The Cost of Living (Tenant Protection) (Scotland) Bill has now completed its passage through the Scottish Parliament and will take effect in the next few days. This emergency legislation gives the #ScottishGovernment the right to freeze or cap #rent increases, and to put a moratorium on certain eviction proceedings, for both the social and private rented housing sectors. These measures can be introduced for six-monthly periods up until the end of March 2024.

As has been previously announced, the initial period of a freeze on rent increases and a moratorium on certain evictions will run until 31^st March 2023. The legislation requires that any extension to these measures, or the introduction of a cap on rent increases, must be announced by 14^th January 2023. The Scottish Government has established a working group with the sector to work on the way forward from January.

It had initially been thought that the first phase of the rent freeze would not impact social landlords as the measures terminated at the end of March 2023, and most increase their rents from 1^st April. However, a strict reading of the legislation suggests that no rent increase notices can be served during the rent freeze period, effectively preventing increases taking effect at the beginning of April. If a cap is introduced with effect from 1^st April, rent increase notices may be able to be served as normal, provided the rent increase is no greater than the cap.

The result of this is a period of considerable uncertainty for the governing bodies of #sociallandlords with the ‘rules’ applicable to their 2023/24 rent increases likely to remain uncertain until eleven weeks before the new financial year.

The impacts of a freeze or a cap will be highly significant for most #landlords. The difference between a rent increase freeze and a 5% increase for an #RegisteredSocialLandlord with a rental income of £10m will be £500K income in year one, and multi-million pounds of income translated through a 30-year business plan.

Against the backdrop of sustained high inflation and increasing interest rates, this uncertainty presents significant risks and makes decision making challenging. The variation in potential incomes is likely to mean the difference between maintaining a development programme or not, achieving EESSH2 or not, and maintaining some services that may be particularly important to the most vulnerable customers. For some RSLs, a #rentfreeze or significant cap may make it hard to achieve a viable long term business plan that meets their funders’ covenants.

The legislation, therefore, presents a significant strategic risk and challenges for RSL Boards and Management Committees. Against this backdrop, the advice from the @DTP team is be prepared and to start thinking now about the possible impacts, risk, and options available now – and to set these in the context of your purpose and values.

First, the most important thing to do is to engage with lenders at the earliest opportunity about the potential impacts of rent freeze, or impact scenarios, over the medium term – not just 2023/24. The Scottish Housing Regulator has also asked RSLs to advise it of any financial viability concerns that arise.

Second, the SHR has stressed that RSLs must plan for their April 2023 rent increase in the usual way, and honour their obligations to tenant consultation on potential options; the Regulator also asks RSLs to report their proposed April 2023 rent increase as soon as it is decided.

The position will be different for every RSL, but we have set out below the key questions Boards and Management Committees need to ask as they seek to effectively govern their organisations through this period.

Boards and Management Committees need to ask themselves:

• What are the priorities for the RSL? and why are they priorities? Is it affordable rents? Stock investment? New build development? How far are we prepared to reduce our ambitions?
• Do we know and understand the base financial position of our RSL and the key risks and challenges?
• Do we understand how individual risks (such as sustained high inflation or a longer rent cap) will affect our financial strength? Are we getting the right information about these risks?
• Have we stress tested the business plan for the right risks to an appropriate level?
• Lender and regulators increasingly look for multi-variate testing; do we understand how the risks might interact? and, therefore, which combinations of adverse events do we need to test the plan for?
• Have we identified the warning flags that will tell us the plan is being weakened? And have we developed the mitigations that will allow us to contain that damage?
• Do we have good enough data about the RSL’s rent levels, service standards, asset management condition and compliance, staff, suppliers and procurement, development projects and contracts and, crucially, its debts and financial performance, to allow us to be confident that the organisation will remain financially viable through upcoming challenges?
• Do we understand the risks that come from any diversification or subsidiaries?
• Have we got the right skills around the Board and Committee table? Are there gaps we need to fill?
• Have we got good quality data about our customers, and their household finances? Can we identify the most vulnerable customers?
• Are we confident that we can withstand scrutiny from lenders and regulators on all these points?

DTP are ready to help RSLs assess and develop their response to these questions, and to help them improve their resilience to any of the threats facing them. For advice on any aspect of your thinking in relation to the impact of a rent freeze or cap, or the questions we have posed above, please do get in touch.

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On 31 August 2022, The Department for Levelling Up, Housing and Communities launched a consultation on its proposals for a cap on #socialhousing #rent increases for implementation in 2023/24.

The team at DTP are considering these proposals and will be providing a response – as will many others working in the social housing sector. But whatever the outcome of the consultation process, what are the factors that a #board of a registered #housing provider will need to know when making the difficult decision about rent increases in the current challenging social and economic environment? My advice is to be prepared and to start thinking now about the possible impacts, risks, and options available and to set these in the context of your purpose and values.

The position will be different for every provider, but I have set out two summary checklists below which may serve as an aide memoire as boards prepare to make, what will be, a difficult decision.

Core financial data

• All boards will need to see and understand baseline information in relation to the business plan. This should be in the form of a series of stress tests across the proposed rent cap levels and perhaps some other levels in between (three or four variations) to identify the impact on the business plan and to provide boards with a first look at what mitigations might be required or even triggered.
• This aspect must also review the current business plan predictions on rent – and set out the implications of any changes.
• The outcomes of your most recent stock condition survey – to provide absolute clarity on the future investment requirements.
• Information relating to different scenarios on current inflationary pressures and available forecasts, particularly relating to service, contractor, material, component, and labour costs etc.
• The position relating to directly employed staff pay and any skills, recruitment, and retention challenges.
• Development growth ambitions – and the current position on committed and non-committed projects.
• Zero carbon targets and associated investments.
• Financial and performance information relating to any diverse / non-core activity.

Additional background information

• The current rent charges for your organisation – average rents for different forms of tenure in the rented and shared ownership portfolio.
• Information about the local market from peer comparators and those from the private market as a rough view on positioning.
• Information about average wages in the areas in which you operate.
• Data on affordability, from research sources but at the very least, the average rents compared to the Local Housing Allowance,
• Any information you can collate in relation to the average running costs for residents in your home. This can include average Council Tax, average utilities bill etc. It may be useful to see a sample which is indicative of the property portfolio.
• Demographic information about your current tenants and residents including age profiles; number of Universal Credit (and other benefits) claimants; number not in receipt of any benefits. Draw upon the customer insight data sources you have from surveys etc.
• Any information you have around anticipated levels of cost of living support from existing Government sources, for example the Council Tax rebate; energy discount; winter fuel allowance; disability top up; low income household top up etc.

For any advice on any aspect of your thinking in relation to the impact of the rent cap, please do get in touch.

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One of the key questions facing the social housing sector since the 2017 Grenfell fire tragedy is how do we focus more on tenants? The disaster has shone an unprecedented light on social housing landlords and forced them to re-evaluate their relationship with tenants. In board rooms across the country, there has been a good deal of soul searching. Board members have been asking: do we really listen to our tenants? And are we responsive as a landlord?

It’s against this backdrop that the Regulator of Social Housing has begun the process of putting in place a new system for consumer regulation. On the back of the Social Housing White Paper of 2019, it has recently consulted on a proposed new set of 22 Tenant Satisfaction Measures (TSMs) which will be the basis of how landlords’ performance is measured and compared. The consultation on this set of measures ended on March 3rd.

So, are they the right set of measures? And will they have the desired outcome?

Firstly, I think the principle of more active consumer regulation is something the whole sector would welcome. In many respects this is something which has been missing for more than a decade. If we cast our mind back to 2010, the fledgling coalition government took an active decision to move away from the consumer elements of regulation and instead focused on viability and governance. It’s right that the pendulum is swinging back again, to hopefully rest somewhere in the middle.

