can hold the HCA to account.
Consolidations and mergers
We expect mergers and consolidation to continue in 2018, with the sector remaining focused on realising the business benefits of such moves. Given the challenges the sector faces, there must be increased emphasis on making sure merged businesses deliver efficiencies as soon as possible. Transitional planning and integration work will be essential for those going through the process of consolidation. Complacency will not be an option.
November’s budget saw the government step up a gear when it comes to house building. The ambition is now to build 300,000 homes a year by the middle of the next decade. However, though the additional £2billion for social homes was welcome, many in the sector believe it is not enough and may not be directed to rented provision. And the majority of the cash for new house building is inevitably going to find its way into the coffers of private house builders.
That said, there will be no let up in the pressure on the sector to play its part in delivering the new homes the country needs. The sector must continue to innovate with models of tenure and methods of construction to ensure we get the most development possible. Get it right and there are great opportunities to enhance the sector’s standing.
Expect a continuing focus on governance and the skills and capacity of boards to deliver during the year ahead. We may see a move to annual reviews of board member performance and a decline in members staying in post for the maximum term of office (which we are increasingly seeing a trend of it moving from 9 years to 6 years).
Governance structures will continue to become more streamlined, with boards expected to play their part in delivering value for money and effectiveness as much as any other part of the organisation. Audit committees will face increased scrutiny and will be expected to take a more strategic view on setting the internal audit programme and outcome reports.
Boards will also be expected to play a greater role in ensuring new development is secured, while existing social housing assets are protected and well managed.
Two reports will undoubtedly be closely observed by all those working in the sector. And both will relate to the Grenfell tragedy. The first will be the public inquiry into the causes of the fire itself, while the second will be the review of building regulations and fire safety.
We expect Grenfell may see many social landlords refocus their efforts on services to tenants in 2018. Boards will be expected to do their bit, and investment in resident engagement could receive greater emphasis than it perhaps has done in recent years. Quite rightly, RPs will reflect on their approach to communication and accountability, and take steps to make improvements. We expect the tragedy will continue to have consequences for the sector for many years to come.
2017 presented the social housing sector with its fair share of challenges, and even traumas. Coming after the momentous global shocks of 2016 (Brexit, Trump) it’s fair to say we started the year almost sanguine about the likelihood of further major upheavals.
In the end, it was on the domestic stage that many of the key events impacting on the sector were played out. And whether it was the surprise summer General Election (and the even more surprising result) or the horrifying tragedy of Grenfell, the long-term consequences remain far from certain.
On the political front, the loss of the government’s majority and the doubt this has cast over its long-term viability has obvious implications for Registered Providers. The policy landscape is unpredictable, making planning and decision making challenging. The government, while preoccupied with Brexit, has actually taken a number of important decisions regarding housing. But who can be sure these will stay the course; or, in some cases, even come to pass at all?
There were, on the surface at least, a number of positive developments for the sector. In October, the government was forced into a major u-turn on its plans to cap Housing Benefit for social housing tenants at Local Housing Allowance rates. Not only will this not now be imposed on those living in sheltered and supported housing, but the under 35s will also be spared this potentially devastating cut.
The reversal was welcomed by a sector which has seen its financial stability rocked by government benefit reforms. Questions still remain over the impact of Universal Credit, despite some mitigation measures unveiled by the Chancellor in his November budget.
October also saw further welcome news when the government delivered on its promise to reverse four years of rent cuts in England. From 2020-2025 rents will be set at CPI plus 1% in a move the government said would give RPs the “security and certainty they need”. NHF chief executive David Orr said it would enable RPs to leverage in private finance and “build the homes the nation so desperately needs”. From our conversations with RPs we also get the sense it will improve business plans and loan security valuations.
A month later, a further major policy change was announced when the ONS reversed its 2015 decision to classify housing associations as public bodies. The biggest effect of this may be on the government’s balance sheet – with the sector’s debt no longer included in its own borrowing figures. For the sector, the impact has probably been more profound from a regulatory perspective: in order to get the ONS decision made, the government put in place a range of deregulatory measures which have undoubtedly added to the freedoms and flexibilities enjoyed by providers.
Taken together, these developments represent a significant shift in government policy during the year. The policy landscape certainly seems very different to that set out during the Cameron / Osborne era.
Welcome too was the Chancellor’s decision to boost funding for affordable house building to the tune of £2billion in his November budget, although it’s worth noting that the vast majority of additional funding to boost house building will go to private house builders – not RPs. It also remains a moot point how many homes this funding will actually deliver, as well as how many will be rented.
Within the sector, there was a continuing trend towards greater consolidation during the year. Mergers progressed and for many RPs the benefits have begun to be realised. And while the regulatory landscape has changed – mergers and disposals only require ‘after the event’ notification to the HCA – much of the process and methodology remains the same. Due diligence and business planning must still be carried out before a merger can take place, and in some respects this has increased the focus on boards and their skills and expertise.
Indeed we can’t overstate the impact this is all having on boards and the general issue of governance. Expectations on the governing body have been raised, with In Depth Assessments (IDAs) now expecting boards to have a “holistic grip” on all aspects of the business.
Whether its pay and severance, health and safety or regulatory compliance, the buck stops more and more at the board’s door. Many RPs are asking themselves if their boards are fit for purpose and have the skills and experience needed to do the job. Critical questions are being asked – such as whether boards are capable of directing the overall strategy of the business. In many respects this has been the biggest internal issue for the sector of the year.
Those have been the key developments during 2017 – from our perspective at least. The team at DTP wish all those in the social housing sector a Merry Christmas and a happy New Year. We will be reflecting on what 2018 has in store in a second blog to be published in January.
We have all been stress testing for a couple of years now, but it is now clear that two years in, the Social Housing Regulator is no longer prepared to give anyone the benefit of the doubt on these matters. In particular, the HCA has made it clear that it will look to ensure that there is a joined-up approach to the process of business planning, stress testing, developing and maintaining risk registers and developing and maintaining assets and liability registers.
While most associations conduct these activities with appropriate care and attention, and a fair degree of sophistication, the regulator wants it to be clear that these activities should not be done in isolation, or as if in a vacuum. All of these matters are clearly inter-linked and they should therefore be aligned and used to inform the definition of the stress tests and the mitigations which would be required to realign a ‘broken plan’.
Going forward, boards must ensure that they show that the risks in the risk register reflect the business activities of the association, and that these risks can be quantified and then properly reflected in coherent stress tests on the business plan. Internal and external risks to the association should be recognised in this process.
The same process must be adopted for the asset and liabilities register, which incidentally should also support the ‘mitigation’ element of this work, by providing adequate information for use in mitigation strategies. This enables a board with the support of the executive to deploy actions in the face of a projected issue, or a series of issues, which threaten to compromise a ‘Golden Rule’, more of which later.
In conducting the stress tests, which clearly reference sections or elements of the risk registers and the assets and liability register, it is vital that they really test the plan and thus enable the board to assess resilience. The tests should not just show single scenarios, rather they should also show the impact of multi-variate scenarios. The results of the tests provide clarity on the impact that events may have on key business critical measures. These should include the impact on cash, loan security and loan covenants, all of which must be properly understood.
Intra-group risk flows can present some added complexities to the process, but nonetheless these need to be identified, understood and carefully mapped where appropriate. Having established the risks to be assessed and conducted the tests on the business plan, it is important to have developed practical and deliverable strategies which can be adopted in the face of adversity (a broken or projected broken business plan). These will need to be significant enough to address the emerging issues, but tailored enough to be used in the right circumstances. For example,
some mitigations may take a long time to realise (sales of assets, or securing new funding arrangements, for example), but if the problem is not an immediate one then this can be a reasonable course of action to take. If a problem appears to be more immediate, then a deployment will need to be more dynamic, in the short term, perhaps reverting to a medium term strategy to address an underlying problem. Either way, the point is that there needs to be a range of effective options.
Crucially, the HCA is looking for evidence that the board is in control of all this, and therefore effective board engagement during the process will be required so that it can (and be seen to) direct the testing process and be fully involved in the establishment of mitigations and the prioritisation of these.
Having an effective testing process and robust mitigation strategies is clearly a good thing in the context of the scrutiny being exercised by the regulator, but these will naturally lead to an obvious requirement for adequate monitoring of management information to ensure that real life activities and internal and external factors do not threaten to compromise the business. It is for this reason that it is important to define your ‘golden
What are these, you may well ask. Well, these are the ‘red lines’ you must not cross as a business. Typically, you will have a series of targets for operational and financial performance, all of which will be closely monitored by the executive and reported to the board. The ‘golden rules’ can be described as the business critical, ‘high priority’ performance measures which must be maintained and will include the availability of cash (liquidity) and headroom on loan covenants. Some will also include measures relating to income recovery and other measures associated with the
development programme (programme slippage and targets for sales receipts being obvious example).
Agreeing what these ‘golden rules’ are is the responsibility of the executive, working with the board, but once these have been set, the focus inevitably moves to monitoring performance and as far as possible ensuring that early warnings can be developed to show where performance looks likely to be heading towards a possible breach of a ‘rule’, which could then lead to a requirement for some recovery action.
With this in mind, it is logical for (internal and external) data monitoring to be undertaken to ensure that relevant evidence is collected on a timely basis to measure current and projected performance against the ‘rules’, so that early warnings can be secured on these important factors. Each ‘rule’ will require a different source of evidence, but as long as relevant data is collected and reported, the executive and the board can look forward and see potential issues arising, and identify the best opportunities to address these (potentially therefore to deploy a mitigation/mitigations).
We are supporting a number of clients with these matters at the moment and we have helped some associations to provide assurance to the boards through the development of ‘resilience statements’. These relatively simple reports can be prepared as often as you like, but typically they will be presented at least twice a year. The assurance is derived from a timely update on risks that the business is exposed to, the tests that have been conducted and the latest series of mitigations that have been designed to be deployed in the face of adversity.
The relative position and the projected position of the association’s performance against the ‘golden rules’ can be shown, with the headroom (comfort) being reported also. This regular reporting can provide the board with the oversight that it needs, as well as assurance that the business is containing and managing risks (known and unknown). The process also provides excellent opportunities for defined mitigations to be regularly reviewed and updated, as inevitably some of these will become obsolete and less effective as time moves on.
So, a lot to think about there, but all in a good cause and the efforts made in the delivery of all these actions should help executives and the board to sleep a little easier at night!
Last year, I wrote a blog post on the issue of value for money and the social housing sector. In it, I suggested the idea of league tables might be creeping onto the government’s agenda. Unexplained variations in operating costs between providers was causing concern at the HCA. And sooner or later, a bright light would be shone on our efficiency record.
The events of the summer, including the General Election, the tragedy of Grenfell and, for a while, a general sense of inertia, had the effect of delaying that moment. But with last month’s announcement of a major review of the HCA’s Value for Money standard, it moved a step closer.
So what does it mean and what should the sector’s response be?
Firstly, there’s much to welcome in the review and the sector will have a chance to respond through a formal consultation which will run up to December 20th. The first most obvious change to note is that alongside a shorter, sharper standard, sits a new Code of Practice (COP) which is intended to shine a light on what ‘compliance’ could look like. Immediately, we can see that this could cause confusion – should providers simply focus on complying with the actual Standard, or ought the COP also be considered? (particularly challenging when some of the language in the COP is somewhat prescriptive – ‘must’ rather than ‘could’!).
The other key change involves a move away from a narrative-based, bespoke self-assessment of performance, to one more clearly-defined by a specific and new set of metrics. There are seven metrics proposed by the HCA, which are largely financially-based and will allow comparisons to be drawn between providers’ performance. Crucially, these have to be supplemented by providers’ own VFM metrics, which must derive directly from their corporate objectives, and which boards must set, monitor, challenge when not achieved and report on annually in the statutory accounts along with the HCA metrics. This new approach might not be called league tables, but in future there will be publicly available sets of figures which will provide a snapshot of how individual providers and the sector as a whole are performing.
A more data-based approach was in many ways inevitable, given that the HCA is first and foremost an economic regulator. It has to convince government that the social housing sector is maximising efficiencies and delivering best value for the taxpayer. It can’t do that without some numbers, and the previous self-assessment approach simply didn’t deliver enough comparable information.
Other key aspects of the new approach to note include an explicitly holistic approach to VFM – spanning the whole business, not just social housing, with a robust business case needing to be made for investment in non-social housing activities – and the need for Boards to ‘strike an appropriate balance between investment in existing stock, improvements in services for tenants, and investment in new development’. I think this is a direct response the Grenfell tragedy and should be welcomed.