But as the regulator faces increasing pressure to come up with the right response to Grenfell, we need to be sure that a new system is fit for purpose. And in my view the 22 proposed TSMs aren’t. There are too many of them, they don’t allow fair comparisons to be made between landlords, and they risk creating an entire industry devoted to distorted benchmarking.

Let’s take a couple of the TSMs as examples. Firstly, under the proposed system, landlords would have to provide data on tenants’ views around anti-social behaviour (ASB), specifically how good landlords are at dealing with reports of ASB.  There’s an obvious flaw here: most tenants won’t have made an ASB complaint. And those who have will probably be more focused on whether they got their desired outcome, irrespective of whether the landlord did a good job or not.

Another TSM will measure tenant satisfaction with their local neighbourhood. But this is an unfair evaluative measurement of a landlord’s performance from a tenant satisfaction point of view. How people feel about where they live is determined by many factors – and many stakeholders have a part to play, not just registered providers of social housing. It would be unwise to conclude a landlord is performing badly if they scored poorly on this measure.

I do think there is value to having some kind of comparative set of measurements around consumer regulation. But they need to be much more focused and appropriate. The RSH’s Value for Money metrics are a good example of universal cross-sector indicators which largely work, and which are then supplemented by a provider’s own complementary VFM metrics. Why not a similar approach here?

And as always context is key. KPIs and benchmarks are what I like to call a “can-opener”. They can lift a lid on problems, but they don’t always tell you why things are the way they are. Raw data only takes you so far: it’s ultimately quite a blunt instrument.

It is well understood by anyone who takes even a passing interest in tenant satisfaction that surveys consistently report that social housing tenants living in London are less satisfied with their lot. Meanwhile, older people are more likely to say they are satisfied. Having more properties in London in your portfolio isn’t down to poor performance: it’s geographical potluck. Likewise having a skew towards older tenants isn’t a reflection of your performance good or bad. It’s just the way things are for you.

I’m sure the sector will be awaiting the results of the consultation with great interest. And I’m also sure there will have been lots of sensible and measured responses which will hopefully give the RSH reason to pause and reflect.

The question is whether political pressure will win the day. Will being seen to do something prove more important than doing the right thing?  My hope is that the regulator will use feedback from the consultation to ensure it has the right set of TSMs, in the right format, with the right methodology. A lot is riding on it and the sector will be eagerly awaiting its response.

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For registered providers of social housing, inflation is probably the number one factor bearing down on their business plans right now. Think of inflation almost as the hub at the centre of a wheel – with the spokes of the wheel representing a series of risks. Rising prices are the ultimate cause of each of these risks, and providers must weigh up how best to mitigate against them.

It’s no easy task, and a balance must be struck between the needs of its key stakeholders – the tenants who rely on providers for the roof over their heads – and their own viability as a business. And while the challenges are almost unique, certainly in the period I have worked in the sector, they are hopefully not insurmountable. The sector has displayed remarkable resilience in the past – not least when it was faced with a 1% rent cut a few years ago. I’m confident it can show similar resilience in the potentially difficult years ahead, if we plan for and manage circumstances appropriately.

I certainly have confidence that housing associations themselves can weather the storm, but we can’t shy away from the impact the cost-of-living crisis is having on many of their customers, especially those at the very bottom of the income spectrum.

I don’t intend to dwell on the causes of the current high inflation environment here. They’ve been well documented elsewhere, and instead I want to focus on some coping strategies which RPs can adopt to see them through the next 12 months and beyond. I also want to make the case for acting now: prompt and decisive action is needed sooner rather than later and before the worst effects of inflation are felt.

So let’s start with the risks – those spokes in my wheel analogy.

The first of these is rising input costs which are most keenly felt when it comes to the repair/refurbishment side of the business, and on new build development. This is already painfully familiar to many of the RPs we work with who are paying more for everything from timber to concrete to labour. Some I have spoken to have told me of contractors who have signed on the dotted line for a new build development but have then had to renegotiate costs as a start date approaches.

In my view, RPs need to stand firm in situations like these. If not, schemes which were originally appraised as sound investments could be deemed unviable and fail to get off the ground. Providers should be prepared to re-tender a contract if necessary or at least revisit it to ensure everything is done to keep it within the original budget. If necessary, be prepared to delay starting work to ensure you are getting value for money.

The other key risk is around RP’s main revenue stream: income from rents. In recent weeks, housing association boards have been setting the rents their tenants will pay from April this year – in England, based on last September’s CPI rate of just over 3%. Most RPs I am aware of have gone for the full CPI + 1% permitted by the government. This time next year the decision may be a lot more difficult given the CPI figure for September this year is forecast somewhere between 6% and 7%. Affordability, already a key consideration, will then be absolutely critical. I suspect many will struggle to justify charging the full September CPI +1%, especially if headline inflation has perhaps fallen back to 3 – 4% at that point.

Tenants will have effectively had a full year of energy price rises by next spring, plus soaring costs for other household essentials including food. Many housing association tenants are just not able to absorb these shocks and boards are acutely aware of this.

This means other risk-mitigation strategies are now ‘mission critical” for RPs. By finding other ways to build in some resilience to inflation they can hopefully spare their tenants further pain and avoid unprecedented rent rises next spring.

Treasury and financing is an area where quick wins can be achieved. High inflation of course means we are now entering an era of higher interest rates (or more normal rates some might say). The Bank of England has already raised rates twice since December, and only intervention by the central bank’s governor Andrew Bailey prevented a rise to 0.75% in February. Rates were held at the meeting on February 4th at 0.5%, but further rises are a near inevitability as the year progresses with the possibility of a base rate around 2% in the next 12 months.

At DTP we are advising RPs to act now to improve their borrowing cost position. Where a provider is thinking about going to market for new funding our advice is: don’t wait. This applies even If you are holding back making a decision on a new loan until security is in place. If you have a break clause in an existing loan, look carefully to see if it is worth paying off the loan and incurring the break cost. It may well be because current attractive loan rates won’t be around for long.

Staff remuneration is the other risk which may potentially bear down on RPs, however the jury is still out on what impact rising inflation will have on wages. Whether staff will heed the Bank of England governor’s controversial call for workers not to ask for large pay rises remains to be seen. The labour market generally in the UK remains tight and unemployment is low, all of which could add to wage pressures for RPs.

This area of risk, along with the others I have identified, highlights again the importance of stress testing for RPs. Even in the best of times, regularly revisiting the dynamics and the inter-relationships of all your main business planning makes sense. Against the current backdrop of a period of huge global and domestic uncertainty it is absolutely essential. DTP is here to provide expert advice with all aspects of business plan stress testing, so do get in touch if you think your organisation could benefit.

It’s a hugely challenging time for everyone and a lot of uncertainties remain about how the next year will pan out. There is an emerging consensus that the worst impacts of inflation will begin to ease during 2023. Let’s hope so, and that this bout of inflation turns out to be transitory; no more than a bump in the road for the UK social housing sector. Time will tell.

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Published in December, I would assume the new CIPFA Treasury Management in the Public Services Code didn’t make it onto many people’s Christmas present lists.

An update of the code is not an annual event – the last edition was published in 2017. And so changes will be followed closely by all those public sector organisations which are required to pay regard to it.

But while its contents may be arcane to most of the population – for those of us with an interest in the finer points of treasury management it’s essential reading. The code is effectively a Bible of best practice when it comes to treasury management – a “page turner” for those of us who care about these things!