It’s also clear that much has not changed – providers must understand their costs, how they compare and what drives them; equally maximizing the use of all assets is expected. The ongoing focus on risk remains, and in particular the HCA strikes a note of caution regarding non-social housing activity needing to achieve a balance of risk and reward.
We now at least have clarity, and providers know they will have to carefully review their strategic and operational approach to value for money. The new standard comes in next April and we will have time to consider how we respond.
The implications for boards are particularly significant. They will have a major role to play in monitoring and reporting performance against the HCA and their own VFM metrics. Decision making will, in many cases, need to be more robust, and a rigorous appraisal of options undertaken. Other legal and governance structures and delivery models will need to be regularly considered. And where underperformance is identified, strategies will need to be developed to address this.
Ultimately, this could be good for governance. The buck really will stop with boards in future, ensuring much-improved accountability and transparency.
But providers need to be given opportunities to provide some context, and explain their data. Somewhere along the line we need to find a happy medium between number crunching and more nuanced explanation. On the one hand, that is where the IDA (In Depth Assessment) comes in, which is still the key method of assessing compliance on VFM. However, IDAs for most come but every three or four years, so it will be interesting to see if the consultation throws up a desire for providers to include narrative alongside their reported metrics.
A good overview of the new standard can be provided by the ‘three Es’ which appear regularly throughout the draft document – economy, efficiency and effectiveness. The latter is significant, as it suggests there may be a willingness to go beyond simple economic data; something which will be welcomed by all in the aftermath of Grenfell.
Overall the jury is out on how the new Standard will play out. The devil, as always, will be in the detail. Given the existing Standard has been in place for five years, a review was overdue. We should all be watching developments very closely. Inertia will not be an option.
Housing associations face a delicate balancing act. On the one hand, the concept of ‘social purpose’ defines them. They exist to provide the most disadvantaged members of society with a roof over their heads and a decent community to live in. On the other hand, the sums have to add up. Ultimately, there’s a bottom line, even if there is no requirement to make a ‘profit’ or satisfy the whims of shareholders.
Recent pressures such as rent reductions, benefit changes and dwindling grants have made this balancing act all the more tricky. And in some instances, in the case of managing assets say, these pressures have even thrown up some moral dilemmas.
Through our latest Weather Forecast Group (WFG) survey we’ve been hearing about some of them from senior housing professionals on the frontline.
The pressures I mention have certainly forced “Active Asset Management” up the agenda. A few years ago, this was the preserve of just a few sector ‘front runners’, skilled in the arts of Net Present Value calculations, sustainability indices and ‘fan charts’. Now it’s a term which is well understood by the majority of providers. Needs must.
Most are now talking in terms of a proactive and intelligence based approach when it comes to investing in or selling off stock. On a positive note this means boards are increasingly taking informed decisions about their organisation’s assets. But that doesn’t mean they are necessarily easy decisions to make.
Divestment is throwing up particular challenges, especially when it comes to maintaining that commitment to social purpose. Moving out of an area where a housing association has only a handful of properties, but which are of high value, might make sense from a balance sheet point of view. The sale proceeds could most likely enable you to build more social homes in another area.
But what if that means the end of social housing provision in say a rural village or an affluent area of a city? Might you inadvertently be contributing to social cleansing?
Contributors we spoke to for the WFG report told us they had wrestled with their consciences at times and asked themselves whether it was “the right thing to do”. It was also causing some tricky relationship management issues with local councils where a housing association was selling up and moving out.
One chief executive whose views we canvassed summed it up perfectly: “It’s about looking at more than simple economic value (or return) of an asset, and considering wider community considerations.” Another was keen to stress that it wasn’t about abandoning ‘difficult areas’.
On another positive note, there does seem to be evidence of creative thinking out there. Building new homes in higher value, easy to manage, areas in order to cross subsidise activity in poorer, more ‘difficult’ neighbourhoods is one solution we’ve come across. That strikes a good balance between social purpose and the bottom line, in my view.
We’re also seeing evidence of a longer term approach being taken by many. When it comes to Net Present Values most aren’t making their calculations solely by weighing up the financial costs of a property versus the income it generates. They are also considering factors such as community or strategic value.
And many are coming to the conclusion that ridding themselves of all negative NPV properties isn’t necessarily the answer. Taking a longer term view which focuses on turning Net Present Values positive and reducing the number of negative NPV properties in your portfolio is increasingly being seen as a more sustainable solution.
And in some instances a more ‘commercial’ approach might even be a win-win for tenants, communities and landlords. Take the housing associations who are giving tenants small pockets of land to increase the size of their gardens. Tenants are happy to have more outdoor space and landlords have a reduced liability for grounds maintenance costs. It doesn’t have to be a zero sum game.
Challenges certainly remain for all social housing providers who want to maintain a commitment to social purpose. And while the balancing act may have become harder in recent years, it’s not impossible. If our latest report is anything to go by the sector is coming up with some innovative solutions, aided of course by the deregulatory measures introduced last April which means HCA consent is no longer required to dispose of properties.
“We’re using our current assets and making them fit for purpose,” one director of housing told me, with the kind of breezy pragmatism the sector should be proud of. It’s as a good a summary of Active Asset Management as I can think of.
The watershed moments that jolt our national consciousness are all too often defined by tragedy. Whether it’s the Bradford Stadium fire, the Herald of Free Enterprise disaster, the terrorist attacks of July 7th 2005 or, further back in time, Aberfan, large scale loss of life scars our collective story.
And so to this grim list we must now add the Grenfell Tower fire of summer 2017. For the social housing community, this appalling event may well prove to be our own watershed moment.
A few weeks after the fire, conversations with senior housing professionals for our regular Weather Forecast Group survey inevitably turned to the recent disaster in the borough of Kensington and Chelsea. We hadn’t intended it to; it wasn’t on our list of discussion topics. But it was impossible to talk with our survey group about current issues without it coming up.
One contributor described Grenfell as a potential wake up call for all those who worked in the sector. While different language was used, others spoke in similar terms.
There was a recognition that we are still in the early stages of the fire’s aftermath. It will be some time before the inevitable lessons are fully learned. The public inquiry hasn’t started, meanwhile the media continues to contribute varying degrees of insight, with the usual rush to blame rather than understand.
We are certainly a long way off understanding the technical implications of the tragedy, around issues such as building regulations, retrofitting (of sprinklers, for example) and fire assessment regulations.
The all important issue of cladding featured prominently in our discussions, with many anticipating far reaching consequences for how we approach building control, purchasing and procurement and contract management.
One observation reflected the experience of many perhaps when pointing out that cladding schemes had largely been delivered to achieve laudable sustainability objectives – to increase energy efficiency, cut tenants’ fuel bills and reduce condensation. Removing cladding would potentially wipe out all these gains at a stroke.
The implications for regulation remain uncertain; however most anticipate some kind of review at some point, with a particular focus on consumer standards and health and safety compliance. And generally across the sector, it was felt there had to be a corresponding shift away from focusing solely on price and efficiencies – at the expense often of quality and perhaps even safety.
The tenant/landlord relationship was also a subject of reflection for many of our contributors. Grenfell had caused some to question how we listen to and consult with customers. Recent years had perhaps, some thought, seen too much focus on finance and governance and not enough on services and tenant experience. Basic housing management must also improve in the wake of the tragedy.
Grenfell appears to also be prompting some to reflect on the increasingly swift moves towards ‘channel shift’ in the way we deliver services, meaning less face to face encounters and more digital interaction. Several interviewees said they no longer felt as close to tenants as they used to.
All agreed the potential for major reputational harm for the sector from Grenfell was real and apparent. Local and central government, the fire service and social landlords were all likely to face criticism. But in the absence of thoughtful analysis in much of the media, one of our landlords felt the focus should be on restoring trust with customers: “our priority is to make sure people are safe, and then to make them feel safe.”
There are perhaps some less anticipated outcomes. Some, optimistically perhaps, hope that the 1% rent reduction could be relaxed in the wake of financial demands on them to carry out expensive retrofitting refurbishment programmes or large scale cladding removal. Likewise, government policy to cap HRA borrowing could come under pressure – for the same reason. More focus on asset management of existing stock is likely to be another consequence – which many felt would not be a bad thing, after years of an almost exclusive focus on new supply.
For our landlords with high rise accommodation in their portfolio, the implications of Grenfell will inevitably be more far-reaching. There appear to be so many arguments against tower blocks – from a cost and safety point of view – that some even talked, apocryphally perhaps, about the end of high rise living in the UK.
Question marks also remain about the future of new build high rise schemes. With 220 tower blocks with planning permission but not on site yet in London alone, this could have serious implications for the delivery of new build targets.
As the story of Grenfell continues to unfold, and as the public inquiry begins to hear evidence, I’m sure the consequences for the social housing sector will become clearer. Whether such clarity will make it any easier for the sector to absorb those lessons remains to be seen. One thing is certain: the mood of sombre reflection will continue for some time yet.
Recent years have seen no shortage of momentous events which have prompted pundits to declare that “things will never be the same again”. Whether on the UK or global stage, things have certainly been sent to try us. In the case of Brexit and the election of President Trump, the hyperbole may not turn out to have been misplaced.
And as we headed into 2017, who could have predicted what lay ahead? Firstly there was the snap General Election and the landslide that didn’t happen. A government with a reasonable working majority has been replaced by a far from “strong and stable” minority administration, propped up in parliament by less than a dozen MPs from Northern Ireland’s unionist faction.
Then within a week of the poll, came the first terrifying images of the burning Grenfell Tower. First came the horror and the grief. Then the anger. And only now are we beginning to wake up to the long-term consequences.
For the housing sector these consequences are going to be immense. Talking to senior executives for our latest Weather Forecast Group survey of the sector, it’s clear this is going to dominate the next few years. Its ramifications will be far reaching, and probably more impactful on our sector than the election outcome. We now face uncertainty piled on top of uncertainty.
My initial sense is that the public inquiry into Grenfell won’t look at the wider lessons of Grenfell for social housing. That will be left for the sector itself – and possibly the regulator – to consider. But reflect it must and change it will.
Firstly, there will be the technical changes which will surely follow – the changes to building regulations and health and safety requirements. This won’t just cover cladding and refurbishment projects but will take in other issues and questions. Why, for example, do many older social housing blocks of flats still have exposed gas pipes? Inspections of blocks in Camden, which led to the evacuation of residents, also threw up issues such as the absence of fire doors. More will come to light, I expect.
But then there are the wider changes to how we have delivered social housing in recent years, which Grenfell will throw under the spotlight.
The “digital channel” shift of the last decade, while necessary and beneficial in many ways, is reducing the number of boots on the ground which providers can call upon. Whether it’s the removal of wardens or concierge staff from tower blocks or reductions in housing officers, Grenfell has highlighted the lack of basic, on-site housing management being provided in many places. Most in the sector I speak to expect this now to change.
One chief executive I spoke to recently also highlighted the shift in responsibility for fire safety checks from 2005 onwards from the fire service to landlords. This has only weakened regulation – with the responsibility being placed on non-technical people for a highly technical task. This highlights an important point – regulation of housing providers in recent years has focused on their financial robustness and governance excellence (both extremely important issues), to the detriment of regulating service provision. Again, Grenfell could well turn out to be a catalyst for change on that.
Grenfell is also likely to force unexpected consequences for housing policy generally – especially what does or doesn’t make it through parliament in the coming years. That’s also a consequence of the General Election result and the fact the government will only bring to parliament what it is likely to win.
So what limited parliamentary time will focus on housing, is most likely going to be dominated by Grenfell.
That will mean a number of the issues which have come to dominate the sector may well be kicked into the long grass. For some of those policies, that might not be a bad thing. For others, the consequences could be less positive.
On the future funding of supported housing, will we see the promised response to last September’s consultation? The government may now lack the will and the capacity to get change through. Will the sector’s lobbying around the shared room rate being applied to Housing Benefit for under-35s bear fruit and result in changes? Probably or possibly not.
Voluntary Right to Buy proposals could suffer a similar fate, as could plans to reduce homelessness. The latter had seen a Homelessness Reduction Act passed which did make some headway on the issue by making local authorities responsible for reducing homelessness. But the election result and the corresponding focus on Grenfell could see this falling off the radar, especially when it comes to allocating resources to tackle the problem.
On housing supply, there was no mention in the Queen’s Speech on this crucial issue. This doesn’t bode well, and there is now a glaring lack of clarity on how the government plans to build 1.5m more homes by 2022. With the government’s focus on other things, there could be pressure on actors beyond central government to pick up the baton on this. In fact, this could be devolution’s opportunity to prove its worth.
For the construction of new social housing, Grenfell could, again, have an unexpected consequence. Many providers with tower blocks will be forced to divert potential new build resources into dealing with the cladding issue and whatever else emerges from the public enquiry. Money which could have gone on new homes will instead be spent on further investment in the refurbishment of existing properties.
The Queen’s Speech did at least include the government’s plans to end ‘unfair tenant fees’ for private rented tenants. With cross party support that should make it onto the statute book. And another proposal, to offer new council-built 15-year fixed term tenancies with a right to buy a social housing property at the end of it, also made it into the government’s legislative programme. There are many unanswered questions on this one, but it offers at least a glimmer of hope for young people looking to get on the housing ladder. My emphasis is on the “glimmer” at present.
All of which leaves a lot for the new housing minister, Alok Sharma to consider. His parliamentary ‘in-tray’ may not be bursting at the seams but he will still have much to occupy his thoughts. It’s illuminating that his appointment came a full four days after Theresa May had managed to fill other government posts. I can’t imagine it was a job Conservative MPs were queuing up to take on.
Whether the housing portfolio will turn out to be the poison chalice it appears to be, only time will tell. Mr Sharma’s lack of experience in housing doesn’t auger well. But it’s early days and it would be unfair to write him off just yet. I would certainly wish him luck. He may well need it.
In this second blog examining the key housing related issues in the forthcoming General Election, I want to look at welfare reform and how it is impacting on the sector. This policy area, along with measures to tackle under supply of new housing, demands the attention of all political parties putting themselves forward for election.
Two recent policies in particular are having an effect on many of the social housing providers we work with: restrictions on access to Housing Benefit for the under 35s (via the Local Housing Allowance cap limit) and a similar scenario for sheltered and supported housing. Registered providers are telling us that these key elements of government welfare reform have resulted in unintended negative consequences. The harm is being felt both by the benefit recipients and the organisations providing them with affordable housing. And in most cases, there is a north/south divide, with those in the north and midlands being much more adversely affected as LHA levels are generally much lower there than in the south, and therefore present a bigger differential in relation to social rents.
One aspect of reforms affecting single younger people with no children is proving particularly problematic and we would go as far as to say the plans should be scrapped. Under the change, Housing Benefit entitlement for the under 35s is now restricted to the shared accommodation rate (the upper age limit was previously 25). This means signficantly limiting housing choices for this group. Having a home of their own – even a simple one-bedroom flat – is therefore no longer an option for most of those who rely on this benefit. It would only be an option if the tenant was able to make up the difference from their own income – which is a rarity.
Most providers we speak to say this has been a disastrous policy. It is also making elements of some providers’ stock portfolio unviable. One stock transfer RP we advise has told us they have even been demolishing flats which had previously been let to single, often younger, tenants. They simply no longer have enough of the kind of tenants who can afford this kind of home – now the benefits they are in receipt of don’t cover the rent. Other RPs are looking at change of use for such properties, or in some cases even considering reducing their rents to the LHA level (with the consequential hit on rental income this will mean).
What is needed from whoever wins the election is a formal and compassionate review of the impact of these reforms. It cuts to the heart of issues of basic living standards and the right to safe and affordable housing.
The impact is being felt the most by those who need it most – namely young people who do not have stable families who they can fall back on for their accommodation needs. As the charity , staying at home is often not an option – with many homeless young people fleeing violence or abuse or trying to find their feet after leaving the care system. Discretionary exemptions do exist, but it is often difficult and time consuming for this group of tenants to navigate their way through the system.
The government’s review of how supported and sheltered housing should be funded is also causing uncertainty and problems for the sector. Its consultation document on this issue proposes the capping of Housing Benefit payments for supported housing tenants at Local Housing Allowance rates. Previously, all rent for those in supported housing was covered by Housing Benefit – with local authority budgets meeting the costs of additional care and support.
Again, this hits at some of the most vulnerable in society – in this case the elderly, those with mental health issues, the homeless and the disabled.
However, the lack of clarity is also hitting supported housing providers’ ability and willingness to invest in much-needed new provision. There is already an estimated national shortfall of supported housing places of 17,000. Without clarity and direction from whoever forms the next government on this issue, this will only worsen.
The government’s consultation document proposes that local councils will get top up funds to make up for the gap caused by reduced Housing Benefit payments. But the providers of supported accommodation who we speak to say they don’t believe it will result in the necessary funds being made available; as the funding won’t be ring fenced, there is a real fear that councils will simply use the funding to plug other gaps in their budgets.. Many RPs have already put developments on hold until they have had the necessary clarity from government. That certainly won’t come before June 8 – however a resolution to this issue must be a priority for any incoming administration.
The new government must also take immediate action to address the sharp rise in homelessness across the country. Practical, responsive and easy to implement measures are needed. A start might be to offer longer tenancies – perhaps three years – aimed at reducing the amount of homelessness created when 12 month tenancies come to an end.
These are the housing issues which those at the sharp end say must be addressed. As with any election campaign, these concerns will compete for attention in the coming weeks with other matters of state. The solutions which are proposed, and those which are ultimately implemented, will be watched closely by all those working in our sector. Their impact will be felt by those in receipt of our services. There is much at stake.
It may not have escaped your attention that a General Election campaign is currently underway. As I write, all the main manifestos have been published and we are beginning to get a clearer picture of each of the parties’ positions on a range of issues (notwithstanding the odd u-turn, of course!). Housing has been jostling for position against the nation’s other pressing concerns including (of course) Brexit, as well as health and social care, education, the economy and fiscal policy minutiae.
As I see it, there are two areas of housing policy which are demanding most attention from those who would wish to form the next government.
The first relates to the pressing need to build more homes. Chronic underinvestment in house building by successive governments has created the currently unsustainable situation we find ourselves in. House prices continue to inflate to levels beyond many people’s ability to pay – with the situation among first time buyers especially acute. While housing associations have been trying to do their bit when it comes to affordable homes, construction rates continue to fall short of what’s required. The construction of new homes by councils is so low in most cases as to barely even register.
The second area of concern relates to the impact of a series of government welfare reforms on the housing sector. I believe that policy makers of whatever political hue must confront the effect these reforms are having on social housing providers. And that isn’t to ignore the impact they are also having on individuals and families.
So what is to be done? That’s ultimately down to whoever forms the next government and I will of course refrain from passing any form of judgement on who that should be. But myself and my colleagues at DTP have at least a few ideas which might begin to address some of these concerns.
In this two-part blog I’d like to tackle first the issue of house building, with an obvious emphasis on the affordable end of the market.
In our view, the sector firstly requires clarity over what the government deems as ‘social housing’. Agreeing a common definition matters because it is critical to ensuring we build not just more homes, but more homes of the right type. When working out how many new ‘affordable’ homes we need, a future government needs to drill down into the detail. So, as well as traditional social rented homes, we also need to throw into the mix sub-market private rented homes, and low cost home ownership options, ensuring a ‘pathway’ and choice for those who need sub-market accommodation either in the short term or for most of their lives.
Next, there needs to be a focus on how we can get builders building. We’ve a few suggestions but this is by no means an exhaustive list.
A good start would be to stop developers sitting on land in order to profit from rising values. One solution might be to impose a retrospective Council Tax levy if developers fail to develop land earmarked for housing within three years. A corresponding incentive could grant a Council Tax ‘holiday’ for those who do build homes within three years of buying a plot.
A commitment from government to replace all social housing lost to Right to Buy and Voluntary Right to Buy would also help increase the supply of affordable homes. With housing waiting lists continuing to grow and owner occupier rates falling, not to mention a less than perfect private rented sector, this is essential.
Policy intervention is also needed to address the fact we have become too reliant on larger developers to deliver on housebuilding. Smaller developers used to account for a much greater proportion of new homes construction, and by addressing this we could kick start development on plots of less interest to the big players. Many LSVT providers, for example, inherited smaller plots of land which could be sitting vacant or where you might find rented garages now in low demand. Large developers, seeking the economies of scale of large development sites, might not be interested in this type of scheme. But smaller developers might be. On their own these might not amount to much, but added up across the country they could result in significantly more additional homes.
We might also be able to find ways to financially support these developers – with for example a loan guarantee offer by government. Similarly, partnership arrangements whereby larger developers supported smaller developers to deliver schemes could also be an idea worth pursuing.
In addition to these top level responses, there are other less obviously related issues which will require government action in the next parliament whoever wins the election. All will have a bearing on the social housing sector’s ability to deliver on house building.
The post-Brexit trade deal which the government strikes with the EU, and future immigration / free movement policy, will for example, affect the price of raw materials used in construction, or indeed housing repairs. Efforts to tackle issues such as productivity, skills and training will likewise impact on the sector. Here is probably not the place to offer detailed answers on these issues – but we would suggest they are critical for our sector, as well as other parts of the economy.
For our take on the welfare reform issues impacting on the housing sector read part 2 of this blog
Recently I read an article in The Guardian entitled “Housing associations are critically important, but have lost their way”. It took the tact that too many housing associations have focused on being developers (and the profit) and as result have lost sight of their mission to provide good homes at genuinely affordable price. (https://www.theguardian.com/housing-network/2017/apr/24/housing-associations-crisis-commercialisation)
But let’s not forget this diversification and commercialisation has been with us for a long time. I remember this being topical in the 90’s, more recently the global financial crisis and the rent reductions have seen associations taking a more entrepreneurial outlook in respect of new ventures and there has been a marked increase in the appointment of commercial directors and along with this the recruitment of board members from commercial backgrounds.
The rationale for diversification is clear and well founded, as there are a number of drivers for this. The most obvious of these is the desire to generate revenue to fund social activities. Some of the larger associations have cited their move towards a wider range of activities as a response to the inability of some local authorities to provide services and community support in areas where they have housing stock.
Small to medium associations have largely used diversified activities to generate subsidy for their housing business and to provide additional funding which can fund new housing provision. Inevitably, the success of such activity across the sector has been mixed. There are certainly some excellent examples, but equally there are a number of examples where it is clear that the pursuit of these activities has required a significant investment of resources, with little evidence of a significant return on the investment of time, money and resources, or an assessment of the opportunity cost of pursuing these. All of this would be deeply embedded in the practices of a purely commercial company, but for many organisations in this sector the desire and the demand to drive out commercial returns on deployed investment can often be obscured by social objectives and priorities.
What needs to be recognised is that successful commercial activities require commercial acumen, commercial skills and experience and a lot of time, money and resources. If the return is tangible then the investment is clearly worthwhile, but the danger of pursuing activities with less clear outcomes is the impact that these efforts can have on core business, which can be diluted through the spread of available resources.
Associations must always remember what they are here to do and most importantly how any activity will contribute to the corporate strategy, key objectives and the delivery of the mission/vision that has been established. It is clear that the HCA has recognised the uneven outputs from these activities and has raised concerns about the levels of returns and the exposures to risk andthe IDA approach is now looking to explore any signs of weakness.
HCA chair Julian Ashby, in a recent article, has noted that the levels of return achieved by associations’ core business can often be significantly greater than those achieved by so called diversified, commercial activities. This reveals the levels of risk associated with such ventures and suggests that more thought, planning and skills need to be brought to bear, before commitments are made to non-core, resource draining, commercial activities.
Clearly, all of the skills and necessary experience that is required to make a success of such activities can be easily outsourced, but the management and governance framework for the association must be able to sustain, monitor and effectively manage these activities, well after the advisors have moved on. The regulator will expect the board of management to fully understand these aspects of the business and all of the risks that are inherent. Effective mitigations will also need to be well established and they must be practical and fully achievable. None of the foregoing should in any way discourage the exploration of diversification and the pursuit of commercial returns, it should simply raise the priority of fully appraising the investment against the real prospect of securing a return that is worth the effort and the risk exposures that may be involved.
Periods of rapid and unsettling change can often trigger introspection and reflection. When the ground shifts beneath our feet, we find ourselves re-examining the things we previously took for granted. We look back for an explanation as to how we got here, and forward to consider how we might navigate the new terrain ahead of us.
The last 18 months have undoubtedly seen seismic shifts in both the global and the UK political outlook. At the same time, the social housing sector has experienced its own ‘local’ shocks to the system, such as the 1% rent reduction of July 2015, and a government shake-up of the regulation system.
Not surprisingly, housing associations have been taking stock and formulating their response. And for many, it’s provided an opportunity to reassess their very purpose. Searching questions are being asked. What are we here to do? Should we carry on doing everything we currently do? Are we delivering on our stated purpose?
The senior housing professionals who we speak to for our quarterly Weather Forecast Group survey all say they have taken time to reflect on their purpose in the last two years – as the world and the sector has changed around them. But their responses have varied.