Treasury management is, of course, at the heart of financial viability for the registered providers which DTP works with. As providers of public services, as defined by the code, RPs have special considerations and responsibilities when it comes to how they manage their investments, their cash flows, and their money and capital market transactions. Questions such as how much money they borrow, from whom, at what rates, and for what purpose, are critical to overall business success, and for an RP’s social purpose.

Put simply: the numbers matter. The myriad figures on our spreadsheets may seem obtuse, but people’s lives and homes depend on them. Successful treasury management puts an RP on a stable and responsible footing, enabling it to deliver quality homes and services for its customers. Poor treasury management can threaten its very existence. Treasury management is also ultimately about risk: what RPs take on and how they manage it.

CIPFA notes that “the landscape for public service delivery has changed significantly” since the last edition. The developing localism agenda and reduced public spending are highlighted as the most important of these changes. The regulatory environment is also much changed, and all public sector organisations are utilising a wider range of investment opportunities.

The full code is available to buy from the CIPFA website, so I am not able to quote from it at length given it isn’t freely available. Firstly, I can point out that the vast majority of the code hasn’t changed a great deal. There are however a number of additions and changes which I would draw RP finance teams’ attention to.

Three areas are noteworthy …

• An increased focus on non-treasury investments
• New reference to ESG (environmental & social governance)
• A strengthening of the requirement for staff skills and training

So, at first glance a treasury code flagging non-treasury investments might raise eyebrows. But public bodies including RPs will be making commercial investments which do fall outside the remit of managing the short-term investment of surplus funds – something which was acknowledged in the 2017 edition of the code but not elaborated on.

CIPFA’s concern here is, of course, that public money is protected and managed properly. And while the revised code doesn’t tell RPs exactly how to do that, that’s perhaps missing the point. Instead, the importance of transparency and good governance in this area is what CIPFA is determined to highlight.

This is certainly an area DTP can advise RPs on – as well as wider investment policy. Our approach, as you’d expect, isn’t one size fits all, given providers will have many different types of commercial investments, each with different risks. Investment policies are not off the shelf – but we can certainly help organisations to develop a policy which reflects their own risk appetite and their approach to appraising investments. Fundamentally, it’s about making sure you have the proper governance infrastructure in place before making commercial investments.

As far as ESG is concerned, the code isn’t very specific or prescriptive about what it now expects from public bodies. Instead, they are simply asked to be more mindful of ESG considerations when making investments in the future. That wasn’t there in the 2017 version of the code.

There’s an implicit recognition that many public bodies are in different places when it comes to having ESG policies. In many respects, everyone is on a learning journey on this one, but RPs need to make sure when they are making investments, they are consistent with their ESG policies, if they have one. If you are wondering what to do with surplus cash you have sitting in the bank – ask some searching questions first to make sure decisions are consistent with the values you want to adhere to.

CIPFA’s expectations around knowledge and training is the third change worthy of note. Again, this is designed to improve governance in this area. There are new requirements when it comes to training requirements and records which it’s important RPs get to grips with. I would advise all RPs and treasury staff to make sure they are up to speed on these – and again DTP can provide advice if needed. For boards, it’s about making sure they have the knowledge needed to make good decisions; while for CEOs, FDs and treasury staff there is more of a practical focus on proper skills and training.

So, the new code does mean there are several things which RP finance teams and boards should be aware of. ESG factors, commercial investment and ensuring the organisation has the necessary specialist skills and experience are all areas that most RP Boards and senior teams will have given consideration to in the course of running their organisations. So their increased importance to treasury management won’t come as a surprise.  If you need assistance incorporating these elements into your treasury operation, help is at hand from the DTP team.

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More than six months on from the launch of the new CQC inspection strategy for the health and social care sector, how is it working out in practice? And what does it mean for Registered Providers who are subject to CQC inspections and its grading regime?

The CQC says the new strategy is about changing how it regulates health and social care providers “to improve care for everyone” with greater emphasis on the lived experience of service users. Who could argue with that?  And who wouldn’t welcome the general principle of “smarter regulation” or “accelerating improvement” through the sharing of best practice?

Regulation, it says, will be “more relevant to the way care is now delivered, more flexible to manage risk and uncertainty, and will enable us to respond in a quicker and more proportionate way as the health and care environment continues to evolve.” So far, so good.

Registered providers I speak to, who run care homes or provide domiciliary care, are still making sense of the new strategy and what it means for them. But while most welcome the strategy’s ambitions, they still want more detail. Not all have had experience yet of the new inspection regime in practice and most are still considering what it will mean for their services. it.

The general direction of travel though, signalled by the CQC in the strategy, is clear. Crucially, fewer inspections will now be carried out in person, so it’s less likely CQC inspectors will in future arrive at your care home to go through your reporting documents. Instead, these documents will probably be asked for digitally in the future, with inspection then carried out remotely.

Going forward, ‘in person’ inspections will also be more driven by risk – so if complaints or concerns have been raised through staff or residents or their families, levels of safeguarding or statutory notifications have increased. The risk of that, of course, is that only bad providers will end up being inspected.

So how do providers need to adapt to the changing focus of CQC regulation?  Well, in some respects, my advice is the same as it always has been: delivering good quality care should be your priority. And you should do this not to keep the regulator happy, but because it’s the right thing to do. Don’t wait for an inspection to identify service failures or improvements– ensure you have robust internal processes to monitor the quality of care you deliver and seek ways in which to constantly improve it.

Data gathering and intelligence also needs to be given a lot more serious consideration. This is more likely now to be used to trigger an inspection so it’s vital that systems for collating and storing data are fit for purpose. You should be able to access that data – and provide it to the regulator – in a timely fashion.

There is still a need for further clarity from the regulator on exactly what they are looking for – and it needs to spell out what it means by a requirement for “high quality data”. The strategy is still a work in progress in some respects and providers should note that there are opportunities for them to influence how the strategy develops. I personally would like to see the regulator demonstrate more consistency on what high quality looks like.

High quality data, I think, is dependent on having an open and honest culture within your organisation. Do your systems for collating the views of residents, families and staff really encourage meaningful feedback? Do you really know what they think about your service? So perhaps think about ways feedback can be obtained anonymously or privately in some way.

Don’t be afraid of constructive criticism either – that’s how we all learn. All too often I hear people say they welcome complaints – but do we really welcome complaints?

Drawing data from this wide variety of sources – residents, their relatives or friends, staff and commissioners / local authorities – is crucial. You need a broad evidence base which takes a broad view of your service. Ask yourself: are we collating the right data and do we understand what it is telling us? Is it properly highlighting what we are doing well and where there is room for improvement? But don’t always be thinking about jumping through the regulator’s hoops: again, improving your service should be your primary motivation.

Ask your stakeholders the right questions as well. Break your service down into specific elements – food, care, accommodation, activities – and ask about each of these. For example, ask people do they feel they have a choice?, and do they get privacy when they want it? And why not even take them to see other similar provision in your local area to give them a sense of what other providers offer?

On balance, the new CQC strategy is to be welcomed in my view. It puts the focus rightly on the service user and their experience of care. For providers, there will be encouragement to be open and honest, and the emphasis will be on supporting service improvement. It’s also right that the CQC’s resources should be targeted on those who are falling short.

In the past, stakeholders would often write to the CQC and might come away feeling nothing had happened; that they hadn’t been listened to. With the new strategy I’m optimistic that can change. Elements of the new process are still not quite there in my view – but if we get this right we have a potential opportunity to deliver the real improvements the sector needs. The lives of many of our most vulnerable citizens depend on it.

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Background

In 2019 the Ministry for Housing, Communities and Local Government (MHCLG) published its Policy Statement on Rents for Social Housing (effective from 1 April 2020) replacing previous guidance issued in 2014. The Regulator of Social Housing (RSH) then published a new Rent Standard effective from 1 April 2020.

The policy statement introduced some key policy changes from April 2020 and also directed the RSH to apply its new Rent Standard to all Registered Providers (RPs) i.e. Local Authority registered providers as well as private registered providers (the majority of which are housing associations).

The MHCLG policy statement at Chapter 5, 5.1 and the RSH Rent Standard include provision for exemptions to the Standard for certain forms of accommodation (providing the provider is able to demonstrate that they meet the specific exemption criteria):

‘This policy statement does not apply to certain categories of low cost rental accommodation. These excepted categories are:

• Shared ownership low cost rental accommodation
• Intermediate rent accommodation
• Specialised supported housing
• Relevant local authority accommodation
• Student accommodation
• PFI social housing
• Temporary social housing
• Care homes

The Challenge

Whilst the exemptions to the RSH Rent Standard can be beneficial to RPs, allowing them greater flexibility to set rental levels for complex forms of housing which better reflect the true costs of provision (subject to meeting the specific criteria for the respective category), this does not allow a ‘carte blanche’ approach.

All forms of ‘low-cost rental accommodation’, or social housing as it is more commonly known, need to firstly meet the requirements as defined by section 69 of the Housing and Regeneration Act 2008, which requires rents to be set ‘below the market rate and accommodation made available to people whose needs may not be adequately served by the commercial market’. This is in addition to meeting the requirements of any exemption category which might apply.

Regulatory focus in this area is high and the RSH has downgraded a number of organisations for governance and/or financial viability and issued a range of regulatory notices and judgements in relation to failure to comply with the Rent Standard.

In our work in this field, we at DTP are increasingly seeing RPs seeking external validation of their compliance with the Rent Standard, particularly relating to non-standard accommodation where exemption categories may apply such as:

• more specialist forms of supported housing
• temporary housing (such as hostels, domestic violence refuges, move-on accommodation, foyers etc.)
• intermediate rent accommodation.

How we can help

DTP can offer support to ensure that your organisation is fully compliant with the RSH Rent Standard based on your own unique stock profile. This may include application of familiar Formula Rent and Affordable Rent models but also the more complex accommodation categories which require compliance with specific criteria as well as requiring assurance that rent levels are ‘at below market levels and accommodation offered to those whose needs may not be adequately served by the commercial market’ before any exemption can be applied.

DTP has helped many providers to review their compliance with the Rent Standard and also provided support to address any potential gaps in compliance. Our approach is unique to the needs and circumstances of your organisation and will help you to understand your own data, the requirements of the Rent Standard and provide you with much needed external validation and assurance.

Get in touch with the DTP team below if you feel you would benefit from support around Rent Standard compliance. You can also listen to
our podcast on the issue on youtube – https://youtu.be/QV8wUARcqMM
Sarah Jackson – Senior Consultant (email s.jackson@dtp.uk.com)
Paul Warburton – Senior Consultant (email p.warburton@dtp.uk.com)

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A few years ago, I visited Spain to see how technology is changing the way our older people are supported. During the visit, I had an illuminating conversation with the manager of a contact centre which provided central monitoring operations for a retirement housing
provider.

British visitors, he said, were sometime sceptical or fearful of the new technology. They thought immediately of it as a threat – or an opportunity to make huge savings by doing away with people. Staff working in social housing retirement schemes wouldn’t buy into the idea, they believed, nor would the older people they supported.

For me, the trip was a watershed moment. I came away thinking we could reimagine how social housing providers delivered care and  support for older people living in retirement housing. This would involve rethinking how we use technology, but also taking a different view of the role of people and buildings too.

Fast forward to 2021 and the world has of course changed beyond all recognition. The social care sector more broadly appears in a perpetual state of crisis, and we are still trying to make sense of the implications of the Covid pandemic. The headlines are filled with talk of staffing shortages. Meanwhile, being old is still too often seen as something to dread, not enjoy.

Taken together, are there potential opportunities here – to remodel and reimagine what life looks like for society’s older people? How can we live a better life – in better places – as we get older?

Let’s start with retirement housing, which represents a big share of older persons provision registered providers of the kind DTP works with. While we have seen adopters using the kind of the technology I saw in Spain – it hasn’t been nearly enough.

For many, the processes and monitoring are still a “people heavy” task. How many of our retirement housing schemes have instead installed I’m ok buttons or sensors in kettles and fridges, or as wearable devices to carry out these basic tasks? Not enough in my experience.

Perhaps we haven’t done a good enough job of persuading people of the benefits. Maybe if we could change the conversation, so it’s not about technology replacing people but complementing people, things might be different?

In my view, we shouldn’t just explain that technology can often do as a good a job as a human being knocking on a door or picking up the phone. Instead, we should talk in terms of tech enabling an entirely different model of retirement housing provision. The technology is also developing so fast it can also do much more than check and monitor. In fact, it offers us a potentially rich data source which can tell us a great deal about our customers. Just one example is its ability to provide ‘early warning’ for a range of health problems, including cognitive decline by noting changes in behaviour.

So what might a new model of retirement look like: one which was built on three pillars of people, buildings and technology? Firstly, it would be more flexible than current approaches. It would acknowledge the basic fact that retirement contains a broad section of people – some as young as 55 and some who have received their telegram from the Queen!

Retirement housing needs to reflect that and not offer people exactly the same service irrespective of their age or needs. Using technology could, in my view, give us the freedom and space to do this.

Registered provider staff in retirement housing could instead have a much broader role – one which was more satisfying and rewarding for the employee and which focused much more on quality of life for the resident. Some staff might not get it, but I think most would embrace it.

Staff would have time to consider people’s broader health and wellbeing needs, with training to recognise where people needed more complex support. This would give staff an important signposting and referral role – linking in with local community physical and mental health services, citizens advice, financial and welfare services etc.

And we could also reimagine the role these schemes played in our local communities. We could see schemes having a much more outward focus – offering activities and services which would draw in the wider community. This requires staff to have the space to think creatively and imaginatively to ensure it is done in a way which residents are comfortable with.

Let’s not forget bricks and mortar too. Many retirement housing schemes run by registered providers were built decades ago and things  have moved on dramatically in terms of what people want and expect from a retirement home. Yes, we need to build great new homes for older people, but we also need to improve existing stock – much of which is also way behind when it comes to the carbon agenda.

Adopting this alternative model starts with having a new conversation around retirement housing. And where can DTP come in? We can work with providers who want to change their operating models; helping them to review and improve those models, in a way which works for the provider, their staff and their customers.

We can help providers understand the role technology can play in that process of change and support them to carry out thorough and effective service reviews. We can also support providers through that process of transformation, so you are able to bring both your staff and your customers with you.

Who knows, perhaps when I next visit Spain the conversation might be different. Perhaps we might have moved on from our defensive view of technology. We can but hope.

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The Challenge

Specialised Supported Housing (SSH) is a form of supported housing where accommodation, support and/or care services are provided to enable individuals to as independently as possible. Typically, although not always exclusively, SSH provision is often associated with providing accommodation for people living with a learning disability and/or autism, mental health support needs, personality disorders or some form of specialist care and support need.

Over the last five years or so new models have emerged which often link the provision of SSH to long lease-based structures, funded through private equity, and linked to accommodation providers who are also Registered Providers of Social Housing – often Housing Associations and known more widely as RPs.

Specialised Supported Housing is defined within the Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016 and also more recently within the Government’s Policy Statement on Rents for Social Housing 2019, issued by the Ministry of Housing, Communities and Local Government), as a form of supported housing (also defined within the policy statement).