For some, there has been a clear shift to a more ‘back to basics’ approach. This has meant a move away from community involvement and investment, to focus more on core services – i.e. providing a roof over people’s heads at an affordable price. Some ‘gold standards’ of service provision have been declared unaffordable and dropped. Staff numbers in many organisations have been cut back.
We’re seeing providers taking a more hard-headed and commercial approach, though again this is not across the board. The squeeze on rents is forcing the sector to develop other income streams, which of course brings its own challenges.
Significant and regular policy changes, coupled with the Brexit shock and an effective change of leadership at the top of government, have created an almost perfect storm, where rapid change is seen as the new normal. In response, many providers are telling us they plan to review their purpose regularly, in some cases every year. In this new landscape, strategic direction will become critical; organisations will need to be flexible and agile in order to respond effectively.
Our interviews with Weather Forecast Group members revealed a pragmatism and realism in the sector. Certainly, as far as the government is concerned, we picked up on a willingness to work with the government rather than against it. But don’t be under any illusions – that willingness to compromise won’t be at any cost.
Underneath the pragmatism, the social housing sector is still a sector built on ideals. Last year marked the 50th anniversary of Ken Loach’s landmark television drama Cathy Come Home, which was reflected on by a number of the housing professionals we spoke to. Looking back on Cathy Come Home’s agonising portrayal of the problems of homelessness had even inspired an “examination of our roots” in one organisation.
“And we’re not stopping improving lives,” said one senior executive. Although it didn’t take long before the realism set in: “the issue is that we can now probably improve fewer than previously”. Some even talked of the need for the sector to be bolder in telling its story – of developing a brand even. One vision is of a sector that is the “go to” vehicle for solving the housing crisis. Bold indeed.
A greater focus on purpose will probably accelerate the diversification of the sector which we have been seeing unfold in recent years. All the signs are that this will continue with different providers focusing on different activities.
But while many will head off in different directions, few will have the luxury to ignore issues such as the need for efficiencies and cost savings. And all will face the same pressures and be rocked by future, as yet unknown, seismic shifts. We may not know exactly how things will change in the coming years, but change they will. However, if the social housing sector continues to demonstrate a willingness to reflect and adapt, perhaps it will show itself to be more resilient than we might have imagined.
Spring is in the air and life is stirring across the land. It’s traditionally the season associated with new beginnings, change and promise. In the social housing sector we’re certainly facing a fresh start from April – when the government’s much touted shake-up of the regulatory system takes effect. In effect, a series of deregulatory measures, as embodied in the Housing and Planning Act 2016 – whether they will put a spring in our step remains to be seen.
There are certainly potential benefits arising from the changes, and on balance I think it’s a positive for the sector. But I can also see a number of disadvantages in what will take effect on 6 April.
We all know the headlines by now: from next month, the social housing regulator will no longer need to grant consent to registered providers (RPs) for the disposal of assets or for ‘constitutional changes’ (for which read mergers). Instead, it will require ‘notification’. How quickly it would like to know about your plans depends on a number of factors – and ranges from as early as three weeks in some cases, to three months in others. But in all cases, notification will now be required after the event.
Let’s not kid ourselves here: the government hasn’t just discovered a new found enthusiasm for social housing deregulation. This isn’t really about freeing up the sector and ushering in a new era of deregulated, unfettered social housing provision. It’s about trying to persuade the Office for National Statistics to reverse its decision in 2015 to reclassify RPs as public bodies – thus landing the Treasury with a huge sum of new and unwanted debt on its books. By convincing the ONS that the government is employing a light touch approach to regulating RPs, and that they truly are ‘independent bodies’, it’s hoped it can convince the ONS that they should not be in the public sector at all.
So what will the impact be of the deregulatory measures? The short answer is, in my view, not much. For almost all of what RPs do in relation to the regulator, it will be business as usual. While regulatory consent will no longer be required for a number of important changes, I’m not convinced the regulator will take its eye completely off the ball.
Take asset disposal, for example. While the HCA may now want to be told of a disposal after its taken place, it can still take action if it feels a poor decision has been taken by the board, especially if it is one which has failed to protect social housing assets. It will simply come in and challenge the RP from a governance failure perspective.
We can also expect few RPs to take the deregulatory changes to their logical conclusion. Again, in theory, deregulation could mean providers choosing to deregister; to take themselves out of regulation altogether. Moving all your social housing properties into an unregistered subsidiary may seem attractive on the surface, not least because it could shield you from unwanted rent cuts and other controls. But my instinct is lenders would take a dim view of such a proposal. An unregistered, unregulated social housing provider would almost certainly be seen as a greater lending risk. And greater risk only means one thing: higher borrowing costs.
At present, lenders are willing to splash their cash on a sector they see as well regulated. An RP taking itself out into the unknown will most likely be viewed as a poor investment option. A demand for early loan repayment could follow and a hefty early repayment charge levied. Who would take that risk?
What is probably more likely is we will see a trickling of social housing properties out of the sector as and when they become void. Moving these into a non-registered entity starts to take some properties outside of rent controls but wouldn’t be enough to raise alarm bells with lenders. And if it could be framed as part of a robust and sensible approach to asset management or regeneration, it may even earn you a few brownie points with those same lenders.
In the case of mergers; while RPs may no longer need advance sign off from the HCA, it will still be essential to carry out all necessary due diligence and ensure a robust business case is made. Not least, this will remain the requirement of lenders – who may now take an even closer interest in your plans in the absence of the HCA ‘safety net’. The regulator has already said it intends to carry out an In-Depth Assessment post merger in almost all cases. To conclude: while you may have less to do in terms of form filling for the regulator, the task of seeing through a merger will remain similarly complex and time consuming as it is now – as it should be if it is to be done properly.
For boards, these changes will mean increased onus on them to take full responsibility for their strategic decisions, and a stepping up of focus on good governance. There will undoubtedly be less wriggle room for poor boards. For some boards, they will see this as a positive, enabling them to be fleeter of foot and to engage in more active, assertive asset management (for example). For others, it could also make them more risk averse, resulting in missed opportunities and a less dynamic sector.
The measures aimed at reducing local authority control of LSVT providers could have a similar cost-benefit impact. For existing LSVTs it could remove some of the restrictions which have been holding them back. For other councils where transfer hasn’t taken place, it could act as a barrier to change. Local authorities keen to retain control of their housing assets may be unwilling to give up ownership without the retention of their coveted ‘golden share’.
So as the French would say: “plus ça change, plus c’est la même” or “the more it changes, the more it stays the same”. Deregulation will happen, but the reality on the ground may not look so radically different from the status quo as we might imagine.
When Conservative Prime Minister Harold MacMillan was asked what was most likely to blow governments off course, his reply has gone down as one of the great cliches, or perhaps truths, of politics: “events, dear boy, events.”
MacMillan certainly had more than his fair share of political axioms; “you’ve never had it so good,” was another of ‘Super Mac’s’ quips which was remembered long after his time in office. And his advice that, “it is the duty of Her Majesty’s government neither to flap nor to falter” may well have come in handy when one of those events “happened”.
Politicians have had their fair share of events to contend with in recent years, as has the social housing sector. And the problem with the events which cause us the most sleepless nights is their sheer unpredictability.
The great economic crash of 2007/08 threatened to throw governments off course around the world – and was certainly one of the main contributing factors which led to the defeat of the Labour Party in the 2010 General Election. The subsequent financial downturn and resulting policies of fiscal austerity, have of course, also caused major difficulties for the balance sheets of Registered Providers.
The 2015 rent reduction, proved to be another great ‘event’ sent to challenge those who run the social rented sector. And then of course there is Brexit, perhaps the single biggest political event (in the UK at least) in my lifetime. As the great constitutional historian Peter Hennessy remarked in the summer, “never in our peacetime history have so many dials been reset as a result of a single day’s events”. It may be years before we fully understand the consequences of that resetting.
It’s events like these, as well as the more localised variety, which can also threaten to blow a merger off course – even after you’ve signed on the dotted line and the ‘coming together’ has taken legal effect. It’s understandable that those involved in a merger process often breathe a sigh of relief at this point. The pace will have been hectic in the preceding months, so there is usually a natural pause in proceedings.
However, while it is a major hurdle crossed, it is not the time for complacency. In fact, now is the time the real work begins: to integrate the two providers into a single, culturally cohesive organisation, and to begin to realise some of the benefits which merger promised to deliver in the first place.
Unpredictable events can also bring about a review of a merger’s priorities and objectives. If the unexpected does happen, having robust plans in place is critical. It’s these which will give you the best platform to deliver your stated aims, and weather any storms.
Merger plans must, in my view, be clear about the benefits which will flow from coming together. And these need to be effectively communicated to key stakeholders – including tenants, funders, the board and the regulator. They must be front and centre in the business case and the financial business plan. Progress on achieving these benefits needs to be reported back regularly.
Nowhere is this more important than in the area of cost savings. After all, this is often cited as the key reason for embarking on a merger in the first place.
In my experience, successful mergers are quick at spotting any matters arising from the due diligence process, and are also effective at dealing with them swiftly. Due diligence is often cited as important for identifying issues before mergers take place – but it can also help you work out what actions you need to take after a merger has formally gone ahead.
It’s essential to rigorously monitor performance against financial targets set out in your business plan. Making progress early on is critical – if the savings you hoped to deliver are to be realised.
My advice is: don’t let things slip. Things can quickly move on and other priorities can take over. But press on with implementing your business case, integrate your two organisations, and deliver the actions which are needed to achieve the benefits of merger which you identified.
Also, take time out further down the line to review what’s worked and what hasn’t – and to ask whether the merger process was an effective use of resources and achieved your projected outcomes. Bringing in specialists from a consultancy such as DTP can add real value to this part of the process. We can help you tap into the lessons others have learned along the way and help you develop effective ‘rules of engagement’ for future projects.
The events of recent years identified above have certainly not dimmed interest in mergers as a strategic growth option for Registered Providers. And given many of the events have only increased the pressure on social landlords to be more efficient, it’s easy to see why.
What hasn’t changed is the need to make sure your merger plans focus on the potential benefits: what they are, how you will achieve them and how you will monitor progress. Events might conspire to throw you off course. But if you keep your eye on the prize, success is not only possible, but also potentially game-changing for both organisations. And with the right amount of commitment at all levels of the business, who knows, perhaps you too will ‘never have it so good’.
Just when we thought the shocks to the system couldn’t get any bigger than summer’s Brexit vote, we now find ourselves discussing in all seriousness what ‘President-elect Trump’ will mean for the global economic and political outlook.
The parallels have already been drawn by many commentators between June’s referendum result and Trump’s eye watering victory in the US election on November 8. Most of the focus has been on the so-called ‘left behinds’ – the ‘unheard’ voters who felt both globalisation and the mass migration of recent decades has been of little or no benefit to their lives. The same demographic (mainly white and working class, but not exclusively) which hurled Britain out of the EU also swept Trump to power, or so the argument goes.
If social housing tenants are anything to go by, then there was clearly something going on in disadvantaged communities across the UK when the referendum votes were counted. More than two thirds of social housing tenants voted to leave the EU, while interestingly it seems most of the staff and boards of social housing landlords voted to remain. One impact of Brexit will be to understand how we bridge that apparent gap.
Overall, Trump’s victory will be less easy for the social housing sector to gauge than Brexit (not least because it has only just happened and he himself is such an unpredictable, unknown quantity). At the same time, gauging the impact of Brexit certainly hasn’t been easy up to now.
Our quarterly survey of senior housing professionals, set out in the Weather Forecast Group (WFG) report which we produce in partnership with HouseMark, this month concluded that Brexit hasn’t had a major impact – so far. That isn’t to say it won’t, but, as yet, the impact has been limited.
However, those we spoke to all have Brexit and its potential fallout on their watchlist. For some, the issue has made it into their risk registers, while others are undertaking stress testing to calculate what the impact of different post-Brexit scenarios might be. On a positive note, many think the effects will be of a ‘slow burn’ nature – giving providers time to plan. In summary, the sky hasn’t fallen in yet, and it probably won’t do so at a rapid pace at least.
Beyond that, there is a lot to be uncertain about, and the WFG report uncovered a number of factors which are giving RPs cause for concern.
If Brexit, as seems likely, results in curbs on immigration and the free movement of people, this has a number of potential consequences for RPs. Some of those we spoke to suggested this could affect their ability to recruit and retain staff – especially those in maintenance/DLO or social care roles. Our report reveals a mixed picture with some not anticipating problems recruiting from the domestic labour force, while others felt the UK could face a post EU-exit skills shortage.
At the same time, if Brexit results in fewer people coming to the UK from Eastern Europe, some providers felt this could impact on the ability to rent out less popular homes. This was a concern in particular for some operating in the north of England.