Since the near failure of a lease-based housing provider in 2018, the Regulator of Social Housing (RSH) has placed particular and increasing focus on the emerging wholly lease-based RP sector and other RPs who hold lease-based stock within their stock portfolio. It has downgraded a number of organisations to non-compliant gradings for governance and/or financial viability and issued a range of regulatory notices and judgements. The focus of regulatory scrutiny is varied however one significant cause for concern relates to high rental charges linked to long term leases. Whilst SSH is one of the categories of supported housing which is exempt from the Rent Standard 2020, this is subject to very specific criteria and does not detract from any provision also needing firstly to meet the requirements of being social housing e.g. ‘low cost rental accommodation at below market rate levels’ and  ‘accommodation made available to people whose needs may not be adequately served by the commercial market’.

In April 2019, the RSH published an Addendum to the Sector Risk Profile 2018 ‘Lease Based Providers of Specialised Supported Housing’ which identified the concerns the RSH had along with common themes identified with organisations under regulatory scrutiny and recovery. In December 2020, the Local Government Association (LGA) also published guidance for Local Government and NHS providers around lease-based models of SSH which followed previous guidance issued to commissioners of SSH in 2019 by NHS England and NHS Improvement, the LGA and Association of Directors of Adult Social Services (ADASS).

This is clearly a challenge for the sector that is not going away and scrutiny from the RSH and other public funded organisations is increasing.

How we can help

If you provide, manage or commission lease-based SSH within the social housing sector there are a variety of risks relating to rental charges, lease obligations and wider RSH scrutiny that you should be aware of and ensure you are managing effectively within your organisation. These include ensuring that any provision:

• can demonstrate that it meets the requirements of being social housing e.g. ‘low cost rental accommodation at below market rate levels’
• can evidence the specific definitions for SSH itself

It is also important to ensure any risks related to long term leases can be managed and effectively mitigated, there is sufficient governance oversight at Board level and that providers have clearly defined policies in place which support the approach to both developing new forms of SSH and in managing accommodation to ensure that compliance is maintained.

DTP have extensive experience of working with and supporting a range of SSH providers operating within the social housing sector, in both developing and operating forms of SSH including several whom they have supported around regulatory recovery when things have gone wrong. We can help you if you need advice or support around:

• how to develop or manage SSH
• how to effectively manage the associated risks, governance arrangements and regulatory compliance,
• how to ensure that services are commissioned effectively and short and long term risks are understood and managed
• getting back on the right track if you or the RSH have concerns about your provision

If you’d like to know more and have an informal discussion about how we might be able to support you, please get in touch with our specialist care and support team:

Angela Lomax – Director at DTP (email a.lomax@dtp.uk.com)

Sarah Jackson – Senior Consultant at DTP (s.jackson@dtp.uk.com)

Chris Munday – Senior Consultant at DTP (c.munday@dtp.uk.com)

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If you are a registered provider of social housing, a number of key questions should be at the front of your mind when it comes to regulation and governance.

How can we ensure we are compliant? How can we avoid being deemed non-compliant? And how can we properly address issues which might be of concern to the regulator?

Since the introduction of In-Depth Assessments in 2015, we have definitely seen an enhanced approach from the regulator. It has poor governance in its sights and has been clear about its intention to deal with issues both at the individual and sector level.

Providers which have fallen short of the expected standards have found themselves regraded from a G1 to G2 rating or, in the worst cases, downgraded to G3 (non-compliant) status.

Not all providers which have been downgraded share the same characteristics – however currently there is an over representation among RPs which operate a lease-based model. Complex group structures and diversification into risky and more complex activity can also cause difficulties. But this does not mean that traditional providers can take assurance from a simpler model of business.

The truth is there is no magic formula to work out which organisation might be more at risk than another. It requires careful and bespoke analysis of each provider to identify weaknesses and address these with robust solutions.

Often, one specific issue might emerge which then proves to be an indicator of wider systemic problems.

Examples might include failures in processes or controls – such as around asset related health and safety compliance. A failure to properly understand the risks around non-core activity is another. Shortcomings in stress testing and associated resilience planning also crop up time and time again.

At the heart of many governance failures is often a loss of focus on an organisation’s core purpose and values. It’s important to pay particular attention to this when setting out to do something new. Never forget your constitution and question everything you do against the markers it has put in place.

Much also comes down to having the right structure in place, with a clearly agreed purpose and a sound approach to risk management and mitigation. Robust assurance and a critical and comprehensive review of your internal audit report outcomes is also crucial. And finally, you should expect and maintain the highest standards of conduct and probity from executives and non-executives at all times. Never forget you operate in a regulated sector and good standards are the glue which holds everything together.

There is a lot more detail to work through for  each provider based on their own unique circumstances – but these basics should prove a good starting point for ensuring you retain that coveted G1 status.

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If there’s one thing leaders in the social housing sector are agreed on right now, it’s that there will be no return to business as usual once the Covid-19 pandemic is over. New ways of working and new approaches to customer service and delivery are here to stay.  And it’s in the interests of customers and staff that lessons are learned as we enter the recovery period.

In my recent conversations with sector leaders for the latest edition of DTP Exchange , there was a clear consensus that the sector has stepped up to the plate during this hugely challenging period.

Social housing providers, whose customers include some of the most vulnerable people in the country, have witnessed first-hand the hardship and suffering that the crisis has brought. And, reassuringly, they have been there for the people living in their communities – identifying the most vulnerable and ensuring support is made available.

In terms of staff and working practices, providers have seen an acceleration of trends which were beginning to emerge even before Covid-19: the end of the traditional 9-5, more flexible working, and less time spent in the office.

There have of course been pros and cons. Home working suits some staff more than others, and a lack of face-to-face contact can have hidden downsides. Many staff say they are now looking forward to seeing colleagues again in person, while leaders are keen to increase their visibility among their workforce. But I don’t sense we will be moving from “all out” to “all in” anytime soon. Instead, a hybrid of home and office working is likely to be the norm for some time to come – if not permanently.

Many providers are still finding their way on this in my view – and there is a good deal of variety out there in terms of where organisations are on flexibility. Some are formalising new approaches in employment contracts and terms and conditions, while others are not at that stage just yet.

But the benefits are there for the taking, with opportunities to reduce office/workspace costs, curb the environmental impacts of travel/commuting and even potentially to recruit a more diverse workforce, as employees are freed from some of the constraints of geography.

Getting this right requires we put the needs of customers and staff first if we are to ensure we have social housing businesses which deliver for both.

I am seeing encouraging signs that tenants and staff have a generally positive view of what they have seen so far in terms of service delivery and working arrangements. Customer satisfaction data has largely improved, while many providers are reporting better employee engagement and generally positive feedback from their employees.

Many customers are keen to embrace the digital provision of services, though it’s important those who struggle to get online are not left behind. I’ve talked in many blogs predating the pandemic about this gradual “channel shift” in service delivery. It’s only going in one direction and Covid has given it a major nudge forward.

Challenges of course remain, and communities with high levels of social housing remain those most at risk from any further economic downturn. Covid has worsened an already difficult situation for the vulnerable communities served by registered providers. Poverty, inequality and homelessness remain key issues. We’ve seen negative impacts on mental health and rising levels of debt. Many of the chief executives I talk to say they have seen little evidence so far of “levelling up”.

But levels of trust among tenants – of their landlords – remain high. Generally speaking, tenants feel they can turn to their landlords at times of crisis and they will get help. That is testament to how well providers have handled operations, service delivery and customer communications during the pandemic. That’s certainly one take-away from the last year which the sector should be rightly proud of.

Sam Mcgrady

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The social housing sector has now had just over a year to adjust to the new reality of rising rents, following half a decade of declining income from their property portfolios. But with that new reality has come new challenges for registered providers.

Compliance with the rigorous requirements of the new Rent Standard, which came into force in April 2020, is the most obvious of these challenges. The risks are clear: being declared non-compliant and the unwelcome arrival of a regulatory notice from the Regulator of Social Housing.