Several contributors to the WFG report said they were concerned about the social cohesion implications of Brexit. Reported increases in hate crime, including racist incidents, could prove a challenge for landlords who felt they had made progress in this area in recent years. That disconnect between how many tenants voted in the referendum and how most provider staff/boards voted was also seen as another potential cause of difficulty.
Other negative side effects of Brexit included forecast cost rises associated with the fall in the value in the pound and an expected increase in inflation. This is likely to push up the cost of imported goods – with the effect on building materials especially problematic for our sector. Wider economic analysis suggests this will take hold in early 2017 and could impact on the ability to build the number of new homes required.
The loss of European Social Fund investment was also cited as a downside of the referendum result – especially its impact on training, employment and regeneration. The report also revealed there could be unanticipated impacts on pension fund contributions with one provider forecasting a £500,000 increase in its expected annual contributions to staff retirement schemes. For providers in the north, signs of a possible weakening government commitment to devolution and the Northern Powerhouse (as a result of a change in administration, a bi-product of Brexit) were also viewed with concern.
But as well as the threats, there were also possible opportunities from Brexit. The Bank of England’s decision to reduce interest rates in the wake of the vote had helped some providers to reduce their borrowing costs, especially those who were in the process of refinancing their debt at the time. And some felt the UK could now become a more attractive investment proposition – especially for Chinese and other Asian investors with potentially positive implications for investment in housing.
In terms of the UK housing market, some contributors to the WFG report felt the heat could be taken out of house prices. This would be especially welcome in London where affordability is currently at its most acute.
On government housing policy, we gauged a mixed response. On the one hand, the change in leadership at the top of government has delayed clarity on new regulations and guidance in areas such as Pay to Stay, fixed-term tenancies, Voluntary Right to Buy and the sale of high value council voids. On the other hand, if the result is a shift of government of focus away from social housing, this could bring some welcome relief from the change and upheaval of the last 18 months. Some even sensed a more conciliatory mood coming from central government, and a softening of policy on home ownership is viewed as encouraging. At the same time, signals that there could be an easing of austerity were also welcomed.
A word of caution emerged from the report, which the whole sector might do well to pay heed to. While Brexit is likely to result in a big shift of course for the UK, one contributor at least suggested we would do well not to react too drastically before the split happens. It’s vital we don’t become over-focused on Brexit and risk creating a self-fulfilling prophecy, they argued. In fact, the approach which much of the sector is adopting seems sensible – maintain a sense of ‘business as usual’ while keeping a watchful eye on developments. Barring any further major shocks (and who would rule those out?) this should hold us in good stead.
So we’ve had just over one year of the HCA’s in depth assessments, if we include the initial pilot. There’s been a little bit of ‘tweaking’ along the way, not least the recent announcement that VFM will now be a key feature of the process. Nevertheless, that’s 12 months for Registered Providers to get used to how the assessments work, what the regulator is looking for and what needs to be done to ensure compliance.
I’d like to encourage providers to take a ‘glass half full’ view of IDAs. Yes, notification from the HCA that it plans to carry out an assessment can seem like a burden – and it will make extra workload requirements on key members of your team and Board. But, on the positive side, it’s a chance to review your business, identify areas where you are succeeding and spot problems. In short, it’s a learning opportunity which can help you improve the way your organisation is run.
We should all know by now why they were introduced. The regulator wanted to take a close look at RPs’ businesses to ensure they comply with its economic standards. I suppose it’s obvious, but the crucial lesson from the introduction of IDAs is that the issues they raise should be on your radar anyway. In many respects, the expectations laid out in the IDA guidance are good business practice.
Unless the regulator has identified serious and urgent issues at a provider, you will usually receive at least six weeks’ notice of an IDA. So what can you be doing to make sure you’re ready when the inspectors call?
Here are my top 10 tips for preparing for and ensuring a successful IDA:
Don’t wait for the HCA to call before you start thinking about what an IDA means for your business. Start getting ready now – as you can rest assured you will get a notification at some point. It’s a case of ‘when’ not ‘if’.
Make sure all your key strategic documents – your business plan, corporate plan, asset management strategy, development strategy, value for money strategy, risk register – are up to date and contain all relevant information. Are they fit for purpose? Are there any gaps? Are they in the right format? Would they benefit from an external review?
DTP can help with this. Recently, for example, we worked with an RP which has put all its future development on hold while it waits for government clarity on supported rents. The HCA will want to know why when the IDA inspectors visit and pour over the development strategy. So we’ve been making sure the team has an answer and can explain why this won’t have negative financial (and other) implications for the business.
Crucially, they will also delve into the decision-making processes which have informed your key documents. Again, you need to have the information and answers at the ready.
Document management also needs to be a priority. In my experience, it can pay to allocate responsibility for uploading all documents to the HCA portal to a single person.
One of the key things is having all the relevant facts at your fingertips and making sure everyone is agreed on what these are. And while the numbers are important, it’s also vital that you are able to articulate what your strategic thinking is behind the numbers. You might want to consider briefing notes for key personnel with important dates, facts, figures and a few strategic bullet points.
You might be surprised at the level of detail this could involve. For example, the regulator might drill down into the detail of your asset management strategy. Why did you choose to paint your communal areas every five years when the sector norm is to do this every 10 years and it will cost you more? Your answer might be that in your geographical area, properties are easier to let if communal areas look well kept and inviting. So, while it does represent a cost, it can be shown to reduce future losses which can be incurred if properties lie vacant for prolonged periods.
Take some time to think about what your organisation’s story is. Make sure the Board (especially the Chair and the Chair of Audit/Risk Committee) and the Executive Team know what this is and can articulate it clearly and convincingly. If necessary, have practice run through sessions so people can gain confidence and be comfortable in what they say.
It can be helpful for some or all of your key team members to have a ‘dry run’ interview. This can help boost people’s confidence and ensures they are ready to deliver when the team from the HCA arrive. It can also help to identify any gaps in people’s knowledge and understanding. Of course, it’s vital to make sure these gaps are filled before the assessment takes place.
Put your governance practices and policies under the spotlight before your IDA. The HCA will attend and observe both a main board meeting and an Audit/Risk Committee – so make sure these are well run and managed. Think about how you come across – and consider what changes might be needed.
The HCA may well ask to see your assets and liabilities register. Is it easily accessible, up to date and understandable? Do you have a member of staff who can demonstrate it? Are there any gaps in it you need to address?
Value for money is now a key element of IDAs. It’s essential you have a firm grip on this and understand in detail the information provided to your Board. Make sure the Board are prepared and are equipped to make the necessary arguments to the HCA about how you ensure value for money across the organisation. It’s essential that the Board is able to convince the HCA that it knows what is going on and is on top of this vital area of the business.
Successful IDAs rest on key personnel understanding the businesses cost base in detail. Everyone involved needs to be able to answer questions on what these costs are, what’s driving them, how you compare with others, and if they are high, why? Your team needs to be able to talk convincingly about operating efficiencies, use of resources and how you are making your assets work harder for you.
It’s important not to underestimate the importance of an IDA. But at the same time the HCA is not asking the impossible. With a robust approach and rigorous preparation you can come out the other side stronger and better. Trust me!
Winston Churchill, that master of the one-liner, once said: “never let a good crisis go to waste”. It’s arguable whether the last few years constitute a crisis for the social housing sector – but they have certainly presented a series of huge challenges. Whether rent cuts or welfare reform, austerity and now Brexit, Registered Providers have been tested dearly by events and policy changes largely beyond their own making.
Some have viewed these circumstances as an opportunity; others have struggled to respond effectively. But it’s not too late to make sure they don’t go to waste in my view. And we can start, I think, by learning from each other.
DTP’s new Weather Forecast Group (WFG) which was launched in partnership with HouseMark earlier this year, aims to provide a platform to do that. Every couple of months talk in depth to senior housing professionals to discuss their experiences and the issues that are impacting on the sector. As you might imagine, there is particular focus on government policy changes, the effects they are having, and how providers are responding. With a new ministerial team taking its place at DCLG as I write, we may have to get used to a new policy framework sooner rather than later.
One area which has revealed some detailed insights is how we deliver services to customers. Most of those we spoke to for the most recent WFG report said they were reviewing this area of their business. For some, it has been a financial necessity; a direct response to the rent cut. For others it’s something they have been doing anyway. In all cases, it’s seen as an inevitable journey as we all become integrated into the digital age.
Other factors are at play beyond falling revenues. The changing nature of the RP customer base is also having an impact – the key feature being more focus on home ownership and intermediate rent. The rise of digitally savvy “millennials” is also playing its part.
One of the biggest changes we are seeing is in terms of “channel shift”. The trend across the sector is a move away from mostly face to face interaction with customers to telephone and, increasingly, online. Levels of commitment vary but the line of travel is clearly established.
The key thing most providers seem to agree on is the importance of getting the new customer experience right. People are more likely to take up digital or telephone services if they are efficient and meet their needs. It’s the key to driving that all-important take up. It’s worth adding that RPs recognise there’s unlikely to be universal acceptance of online services . For a section of their customer base which is vulnerable, elderly etc then the brave new world of digital customer interaction isn’t going to mean very much. With levels of online customer interaction of 15% – 20% still not uncommon this isn’t to be underestimated. We still have a long way to go.
With this in mind customer profiling seems to becoming more prevalent. This is helping RPs to understand who their vulnerable customers are, so as to ensure they don’t get left behind by the digital revolution, as well as allowing for more human resources to be directed to targeted communications with this group.
We are hearing some good examples of innovation out there as providers seek to encourage customers online. One RP we spoke to has asked tenants to upload photos of each room in their house annually to provide repairs/damage insight and data. It also helps customers get used to dealing digitally with their landlord – it makes it ‘normal’. And with so many people regularly uploading photos to Facebook, Instagram and other social sites, why not their landlord too? Another provider had implemented a new system where tenants can report a repair directly to an operative – thus cutting out the call centre / diagnostic element of the process. That’s what you call a win-win. And it’s what happens in the private sector – so why not the affordable sector too?
As my colleague from 3C, Colin Sales, pointed out in a blog on this issue earlier this year, the benefits of channel shift are obvious. It has the potential to reduce costs and improve services. For further guidance on how DTP and 3C can help you maximise those benefits I’d recommend reading Colin’s article.
Where DTP and 3C add value is the way we can help providers to understand what their current service looks like – its strengths and weaknesses; where it is a drain on resources and where and how it can be improved. It means thinking carefully about the strategy behind your service offer and how it operates in practice. Going through the process can help you square what seems like an impossible circle: delivering improved efficiencies while at the same time ensuring the level of service you promise your customers is maintained. Or even improved. It can be done, and as we all move in that direction, that ‘crisis’ will have been far from wasted.
If you use a store card to gather points, you will assume data about you is being collected, but do you appreciate just how much data and what it reveals?
Of course, it includes spending habits and preferences, but did you know it could also include such things as your likely disposable income; how far you are willing to travel to shop, on what days and if the weather impacts your decision; if you respond to incentives; if you are shifting to internet shopping…the list goes on. So valuable is this data, it forms the cornerstone of a retailer’s corporate strategy. I once worked with a Virgin start-up that was developing a stay-at-home fitness club based around activity data collected via a small, belt-worn, bluetooth fitness monitor. I initially thought the corporate objective was to generate recurring monthly payments from people who wanted to get fit at home, but I quickly found that the jewel in the crown was the value that the data had to the trillion dollar private health insurance market, not to mention to other organisations that could benefit from identifying health-minded individuals.
Within the social housing sector, the HCA is already demonstrating how data is shaping the sector’s future and the careers of many within it. An example is the recent letter the HCA’s regulation chair, Julian Ashby, wrote to the top 350 housing associations after global accounts data identified a concerning 50% cost variation between landlords that could not be explained. A link to a copy of this letter is below. It states that those with higher costs will need to be able to defend the additional benefit they deliver or demonstrate that they are making savings as part of future In Depth Assessments.
Some sector commentators speculate that such analysis could be used to justify future social rent reductions, and even RP ‘league tables’.
Such data is therefore critical to success and how we are perceived. As well as accurate and timely information being key to effective operational management and strategic decision making, external bodies like the HCA will use this information to assess our performance. Additionally, service users, stakeholders and local residents need accessible and reliable information to make informed decisions. Careful data management is also critical to data security, so avoiding the risk of financial and reputational damage that can result from data leaks.
We are experiencing a revolution. Executive teams need to display vision and leadership, embracing the benefits that already existing data can provide. Key strategic decisions need to be ‘data-led’. For example, maintenance costs can be reduced dramatically by better understanding the average length of tenancies, the age of assets, the productivity of operatives and the frequency of call-outs. One RP announced significant savings had been achieved simply by recognising that 1/3 of their tenancies ended within 4 years and 1/2 within 7 years, which had a significant impact on their maintenance strategy.
The management and accuracy of data is also key to truly automating services and making them ‘human-free’. For example, the introduction of Universal Credit will mean around three times as much income will need to be collected by RPs rather than coming from housing benefit direct.
To achieve this cost effectively, the use of real-time tenant data will be key. Much of the collection process can then be automated, with only the particularly troublesome cases being highlighted for human intervention.
A carefully considered data management strategy therefore needs to form part of corporate strategy. What should such a strategy include?
If you need to justify why investment in data should be a priority, here is a summary of just some of the likely benefits:
So to conclude, every corporate plan should include a data management strategy, as having access to accurate information is key to the well-being of the organisation, staff and customers. Importantly, it will help minimise the disruption audits can cause and the anxiety that can accompany them.
Access to accurate data will allow you to increasingly take control, saving time and money and helping safeguard against those nasty surprises that makes running a business so much more stressful.
As the housing sector continues to diverge, a group of registered providers have come onto our radar who seem to be forging a new role for themselves in this changing landscape. These housing associations are redefining themselves as broader social businesses.
I touched on this in my previous blog – but here’s a quick recap. DTP has worked with a number of RPs who are thinking beyond their traditional housing role and are actively bringing into their organisation local partner organisations which are involved in the business of improving ‘quality of life’. The charities and commercial businesses being acquired are varied – from drug and alcohol treatment specialists to domestic violence refuges; from training and employment providers to environmental charities. What they have in common is their commitment to improving the lot of communities where registered providers operate.
Acquiring a partner organisation is neither simple or easy. But it can be done and the potential benefits are wide reaching. We’ve assisted for several organisations now, and have seen first hand the positive impact it can have. Where it tends to work best is with RPs with a tight geographical focus – which presents opportunities to bring in partners which are local to you. Stock transfer organisations seem especially well suited to the idea.
These RPs are unlikely to be big players in the development world and instead are shifting their focus to consider the broader needs of their communities – so beyond just putting a roof over people’s heads.
So what’s involved? What’s the process which both parties have to go through? What do you need to consider and how can you make it work for mutual benefit?
The benefits for both organisations are obvious. First there are the efficiency benefits which can be gained from working together on a formal basis – such as sharing back office costs. On a simple level, one acquisition we advised on allowed both parties to avoid paying VAT on environmental improvement works. Coming together also puts both organisations in a better position to bid for the types of contracts which are now available in the kind of areas just mentioned and to do so as lead providers.
For the organisation being acquired it can also help them realise their ambitions for growth – with the RP offering the kind of protection against financial risk which may have been holding them back previously. For each party involved, coming together is about realising the value for both parties.
There’s a lot to think about – branding, legal status, board structure – and no one size fits all solution. In some respects many of the considerations are not dissimilar to those involved in a merger proposal. There’s certainly an argument to be made for presenting to the outside world – and your potential customers in particular – as an integrated offer. The simpler you can keep things for commissioners the better.
One of the key challenges in formally bringing partner organisations into your structure is of course governance. Bringing in new partners means bringing in their existing board structures and we take time to work with both organisations to determine what the best governance structure will be post acquisition.
Here’s a few pointers which I’d suggest organisations consider…
Ultimately, every part of the organisation has to refocus its efforts to squeeze every penny out of what they have available to make this happen. In some respects it involves taking a risk and heading out into genuinely new terrain. It’s about asking yourself, ‘how can we work this organisation as hard as we can, to get the most out of it for the benefit of the people we serve’. That’s what being a broader social business really means.
To merge or not to merge – that is the question. It’s a quandary faced by many Registered Providers (RP) at present with the stakes and the potential rewards both equally high. Get it right and you have the potential to create an organisation which is greater than the sum of its parts – one which is both more efficient and more effective.
In a previous blog I touched on the importance of getting the cultural fit right to ensure a merger succeeds. The new organisation which emerges has to bring together two cultures while at the same time creating something new. Neglect this at your peril.
But analysing whether another RP is a good fit for your organisation of course also requires rigorous financial due diligence. Your potential partner has to be willing to open up their books and let you in on how they’ve been doing – and how they expect to do in the future. You have to make a cool analysis of their overall judgement, performance and effectiveness. And you have to use that information to make a rational decision about your merger partner’s suitability. It’s perhaps obvious but effective and thorough financial analysis is best undertaken by professionals (either in-house or external) with relevant experience.
My advice is to start the process off by looking back into the past and forwards into the future at the same time. Historic analysis of financial performance can help you identify useful trends in financial performance including any areas of weakness in the business. This can raise an important question: have these weaknesses been overcome? It’s essential that your due diligence process gathers the information you need to provide reassurance (or not) on this. To give the green light to a merger you must be confident weaknesses are in the past – or that measures are in place to consign them there.
Meanwhile, future projections in the business plan can identify challenges which might lie ahead. An example might be where projected cost savings are essentially assumed – they have been modelled but are by no means certain. Such assumptions must be supported by achievable plans if they are to be seen as credible and rigorous. Likewise, forecasts for sales income should be backed up by clear evidence of recent sales history and current projected demand.
As you go over these forward projections and assumptions you are looking for a couple of key things in my view. What’s needed is evidence that your prospective merger partner’s planning assumptions are reasonable and conventional. There might be sound arguments for not following conventional assumptions – but you need to know clearly what they are and be persuaded by them.
The due diligence process then requires a moment of reflection in my experience. You’ve met the key people, digested the information they have provided you with, now comes the time to make a judgement call. I call this ‘business assurance’ and it involves asking yourself a crucial question: ‘what does all this amount to?’ There’s some overlap here with the cultural due diligence I mentioned earlier, and it is at least on a par with the analysis of the financial and operational performance of the business.
Up until this point, due diligence can perhaps be characterised as a slightly dry, academic exercise. Critical though this is, our approach is to follow it up with a process of opinion forming.
So what does it involve? At its heart it is about making an assessment of the performance of the executive team. How well is it managing the business and dealing with the problems which it faces? Do the executive team and the board work well together? Clues can be found in the minutes of executive team meetings and in the details of reports they provide to boards. Look for issues such as fraud, contractual difficulties, disputes with third parties (and the potential liabilities associated with this), overspends against budget and failures in statutory compliance. Where these have arisen has the governance structure risen to the challenge? Have the people got on top of these problems? You might not find a ‘smoking gun’ but you may well find evidence which raises a question mark about the effectiveness of management and the culture of the organisation you plan to merge with.
What else might raise concerns? There are a number of things I would look out for including the late submission of VAT returns and associated fines and any signs that the accuracy of internal reporting has been called into question.
A judgement call has to be made about what all this tells you about the organisation you plan to merge with. Does it call into question their ability to carry out the basic tasks expected of them – by lenders, the regulator …? Are there serious underlying problems which should call a halt to proceedings? Or are these legacy issues – which have been banished, overcome and, crucially, learned from?
The key personnel who we engage with during this part of the exercise are usually the chief executive and the finance director (or equivalent). What we are looking for is clarity on matters not fully explained by the data which has been provided.
When we bring all this together into a report it’s crucial that our opinions are based on solid evidence. With this in mind we opt to share our draft with the organisation we have been examining to ask them for their views on its accuracy. At such a sensitive stage in the process this is essential as any misinformation could create tension among the prospective partners.
Next we put together an action plan which sets out any work which is needed pre-merger or post-merger. This is then consolidated with the other party’s financial due diligence action plan and is combined with the legal due diligence to form an important element of the business case for merger.
Keeping boards in the loop is essential. They must have the opportunity to be able to review all due diligence reports and need the best advice possible on all matters arising. That’s not only crucial to the process but also a current HCA requirement. Other parties may also wish to see these reports once the boards have approved them, funders, for example, will often seek copies of them and will pay close attention to them.
As for the question of whether to merge or not to merge, that ultimately requires an analysis based on fact and informed opinion. Due diligence – even the cool headed financial variety – has to combine both to be effective in my view. It’s as much art as it is science. But by asking searching questions and going beyond the data you stand a good chance of making the right call.
‘Value for money’ is the phrase which has been on everyone’s lips in recent weeks. A spotlight is once again shining on the social housing sector’s efficiency, and there’s little sign the light will be switched off anytime soon.
The government can certainly not be accused of sending mixed messages. It has been pretty clear where its focus is going to be. RPs are seen as inefficient, expensive to run, not building enough new homes (for sale), and fostering welfare dependency. The recently publish HCA report this month into RP operating costs in the sector is unequivocal. The HCA will, in future, “increasingly challenge providers on their approach to efficiency, as part of its regulation of Value for Money”. Don’t say they didn’t warn you.
The rumour mill is also turning. We are hearing on the grapevine that efficiency ‘league tables’ for RPs could be an idea whose time has come. That would certainly mean an even brighter spotlight shining on the whole sector.
Already, HCA Regulation Committee Chair Julian Ashby is firing warning shots across the sector’s bows. His recent letter to more than 350 RPs pointed out that only half of the variations in operating costs could be accounted for by factors such as supported housing, regional pay differences, older person’s housing, LSVT costs and deprivation. They want to know what accounts for the other half. The regulator wants to see a step change in operating efficiency and will be placing more and more pressure on RPs to free up latent resources.
Last year’s announcement of a 1% rent cut for the next four years offered a foretaste of what was to come. And let’s be clear about this, the government has its own reasons for imposing that cut, and it goes beyond a belief that efficiency is a good thing in its own right. Cutting RP rents has a direct impact on its own housing benefit bill, and will go down well with the number crunchers in the Treasury.
Many RPs have risen to the challenge and found ways to change the way they work and make savings. I’ve no doubt more can be done and it’s actually quite inspiring to see how many housing associations are using this as an opportunity to think differently about how they work – to see if there is a smarter, more efficient way of doing things. My view is this doesn’t have to necessarily mean pain for RPs. Improving operational efficiency can be good for an organisation – for its staff and its customers and stakeholders.
We are working with a number of RPs at the moment who are looking for ways to respond to the new Value for Money agenda. I’m encouraged by how many of them get it.
Many are turning to us for help with In Depth Assessments (IDAs) and Value for Money self assessments. Both offer important and practical lessons for RPs on how to face this challenge. In addressing VFM in an IDA, our approach is to set out firstly to help an RP to get all the facts in front of them. It’s about asking some searching questions of everyone involved: what are your costs, what’s driving those costs, and, where your costs are high, why?
Then you start a conversation: about your approach to operating efficiencies, how resources are used and how to make your assets work harder. It involves going over all an organisation’s strategic documents – the corporate plan, the business plan, the asset management strategy, development strategy, value for money strategy. Are they fit for the purpose? Do they all hang together? Where are the gaps – which the HCA might identify? This has to be a bespoke exercise – there is no one size fits all approach.
Value for Money self assessments, similarly, require RPs to have to directly respond to the requirements of the HCA’s VFM Standard, and the expectations of the self-assessment in terms of demonstrating VFM. The regulator’s recent review of the 2015 self-assessments makes it clear that it remains unhappy with many RPs’ responses. Cherry picking what is reported by way of costs, performance and peer groups is still an issue. Vague aspirations to be more efficient in the future won’t be enough either. You need to say specifically how you will make changes and put numbers on your plans. The regulator wants to ‘follow the money’.
The costs of failure are high: RPs can be downgraded for a poor VFM self-assessment (and I’m pleased to say we helped two organisations to turn that situation round last year). But if the strategic approach at the board level is the right one, the rewards can be high. And by rewards, I don’t just mean being able to say you’ve jumped through all the regulator’s hoops. You can come out of these often challenging exercises with an organisation which is better equipped to deliver on your purpose and meet the needs of all those who have a stake in it. That surely has to be something worth aspiring to?
The only thing which would seem to be certain about the future of housing deregulation is that things are uncertain. At this stage in proceedings, we have precious few of those Donald Rumsfeld ‘known knowns’, quite a lot of his ‘known unknowns’ and maybe even some ‘unknown unknowns’. In other words: there are things we know, things we know we don’t know, and even some things we don’t even know that we don’t know!
Following royal ascent for the Housing and Planning Bill, we can take little for granted. We know the direction of travel, but I’d be reluctant to place any bets on the fine details of what our post de-regulated world will look like.
What we do know is that the government wants Registered Providers (RP) off its books – in a reversal of the ONS decision last October to reclassify them as public bodies.
But when it comes to the detail, things are … ‘fluid’. For example, the approach to Large Scale Voluntary Transfer Organisations, with their significant local authority involvement (the ‘golden share’ in the organisation), is now being further developed with quite different views being voiced on what this might look like in practice.