But how can providers avoid this risk when setting rent levels for properties or rent increases in line with the new standard?

DTP has been working with a number of providers over the last 12 months to ensure their rent policies and procedures are watertight.

And while there’s plenty of good work going on, we have noticed a number of common issues facing many providers. The good news is: these can be addressed if the right approach is put in place.

This starts with ensuring you have a clear documented set of strategic principles for meeting the requirements of the Rent Standard. The rent policy is the foundation on which everything else is built and has to be agreed at board level. Getting this right is where we always start when working with a provider to ensure compliance.

With this in place, what else is required? I’d start with five key areas of focus …

1. Ensure your staff have the required skills and knowledge around rent setting. Sadly this has often been neglected and has been seen as a low priority.
2. Address any data quality issues. All too often we have come across examples of missing valuations, incorrect formula rent setting or not using the correct county to establish the right formula rent.
3. Make sure you fully understand the rent formula within the Rent Standard and where a rent increases need to be capped at CPI only. So where properties already have a rent higher than the formula you can only apply an increase based on CPI – so not including the additional 1%. This may sound small, but it is enough to trigger non-compliance.
4. Be careful when adding additional service charges to affordable rented properties. This is a common mistake we see – and, if the charges are too high, this risks taking the rent above the 80% of market rents allowed under the Rent Standard for this type of property.
5. Understand the rules around tenants with Fair rent protection. Under the standard, the rent charged to the tenant must not exceed either the formula rent or the registered rent (whichever is lower). Again, this is a common mistake which we’ve noticed.

DTP has helped many providers in the last year to review their compliance with the Rent Standard based on their own unique stock profile. This involves looking at a representative sample of your core rent data or your whole portfolio to ensure you are meeting the requirements of the standard in full.

Crucially, this means you will be able to identify any potential gaps in compliance and avoid them becoming an issue with the regulator. Our approach is unique to your needs and circumstances and will help to you understand your own data, providing you with much needed external checking and assurance.

Get in touch with the DTP team if you feel you would benefit from support around Rent Standard compliance. You can also listen to my podcast on this issue on youtube – https://www.youtube.com/watch?v=QV8wUARcqMM

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Here DTP Director Andy Gladwin outlines the key points of the Chancellor Rishi Sunak’s November Spending Review.

The Great Frost of 1709 and the cold shoulder for more affordable homes

The Chancellor’s spending review contained plenty of record breaking numbers, none of them comforting.  Unemployment set to reach 7.5%, borrowing at 19% of GDP which is the highest ever peacetime level, economic growth not expected to return to pre-crisis levels until the 4th quarter of 2022, by 2025 the economy will be around 3% smaller than expected in the March budget and the Office for Budget Responsibility has forecast GDP to shrink by 11.3 per cent in 2020, which HM Treasury’s Spending Review paper notes is the largest annual fall since the Great Frost of 1709.  That sent me scurrying to Google so if nothing else I have brushed up on my history.

What else did we learn from the statement?

As was widely expected there will be a pay freeze for over a million public sector workers.  It will however, be targeted, and NHS doctors and nurses and those earning less than £24,000 will benefit from a pay rise.  The Chancellor justified this by highlighting the disparity this year between private sector wages which fell by 1% while public sector pay rose by 4%.  Cold comfort for those in the public sector whose average earnings are over 1% lower in real terms than a decade ago.

Also widely expected was the spending on infrastructure, with the announcement of £100bn of capital spending in 2021-22, a £27bn real terms increase compared to 2019-20.

As for housing…..the Chancellor noted nearly £20bn of investment underpinning the government’s long-term housing strategy, including £7.1bn for a National Home Building Fund on top of the £12bn for the Affordable Homes Programme.

So, it looks like nothing more in the review specifically for affordable housing.  A review of HM Treasury’s policy paper confirms that is the case with total AHP funding over the next five years of £12.2bn being reconfirmed.

Of the National Home Building Fund announced, only £2.3bn of this is actually additional budget.  £2.2bn for new loan finance will be made available to support house builders, including Help to Build for custom and self-builders and funding for SMEs and modern methods of construction, and £100m for non-Mayoral Combined Authorities to bring land into use to support housing delivery and regeneration.

The launch of a new £4bn of “Levelling Up” funding for investment in local infrastructure is welcomed, as is the news that the Treasury’s green book will be reviewed which is seen necessary to ensure the investment benefits all parts of the country, rather than the current system which channels the lion’s share of investment to London and the South East.

Other good news which will benefit the sector included:

• The 2.2% increase in the National Living wage and its extension to 23 and 24-year olds;
• The new £2.9bn Restart programme to provide support to over a million people back to work;
• A further £151m for 2021-22 for local authorities to fund the prevention of homelessness in their areas and support front line services through the Rough Sleeping Initiative;
• £300 million of new grant funding for adult and children’s social care and the ability for local authorities to levy a 3% adult social care precept;
• An additional £30m to help deliver the new building safety regime; and
• £90m of additional resource to support victims of domestic abuse and their children in safe accommodation.

Less welcome was the lack of confirmation that the £20 per week Universal Credit top-up will continue beyond March 2021 and that Local Housing Allowance will see no growth in real terms, as was the fact that virtually none of the points advanced by the National Housing Federation in its Spending Review submission have been addressed.

Its turns out the Chancellor didn’t see the 2020 Spending Review as the opportunity to deliver the once-in-a-generation investment in social housing that the NHF, and many others, called for. It feels as if, once again, affordable housing loses out and is not seen as part of the solution. There is certainly work to be done in the sector to address this; we need to be much better at communicating and explaining what we do and the positive outcomes this delivers. And more importantly – getting government to listen.

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An increasing number of registered housing providers (RPs) now offer much wider support services to their tenants and their broader customer base, with some also venturing into care service provision.

Others are considering moving into this sphere, to diversify their services,  add value to their existing customer base and meet customer needs. There is also a prospect of creating an additional revenue stream, for some providers, there is clearly a strong financial inducement to “join the club”.

One of the most recognisable areas under the care and support banner is supported housing.  In this one area alone, services range from homelessness to domestic violence refuges, support for people with a disability, and alcohol and drug dependency support.

Some of these services are provided by the registered provider, but it has become more common to subcontract them to other organisations, in some cases charities or not for profit organisations, who have expertise in these complex fields.

As more RPs add a care and support arm to their business, we have seen mixed results.

While some providers have earned a reputation for delivering the highest quality of service and delivering fantastic outcomes for their customers, others have attracted the attention of both the housing and care regulators for all the wrong reasons.  A number have struggled to keep afloat simply because they underestimated the time, effort and cost involved of operating in this challenging field.  In short, many planning and business models were found wanting because the provider failed to grasp the complicated regulatory regime(s) and the legislation that sits behind it.

What differentiates care & support services from standard housing services is that they bring very different risks for the provider:

• Meeting the legislative requirements of Social Housing Rent setting is particularly challenging and complex for supported housing
• Income levels are uncertain and are likely to remain so for the foreseeable future
• The client group brings a unique set of challenges requiring specific expertise and knowledge from the workforce
• The costs of providing care and support services far outstrip those of general housing services
• Care and support services can often bring added complexities in terms of regulation through the CQC and managing safeguarding requirements

Managing effective care and support services therefore requires a different skill set amongst staff at all levels within an organisation– backed up by strong, informed leadership and governance.

Understanding the complexities and diversity of the sector is also key.   DTP has launched a new service aimed specifically at those providers offering care and support services. We will work alongside providers to strengthen their business offer, ensure compliance with the regulators, help them navigate the pitfalls and challenges that the care and support arena presents and maximise the opportunities for delivering excellent services to their customers.