And hasn’t just been the government and a rebellious House of Lords feeding uncertainty. Some RPs themselves are raising the prospect that a post-regulated world could see them take a great leap into the unknown and become de-registered. Some providers are taking a good look at themselves, what they do now and what they want to do in the future and thinking about the best form of organisation and the most appropriate form of regulation to enable them to deliver it. But, we still don’t really know what a march to de-registration might mean for the status of grant and other public funding provided to RPs who may no longer be RPs.
I certainly don’t envisage a Doomsday Scenario of mass deregistration. I think a majority of boards will be keen to remain providers of social housing for people in need. However, I can see some choosing to adopt a hybrid model, where parts of their business could be de-registered and offer greater freedoms and flexibility while others remain firmly registered. Such models will require careful governance arrangements.
Could the latest planned grouping of L&Q, Hyde and East Thames offer another foretaste of what’s to come? This proposal will build 100,000 homes in London and the South East in the next decade and have assets worth £30 billion. They have the potential to pose a real challenge to the Barratt Homes and Taylor Wimpeys of this world.
So, in this climate of uncertainty, RPs could be tempted to sit back and wait until the dust settles before deciding what to do. I think that would be a mistake.
RPs should now be thinking about what they want to do as an organisation – what their strategic objectives are and how they can best achieve those. What would be the best organisational form which could deliver that? Now that the Housing and Planning Bill is an Act – they need to be in a good position to align those things.
And then there are the implications for boards and governance. The HCA has issued its consultation on registration criteria and use of powers. Again, my advice is don’t use this period of uncertainty to put off until tomorrow things which could be done today. Yes, deregulation has the potential to relieve RPs of some onerous and restrictive bureaucracy, but in some respects it puts the spotlight on boards and will raise the expectations of them. While the proposals on the consultation suggest that deregulation might mean RPs may not have to ask the HCA for permission to do certain things – Boards will still have to let them know what they plan to do and be accountable for how they do it and the outcomes.
Similarly, while the HCA once acted as a useful check on an RP’s plans – that’s no longer the case. That role will now fall fully on boards and could mean we see ever higher expectations on them in terms of skills and performance. (See my earlier blog on tips for better boards).
Deregulation, whatever form it takes, could also put more emphasis on risk management. Again this has potential implications for boards. There may well be more demands for accountability and transparency – with the expectation that they may have to provide an audit trail for funders or the regulator.
De-regulation might also mean more emphasis on the board when things go wrong. Here, exit strategies and recovery planning – often neglected – could become more important, alongside the board’s role in developing them. And here too, Audit and Risk Committees might come into their own; taking on responsibility for compliance for key areas of the business once overseen by the regulator.
So that’s my take on what we know and what we don’t know – and how we can begin to plan ahead. As for those unknown unknowns – only time will tell.
Following June’s shock EU referendum result, there were a number of phrases doing the rounds which threatened to become the new cliches of our time. “We are in unchartered territory” certainly received its fair share of utterances. And among the business correspondents we were constantly reminded that “markets don’t like uncertainty”. I suspect markets are not alone in this dislike. Most of us don’t like uncertainty and try our best to minimise it where we can; fully aware of the fact that (aside from ‘death and taxes’) we can never fully eliminate it. I’m certain registered providers (RPs) share the general gloom which has been fostered by the increasingly foggy nature of our future prospects.
Leaving aside the rights and wrongs of the collective decision taken on June 23, it has without doubt heaped a whole load of new uncertainty on the social housing sector. Please note the word ‘new’ – we already had plenty of other things to be unsure about before the country decided to leave the European Union.
DTP’s first Weather Forecast Group report, published in spring, revealed a number of uncertainties even then which were causing unease in the sector. The report, produced jointly with HouseMark, offers a current snapshot of the experiences of RPs – around the impact of government policy changes and the mitigating strategies they are adopting in response.
We spoke to senior housing professionals (Chief Executives, Finance and Housing Directors) from the housing association, local authority and ALMO sectors across the English regions. Their insights were illuminating; we aim to produce two more similar reports before the end of 2016.
One area we focused on was financial viability, and not surprisingly we found a varied picture. Some are clearly finding this more of a struggle than others. Overall, however, I would say that we found a sector which is generally maintaining financial stability in the face of rent cuts, welfare reform and right to buy. (I will come to the threat which Brexit could pose to that in a moment).
All said they had reconfigured their medium and long-term financial plans in the light of the 1% rent reduction. We also found a broad range of strategies were being put in place to achieve the necessary efficiencies – for example, restructuring staff teams and reviewing repair standards.
Many said they were concerned about future borrowing costs and the potential for a reduction in borrowing availability.
On policy matters, the lack of clarity around issues such as VRTB, Pay to Stay and welfare reform (including the Local Housing Allowance cap) were a cause of concern for a lot of those we spoke to. Since the report was published we’ve had no further indication from government about where it is going with these things (with the minor exception of the government announcing an indefinite extension of the LHA cap exemption for sheltered and supported housing) – not surprising perhaps, given that the EU referendum effectively put most other government business on hold. We will be watching with baited breath as to what – if anything – comes out of any new team in DCLG in the coming months.
On the financial side of things we still await detail on the future direction of fiscal policy, deficit reduction and austerity. We can only ‘watch this space’ until the new government’s course becomes clearer. There will be obvious implications of this for our own sector which will need to be picked over.
I’ve prepared a detailed briefing note on the specifics of what Brexit means for the social housing sector and given the fast-changing nature of events I will endeavour to regularly update this.
There’s more detail in the note but here are a few headlines:
The short term shock to stock markets appears to have stabilised which is of course good news for RP pension liabilities. The pound remains close to its 30-year low and the traditional ‘safe haven’ of gold has seen a rise in value.
There are potentially mixed signals on the implications of Brexit for borrowing. On the one hand, reviews of the credit ratings of the sector’s high street lenders resulted in no change. And there are some suggestions that the cost of borrowing could be set to fall (although at the time of writing the Bank of England’s Monetary Policy Committee had voted to keep interest rates at 0.5%). But on the other hand, the same ratings reviews resulted in widespread changes in outlook from stable to negative. Also Moody’s, the key rating agency for housing associations, amended the outlook from ‘stable’ to ‘negative’ on its 42 rated associations, as part of its overall review of government and quasi-public bodies.
RPs will also be watching closely the impact which Brexit has on house prices. Any fall in prices will clearly impact on financial models which have been built on being able to secure income from new house sales. Many I have spoken to are already remodelling – based on being able to get less for the new homes they build while at the same time facing a reduction in demand and a slowing down of sales (although it should be noted this is currently mainly a problem in London and the south-east).
Inflation too will be one to watch. Most RP business plans are predicated on low inflation – however, the impact of Brexit (particularly the fall in the value of the pound) could exert upward pressure on prices. How wage inflation will be affected depends on a number of factors – including what future decisions will be taken on freedom of movement and what happens to (job creating) capital investment.
There are other ways in which Brexit might have an impact on the sector. How will new paradigms around immigration affect our ability to recruit? Not just care workers and construction staff but general housing employees? If we see damage to the social fabric of our country – reduced social cohesion, tension between host and immigrant communities, increases in hate crime – will it be RPs who are in the front line and bear the costs? These outcomes will be even harder to predict, I suspect.
Whatever the uncertainties, we will be there to work with RPs in the coming months to help the sector find a way through that aforementioned “unchartered territory”. We will be helping providers to review their strategic plans in the light of fast changing circumstances and to amend their growth plans. We don’t like uncertainty either, but we do hope that our knowledge, past experience and expertise can help us all to find a way through the unfamiliar landscape which lies ahead of us.
Crystal ball gazing is by its nature fraught with difficulties. Given “the future is unwritten”, who would make predictions in writing before it’s happened? On the other hand, as the fan who placed a bet last year on Leicester City winning the Premiership at odds of 5000-1 will know, it can occasionally pay off.
I can’t claim my views on the future of housing will certainly come to pass – and I’m definitely not heading to William Hill anytime soon – but I am sure of the basic direction housing associations seem to be heading in at present. Where exactly they will all end up is perhaps less easy to predict.
My main prediction is that we will no longer be able to talk of a single coherent housing sector in the future. In some ways, the sector has been diverging since the mid 1990s, when the first wave of stock transfers began. But that pulling apart is now accelerating and I think we’ve reached the point of no return.
What we are seeing is three distinct types of organisation emerging. And one kind ha been of particular interest to the team here at DTP in the last few years.
Firstly, there are the RPs which are becoming more and more commercial organisations. Given their generally larger nature there are less of these but they will undoubtedly be major players in the housing world of the future. These behemoths will, to all intents and purposes, be commercial organisations which happen to have a housing focus.
Then there are the organisations which will focus on development. These similarly larger organisations will have the borrowing muscle to raise significant amounts of cash, and their raison d’etre will be bricks and mortar. Given how much the Government wants more homes built, these organisations will no doubt prove very popular in Whitehall. They will certainly get more attention.
So what does that leave us with? Well, it leaves quite a large number of organisations for whom the above approaches just aren’t desirable or feasible. They simply aren’t big enough to attract funding to build significant amounts of new homes, and the commercial world just isn’t for them. I think most, but not all of these, will trundle along as they were. Many, but again not all, will be LSVTs.
DTP certainly has on its radar a number of organisations which are far from content with trundling along. And it’s been exciting in the last few years to work with them as they explore ways to take a more holistic view of what they do and how they serve their local communities. Business as usual isn’t in their thinking and we are seeing some real innovation which is genuinely inspiring.
These RPs are taking the opportunity, created by a period of flux, to redefine themselves as broader social businesses. That means having a wider focus on their local community – not just housing. But it’s how some of them are doing it which is interesting.
A number of housing associations we have worked with are exploring ways they can bring into their business local commercial and charitable organisations which are engaged in the business of improving people’s quality of life. That encompasses quite a broad spectrum of organisations – from a charity winning contracts to tackle worklessness to a small commercial drug and alcohol treatment businesses. This means fully acquiring these organisations so they become a formal subsidiary of the parent RP, and generally this has involved organisations which they have already worked with.
What these acquisitions do is allow both businesses to spread their costs – so there are straightforward bottom line benefits from the outset. It also puts them in a stronger position to bid for and win contracts as lead providers – such as the government’s work programme, for example.
There are certainly challenges for both organisations involved – and that’s where we have been coming in. Top of the list is of course the implications for governance – and we’re helping several organisations to grapple with this and to make the new structure work. It’s also about getting it right from the outset and sometimes that involves starting out from first principles with the organisation being brought into the fold. That means talking to them about how housing associations operate and how becoming a subsidiary would work. If both parties agree to proceed then it’s our job to manage the whole process.
Initially, the focus is on setting out the benefits both parties want to achieve and addressing any issues which are of concern. A statement of intent is then put together, governance and financial arrangements agreed and a business case set out. Any legal work is then determined and carried out before we work on the final due diligence checks. After that there’s little else which should stand in the way; acquisition goes ahead and there’s no going back.
I’ve seen some very successful partnerships come to fruition in this way in the last few years and expect to see more in the years ahead. Ultimately, the biggest factor driving how many will make the leap is risk – and the attitude to it. But calculated risks can often lead to the biggest rewards. I’m certain, however, that the odds of success won’t be of the Leicester City variety – and from the experiences of the organisations we’ve worked with, they may well be the kind of risks worth taking.
For those who have made it to the top of Mount Everest, there’s a popular saying: reaching the summit is only half of the journey. Only when you have made it safely back to base camp can you truly claim your expedition has been a success.
In some respects a similar principle applies to housing associations embarking on the sometimes difficult journey towards a merger. (There’s probably slightly less risk of frostbite, however, and I still haven’t quite worked out what the merger equivalent of the ‘Death Zone’ is!)
In a merger situation, the completion of financial and legal due diligence, and meeting the requirements of the regulator, are in some respects the equivalent of reaching the top of the mountain. But bringing together two different cultures into one new organisation is the next, but equally, important leg of the journey. You can only call your merger a success if you achieve this crucial objective.
Cultural due diligence should in many ways be given as much priority as the other kinds undertaken as part of the merger process. In some respects it’s less structured than the financial and legal varieties. It’s easier to apply hard and fast rules or put numbers on your assessment, but it remains vital.
Crucially, you cannot tolerate the retention of different cultures. The newly merged organisation must quickly establish itself as a cohesive business with a single culture. And it must be a new and distinct culture.
So where might there be a clash of cultures? One we often come across centres on organisational structure. You might come across a business which is quite traditional, with quite a hierarchical structure and tightly defined roles. The merger partner, on the other hand, might be a flatter, more fluid type of organisation. It’s not impossible to overcome these differences as long as you make a statement of intent at the highest level of what you want the new organisation to look like. A successful new ‘hybrid’ culture depends on clear direction from the outset about how things are going to be.