One thing is for sure. Those providers that enter the care and support sector with the aim of making a “fast buck” are in for a surprise.  Some are already doing ‘u-turns’ and exiting the market because of the challenges they are facing. There are however opportunities  for those that recognise the specialist nature of the sector, who are willing to adapt their business model, invest in leadership and staff training and are driven, by an altruistic desire to make a difference to the lives of those who most need their support.

So, while there are undoubtedly some providers who are falling well short of the standards required, there are many, many others who would benefit from just a little help to improve their care and support offer, to ensure they stay within the regulatory framework and to explore exciting new opportunities to expand their portfolio of services still further. We look forward to joining them on this journey.

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Compliance, both legal and regulatory, is a constant concern for registered providers (RPs) of social housing. As the sector’s regulatory framework has expanded, this concern has only grown.

Today, the risk of “dropping the ball” is acute. As well as the economic standards, which are actively regulated, RPs must meet regulatory requirements across the four consumer standards – Home, Tenancy, Neighbourhood and Community and Tenant Involvement & Empowerment. Furthermore, they must demonstrate compliance with the Rent Standard. Add to that the impact of ongoing welfare reform and potential hit on income streams, it’s a vast area of operation, requiring the highest levels of leadership and governance, coupled with a highly systematic approach to successfully identify and address those areas likely to fall short of the mark.

Some RPs manage this process with aplomb. Many others muddle through. But pretty much all RPs live in dread of falling foul of the regulatory standards, and having to involve the regulator, which can be hugely stressful and labour-intensive right across the organisation.

Furthermore, if the regulator’s microscopic eye uncovers serious issues for redress, the reputational fallout and overall impact on business can be crippling.

Many RPs are therefore struggling to find peace of mind over compliance. In response, DTP have launched a service to test each organisation’s operating model, processes and procedures against the four consumer standards, the Rent Standard and the approach to welfare reform.

Our new, high-level Compliance Assurance Pulse Checks provide a rigorous review of organisations and their approach to compliance. This bespoke service draws on DTP’s broad regulatory compliance expertise and our extensive experience of operating in the social housing sector.

Our aim is to identify gaps in regulatory compliance and highlight areas for future improvement in key areas, based on current best practice drawn from across the sector. We approach the checks in two ways. Our team will assess compliance first by reviewing key documentation, followed by carrying out interviews with staff.

What we analyse is entirely up to the organisation. We can review against all of the areas mentioned above, or focus on those where organisations have specific concerns.

This is a service that we can deliver either on site or remotely, to fit in with today’s flexible ways of working. Working remotely also enables us to reduce our environmental impact and minimise costs.

At the end of the process we will produce a comprehensive report with recommendations, plus an executive summary Powerpoint presentation for the senior team and board members.

When it comes to the social housing sector, our team have been around the block more than a few times. We bring with us more than 50 years of experience, a significant proportion gained at director and board level. It’s true to say that there are few issues that we have not met and addressed before. We also like to think that we offer a fresh perspective in our approach.

Nobody working in the social housing sector needs reminding of the importance and challenges of regulatory compliance today. Our  Compliance Assurance Pulse Checks are an opportunity for the senior team and board members to get ahead of the game, identify thorny issues early and develop a roadmap for solving them efficiently and cost-effectively. We look forward to working with many more organisations to bring them the peace of mind they strive for.

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This is a joint DTP Views with the team at Bevan Brittan

Most organisations recognise the need to ensure these two vital functions work in tandem – so why do we see many organisations struggle to implement this in practice?

In the first of our quarterly ‘spotlights’, Louise and Sarah have partnered with DTP, a consultancy specialising in finance, treasury and governance, to consider why this alignment poses such a challenge – and how you can ensure your day to day practices equip you to face the uncertainties ahead.

Setting the scene

 As the lockdown eases, the Regulator of Social Housing (the Regulator) is scaling up its regulatory activity. Its IDA programme has recommenced, and it is seeking assurance on the overall position of the sector through the annual stability check process. FFRs supported by current business plans are now required from associations by 30 September 2020.

While associations have adapted considerably in the last 5 months, it is clear that there is still a lot of uncertainty contend with; a recession, increasing unemployment amongst residents, a backlog of compliance and the challenge of managing operations during the phasing in and out of lockdown restrictions.

The Regulator will be focusing on how assocations are managing these uncertainties and, in particular, how their governance and financial management is coping.

We are also increasingly seeing funders taking a more active interest in reviewing governance arrangements, assessing risk exposure by reference to associations’ governance gradings. The ratings agency S&P expects £17 billion in new debt deals for housing providers until 2021 to fund the building of 54,000 more social homes annually. At a time when rates are incredibly low, offering associations a unique opportunity, those associations who can demonstrate good internal controls will be best placed to secure the funding necessary to support the development of new homes on the most advantageous terms.

There is significant interest in the social housing sector, which is seen as a low-risk investment particularly in the current climate due to the perceived strong governance and a robust regulatory regime, which help to tick the “Environmental, Social and Corporate Governance” (ESG) box.   Treasury and governance teams at associations have a role to play in proving that is the case and consequently keeping the interest of those investors.

It is clear now, more so than ever, how vital it is that your governance and treasury functions are aligned in order to adapt to these challenges.

The challenge

In our experience most associations recognise the importance of this link and attempt to achieve alignment through their processes and procedures. However, some organisations struggle to actually ingrain this within the day-to-day working of the association, and only truly bring governance and treasury together in order to report to the Board.

This can lead to:

• A disjointed approach to identifying, managing and mitigating risks, and how this influences the Board’s risk appetite and decision-making
• Failure to implement appropriate internal controls through governance structures to manage and mitigate risks
• Unexpected issues arising on strategic projects  – e.g. slippage / cancellation, creating possible impact on cash flows or costly holding of unnecessary cash, pressure on the finance process leading to potentially higher interest rates on debt and over-reliance on decision making by use of urgency procedures
• Lack of clarity over roles and remit leading to duplication in governance structures– including amongst the board(s) and committees
• Over-reliance on advisersbecause they offer a broader view and carry corporate history, or because there is a lack of skills or knowledge on the Board. This can lead to a failure to ‘ask the right questions’ when making decisions, and to hold those advisers properly to account
• Poor quality reportingwhich goes unchallenged by the Board
• Inappropriate delegation by of important treasury matters to a committee perpetuating the view of treasury as a specialist function and thereby justifying the abdication of responsibility
• Failure to appropriately monitor plans during periods of change – for example, questioning the business case and whether there has been an impact on business plan assumptions?
• Poor integration of fundamental changes into the business because of a lack of understanding of roles/responsibilities for on-going management and retention of corporate history

and so on…

Generally these symptoms will go unnoticed or only reveal themselves at times of ‘high stress’ – when this period is over, organisations move on and fail to take learnings into account for the future. However, at a time when associations are adjusting to significant and on-going change, they are likely to become more acute and persistent.

A holistic approach

Raising debt on the capital markets, by way of a public bond, or to a lesser extent a private placement or merger, tends to shine a spotlight on the governance arrangements of associations and drive fundamental changes.  Interestingly we see less of the above “challenging” symptoms arising for those associations which have been through that process.

The rigour of the process of raising such finance where your governance is analysed in granular detail in order to develop your prospectus and ‘sell’ yourselves to the market forces  associations to question and challenge their governance in more detail than ever before.    The increased emphasis of investors on “ESG funding” provides an additional incentive to ensure that governance and treasury functions reflect best practice.

What can we learn from this?

Significant transactions such as bond issues or mergers require involvement at all levels of an organisation’s structure. This can drive cultural change – it is clear that achieving alignment is not just about imposing new structures, lines of responsibility and processes. In most cases, culture– with the tone set from the top – is the starting point to drive a more holistic and integrated working environment.