Difficulties often arise where there is sensitivity about the qualities which each party is bringing to the merger. People can be a little precious about what’s good about their business and be reluctant to see its shortcomings. I have come across instances where people have viewed the characteristics of other organisations as weaknesses, while similar traits in their own business are viewed as strengths.
The trick is to try to work together to create something that is fit for purpose for your new shared future – rather than to dwell on what worked or didn’t work for the separate organisations. It’s about starting with a clean sheet of paper and creating something which is hopefully greater than the sum of its parts. Ultimately, the success of any merger stands or falls on the extent to which the new culture prevails. Leadership from the top has to define this and expect complete commitment to certain behaviours – from top to bottom. In my experience this offers the best way to create a positive new environment.
Foot dragging and obfuscation by some individuals or groups can be a similar barrier to progress. People can resist change and decide to simply carry on as they did before; sometimes refusing to fully engage with people from the partner business.
While it’s important to listen carefully to the different views within an organisation and to consider sensible suggestions, you cannot tolerate opposition to change simply because it is seen as too difficult. Staff need to know from the outset that the new organisation is going to be different – it will not be business as usual. However difficult it is to overcome this opposition, it’s vital for the whole business that you continue to drive through improvements which will help you operate more effectively.
That is ultimately the end goal of any merger proposals – the base camp if you like, where the air is less thin and you can breathe a little easier!
The desire to be more effective and to deliver better value for money remains the ultimate driver for mergers. The seismic events of last summer, where we saw the government call time on above inflation rent increases, haven’t changed that. From what we are seeing, there do seem to be more preliminary talks taking place about potential mergers as a result. In a lot of cases, potential partners are walking away at this early stage and saying it’s not for us – but if anything the events of last summer seem to be increasing general interest in the idea of a merger.
The changed landscape may make proving the business case harder – but it hasn’t altered the basic premise that housing associations can often be better together than they are apart. There are still efficiencies which can be achieved – even if the value for money wins aren’t as great as they once were. Getting to the summit, and back down again safely, may look a little more daunting in this new era – but it’s still worth the effort!
Registered housing association boards have had much to contend with in recent years. And there’s little sign of things getting quieter for them in the years ahead.
Planned changes to the regulatory system governing housing associations is likely to have a big impact on boards, and in ways which were perhaps are not predicted.
We work with lots of registered housing associations to improve the way their boards operate and perform – and to enhance the contribution they can make to organisational performance.
Get it right and your board really can make a difference – providing independent and objective oversight on your strategy. They can be the critical friend the executive team need when times get tough. Get it wrong and your board can act as drag on performance and effectiveness.
Hard and fast rules are hard to come by and there really is no ‘one size fits all’ solution. But there are some general principles I have picked up from my experience.
Here are my top ten tips for better boards…
For several decades the social housing sector has aspired to increasingly higher levels of tenant satisfaction. Registered providers (RPs) competed with one another to achieve tenant satisfaction ratings in excess of 95%, spurred on by Audit Commission housing inspections, regulation, and the fact that money seemed to be no object.
How different the landscape seems now. The Audit Commission has gone – and the new watchwords of regulation are financial viability and governance. And, of course, how many homes (for home ownership) you can build. Gone too are the income certainties of the last two decades. The era of above inflation rent increases is over and the sector is having to make a painful adjustment. Efficiency and productivity are firmly back on the agenda.
Before we look forward, it’s necessary to look back. Service improvement was probably needed by the 1990s. Some RPs (and certainly council housing departments) needed to up their game, and positive improvements were secured when many of them chose to go beyond their traditional remit of providing a rented home and collecting rent.
It’s amazing now when we look back at how much investment went into these things. RPs employed teams of people to drive up the quality of services – whether it was how quickly repairs were done or how satisfied tenants were with their neighbourhood.
But what we are seeing now is perhaps the beginnings of a culture shift. It’s by no means across the board, nor is it easy to spot which organisations in the sector will go down this route. Put simply: the era of universal ‘gold plated’ tenant service may be over. And (whisper it) that might not necessarily be a bad thing.
The first legitimate criticism of the gold plated approach was that it involved many housing associations getting involved in things they shouldn’t have been. RPs became the ‘go to’ organisations on housing estates to sort out all manner of problems – from claiming benefits to neighbourhood disputes. Got a problem with your neighbour? Your landlord will sort it out. Your child has kicked a football through your window? Call the housing association – they’ll send someone out to mend it. RPs were partly to blame. It became easier to just go round and fix these things – even if it the tenancy agreement clearly said that it was the tenant’s responsibility.
Here at DTP we are definitely picking up on the first stirrings of change from the RPs we work with.
It’s not fair to say that it was only George Osborne’s announcement on the rent reduction last summer which kick started this. The signs were there in the first years of the Coalition government. When the writing was on the wall for the Audit Commission, we should perhaps have seen it coming. The new regulatory framework, introduced under the HCA (bye, bye TSA – and any interest in tenant services) said pretty much nothing about consumer standard. Reading between the lines, the government was pretty clear – we’re not really interested. Are you financially viable? and Are you well governed? Were the questions they wanted RPs to answer – not How happy are your tenants? But the sector can be a little like an oil tanker at times – with those proverbial long timescales on turning things round.
In the last year or so we’ve seen at least three examples of RPs taking quite different approaches to this new landscape.
For one, a move away from carrying out all those repairs which they were never responsible for anyway has saved them £1m a year.
For another, we’ve even managed to put a cost on how much a single percentage point increase in tenant satisfaction with repairs is costing them. The answer, following a slightly complicated benchmarking assessment with peers in their region, is certainly not insignificant: £320,000 a year.
Void properties and repairs are both areas which are beginning to fall under the spotlight. An RP I talked to recently explained that where they had high demand for properties, they were no longer spending thousands on bringing void properties up to a ‘gold standard’ of repair. In most instances, tenants were simply happy enough to have got a new home, and so there has been little negative impact on satisfaction levels. And it’s clear there will be benefits for the RP’s bottom line.
Elsewhere, we are increasingly seeing a shift away from ‘tenant satisfaction’ being the number one priority. Instead, it’s about getting multi skilled operatives in who can fix more than one problem in one visit. Or switching to more sophisticated time management using mobile technology. Again, it’s a more efficient way of doing things which increases the number of jobs which can be finished in a day. And because repairs get sorted out first time, all in one go, if anything tenant satisfaction increases, not decreases.
So are we are seeing the beginnings of an acceptance that tenant satisfaction ratings in excess of 90% just aren’t worth the cost? Maybe. My impression is not all RPs will be happy to make this culture shift. You will still hear many say ‘what about the 5% who are not satisfied? We can’t ignore them’. But for those that are, the first challenge will be securing buy-in to that change at the board level. I wouldn’t like to predict which RPs will embrace this change, and which will fight it. But we know we’re already seeing increasing divergence in the sector – this is yet another example of how it will divide. Some may say it’s time to refocus on our core remit of putting a roof over people’s heads. Others may stick to the ‘gold plated’ approach based on a view of RPs as providers of ‘social good’.
However this pans out, it will certainly be a fascinating few years as RPs try to navigate this new terrain. For some it will require shifting out of their comfort zone, while for others it may involve a little soul searching. It’s a development which I see gathering momentum. Watch this space.
It has been widely publicised that smartphones are now outselling toothbrushes and that for a large proportion of the population, they have made the use of alarm clocks and cameras obsolete. Attitudes to service have also changed. When I present to audiences on the subject of digital business transformation, I ask attendees if they prefer to book a restaurant table online or over the phone. Over 90% have always had a preference for online.
This move to digital communication provides considerable opportunity for both saving cost and for the provision of improved services, available 24×7 from anywhere that has an internet connection. Combine this with the Government’s demand to move services online and the business case for shifting communication channels becomes both compelling and indeed inevitable. Associated savings will generally counter the seismic reductions in funding introduced last summer, a point no doubt taken into consideration when funding levels were reviewed. Both PWC and SOCITM have independently reported that moving customer communication online should lead to associated cost reductions of over 90%, and such savings are just the beginning.
Landlords that are channel shifting services are also benefiting from increased revenue from sales and letting activities; reduced void times and better customer interaction. There are also the environmental benefits from the reduced need for journeys and from going ‘paper-free’ (e.g. the electronic circulation of newsletters).
There will always be a need for there to be somebody a customer can talk to, as indeed there will be for a toothbrush, however, whichever way you look at it, doing business over the Internet is here to stay. Ensuring your customers have online access to your services has to be a priority.
To achieve digital business transformation, there are some important first steps. These are, in order of priority:
Some RP’s are yet to start their journey to digitally transform, but others are completing theirs. A number of golden rules have become evident:
It would be irresponsible of me to claim that by following some simple rules, the move to online services will be relatively simple, but having had to achieve such a move almost a decade ago in order to safeguard my old business (delivering managed IT support services), I can reassure you that the implementation process is formulaic and readily achievable.
So to conclude, if to justify the investment in time and money necessary to move services online you are still deciding what could be achieved, here is a summary of some of the many benefits:
At DTP, we talk to Registered Providers on a daily basis, and there’s one topic of conversation which seems to be cropping up a lot lately: asset management. Many organisations are approaching us for advice on making their assets work better for them. How can we ‘sweat our assets’ is a question we’re asked a lot of late.
How to get more value from your property portfolio is rising up many people’s ‘to do list’. It’s just one part of a growing focus on efficiency savings, as organisations wrestle with some of the challenges forced upon them by reduced rental income, welfare changes and the loss of grant for building new rented homes.
The emphasis is understandably on the homes which RPs already own and manage – the core housing assets where much of the value of their organisation lies.
But in the last six months, almost every RP we have worked with has also been undertaking a review of its office accommodation – and how staff work. I’m seeing encouraging signs that many RPs are ‘getting’ this and are starting to rethink how this part of their asset base can be re-designed to work harder and smarter.
Here’s a few things I’ve noticed in respect of ‘non-core housing’ asset management:
Many RPs are shutting area and regional offices where these are no longer economic. This is in part running alongside a ‘channel shift’ in the way associations engage with customers. The move is away from face-to-face and in some cases even telephone, in favour of online interaction. Cost benefit analysis of these options is throwing up some interesting data. For example, one RP told us they had estimated every face-to-face visit with a customer at a public office cost them £14.
Closing offices, where it’s feasible, saves money whether you rent or own the property. The former takes a chunk of outgoings (rent) off the expenses spreadsheet, while selling an office you own, of course, gives you a capital boost which can be invested in new homes. An alternative, if you own the asset, is to rent it out commercially and create a new revenue stream.
Mobile-enabling staff is the other trend we’ve noticed. This means getting staff out of the office and working remotely in communities, on estates and/or at home. This really can be a win-win for employees, organisations and customers if done properly. And ultimately, it can reduce your need for office space, helping you to further drive down costs.
In some respects, this requires a culture change from managers. It is far from being universally embraced at present. Many managers tell me, “if I can’t see staff, I don’t know they are working.” This is what has to change and requires a complete rethink of performance management to focus on outcomes and outputs. The days of 9-5, office-based working for many housing staff may be numbered. And there are many roles which could thrive from a different way of working.
The benefits of flexible working have to be sold to staff. Do you need to take a couple of hours out of the day for the school run? With flexible working you can do that. You can then put a couple of hours of work in during the evening chasing rent arrears – at a time when you are more likely to find tenants at home. It’s another win-win.
When staff do need to go into the office, they are more likely in the future to use a ‘hot desk’ station than a dedicated work space. Also, what’s there not to like about taking the commute out of the working day?
For staff, it’s the shift in emphasis to outcomes which will really drive change. There needs to be a change in thinking that moves beyond the traditional office-based working day. Lowering rent arrears, reducing anti-social behaviour, bearing down on re-let times – these have to be the things we focus on, not where our staff are at every hour of the day. Is the job getting done, and is it getting done well, have to be the critical questions asked by managers in the future.
Taken together, these new approaches offer enormous potential for RPs to overcome some of the many challenges they currently face. They show it is possible to have a better run organisation, whose assets work better for the business, its people and its customers – by rethinking our whole approach to assets. In a world of opportunities and threats – I’d surely see this is an example of the former.
19th December 2019
We are pleased to announce that Andy Gladwin has joined DTP as Treasury Director. Andy is a Chartered Accountant who was previously a Finance Director at the Riverside Group. He has significant treasury experience and a wealth of broader financial experience. This is a key appointment in the development of DTP and our commitment to provide a top quality service to our clients through the recruitment of outstanding individuals.
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