Verification during a bond issue, in a similar (and arguably more rigorous) way to due diligence carried our pre-merger, also requires critical assessment and challenge in order to prove all statements made to the market. This requires organisations to have effective internal lines of communication, an understanding of each other’s roles and how they ‘fit in’ to the wider picture.

It is not about ‘checking each other’s homework’ (although this will be an important part of obtaining assurance when delivered in the right way); true alignment arises from working on a day-to-day basis in a collective and integrated way.

A key challenge and risk for the sector is that many associations have resourcing issues in relation to specialist and experienced governance and treasury staff when compared with other industries. Often organisations will re-assess the skills of the leadership team and boards and committees as part of the preparation for a large fund-raising event, such as a bond issue. But these requirements apply irrespective. Boards and leadership teams need to ensure that their organisation has the right skills, experience and expertise for the business to operate successfully at all times. And that all remits, roles, committee structures and delegated functions are clear and understood by everyone.

Being able to provide reassurance quickly to investors and the Regulator is vital. Boards should ensure that monitoring and reporting are sufficiently comprehensive and robust to enable them to quickly identify and address issues in order to meet the Regulator’s requirements for compliance. It is clear that increasing levels of details and disclosure within business plans and forecasting are expected.

Finally, associations need to ensure they involve both governance and finance staff at early stages of projects.  All aspects of the business are inter-dependant and ensuring that teams, committees and boards work in a co-ordinated manner with the wider governance and treasury function significantly reduces both legal and business risks. Governance and treasury teams may be fortunate to be able to call on the counsel of a Company Secretary to advise on and support decision-making across the organisation. The empowerment of the Company Secretary at the highest levels to take a lead of compliance – and to hold those to account who do not operate within the controls system – is a vital assurance tool.

And – when things do get sticky, for whatever reason – it is vital that organisations take the time to reassess and learn.

In the current environment, having governance and treasury working in isolation is no longer sustainable; all associations need strong, skilled boards and clear, effective governance frameworks in order to thrive. Governance arrangements and structures have to be fit-for-purpose both now and for an (uncertain) future.

Authors:

Angela Lomax, Director, DTP

Sam McGrady, Director, DTP

Sarah Greenhalgh, Partner, Bevan Brittan

Louise Leaver, Partner, Bevan Brittan

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To say the last few months have been eventful in terms of finance is an understatement. The rollercoaster of Covid19 has meant reviewing business plans and finances – and then reviewing again and again.  We thought we’d take this opportunity to share our treasury perspective and how the pandemic has impacted on the social housing sector.

Before digging a little deeper into the impacts, it worth remembering the Regulator of Social Housing (RSH) expects registered providers (RPs) to maintain at least 18 months’ liquidity (and DTP’s advice is that they plan for 24 months). This has served the sector well in this crisis. Compared to most other areas of the economy, RPs remain in a strong financial position. So let’s take a more detailed look at the pandemic’s impact on various elements of social housing finance:

Impact on income

The lockdown has clearly impacted on income. However, given that most development ceased and there has been a focus on emergency repairs only, the impact on cashflow has not yet been as significant as might have been expected. We have produced a stress test schedule and assisted clients in applying this to help them understand the potential implications of the changes. Looking forward, however, RPs need to model the impact on cashflow of income collection remaining below pre-pandemic rates, a resumption of development and managing a backlog of repairs and void work in an environment where socially distant working practices are maintained (and are therefore potentially more expensive to undertake).

 Impact on housing sector banking

The banks have plenty of liquidity and generally are much stronger than they were at the time of the credit crunch. They have all indicated that they remain keen to continue with their funding plans to the sector. Our experience on the funding deals we are currently progressing is that this remains the case, but with two caveats. Some banks are giving more priority to existing customers, and some current deals are stalled at Credit Committee level, as the Committees focuses on more urgent cases in other sectors. Terms of borrowing generally remain unaffected by the pandemic.

One other issue in relation to the banks is that the transition from LIBOR to SONIA is now underway. This is featuring in discussions on new finance, and all RPs with transactions currently priced against LIBOR should be starting to plan to engage with their lenders to ascertain their intentions.

In relation to the capital markets, although the sterling bond market was effectively closed for a couple of weeks at the start of the crisis, underlying demand remains as strong as ever.  Plenty of deals have been completed including long -term private placements, one of which we advised on and which completed recently with an all-in funding cost close to 2.5%. For most providers, the ability to secure long term funding at this price will enable them to outperform their current business plans and have extra capacity for the future.

Impact on property valuation

One impact of the lockdown is that valuations could not be carried out in the usual way. Although external inspections are now being undertaken again, the internal inspection of residential property remains subject to severe restrictions.  Recent advice by leading valuers is that they do not expect the current situation to have an impact on EUV-SH valuations, but MV-ST valuations could see a reduction of up to 10%, particularly in areas of high value. Borrowers with limited headroom on funding secured on a MV-ST basis are advised to gauge the potential impact on their plans of a reduction in both existing and planned levels of asset cover.

Impact on covenant compliance

Covenant compliance will be an important issue moving forward. We had heard that one of the banks was considering some form of general waiver for the immediate situation, and it is generally assumed that banks will be accommodating in the shorter term. Nevertheless, it is important that RPs engage with lenders without delay if they are aware that covenant waivers may be required.

One issue for providers with a large development programme that has stalled is that they can no longer capitalise the cost of their development teams, thus increasing the charge to revenue with the consequent impact on the interest cover covenant. Of further interest is the situation moving forward as RPs plan for the recovery period, kickstarting their improvement programmes and managing the backlog of day-to-day repairs, cost increases and reduced income, which some may struggle to do so within existing covenants. This could be an issue for both March 2021 and 2022 accounts – so it is important to look well ahead.

 Impact on access to government funding schemes

We have been approached by some clients about government funding schemes and we have had several discussions with the banks. There are now a range of schemes available, tailored for both small and medium sized businesses as well as larger enterprises, with support ranging from Bounce Back Loans, through to business interruption loans (CBILS and CLBILS) and the purchase of investment grade commercial paper.

After some initial confusion it seems clear that RPs do qualify for the schemes, but with turnover limits assessed at group not subsidiary level. There is also the expectation that groups with on-lending facilities and resources available will provide funding in the first instance for trading subsidiaries. RPs are unlikely to be regarded as priority cases by banks already overwhelmed with applications from organisations desperate for cash to survive.  There may, however, be instances where RPs conscious of regulatory scrutiny of this area may choose to seek support, particularly if the recovery period is extended or a second wave of infections occurs.

So, plenty to think about and keep under review. Should you want further advice on any of the above, then please get in touch.

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Before the pandemic and the ‘lockdown’ which, amongst many things, has led to a huge increase in remote working for many, we at DTP were reasonably familiar with using video conferencing facilities, both internally to save travel, and also to an extent with some of our clients.  This was particularly the case with financial consultancy work, a fair amount of which is done remotely these days anyway, but it had also become increasingly the case with some of our governance and regulatory advice work.  Since the lockdown, however, we have all moved to another level and we are all much more familiar (and comfortable I think) with using and operating Zoom and MS Teams.  We can all see the benefits in being able to hold meetings without the travel and associated “baggage”, including allowing for and estimating travel time, driving for long hours, sitting in traffic jams, waiting for delayed trains, cramming into packed train carriages, finding car parks and parking spaces, dashing from car parks to clients through the pouring rain, getting smartly dressed!…etc, etc.

Working from a home base as we all do is nothing new to us at DTP, and we are fully geared up to do this.  Adapting to doing this more often, from say two days a week to all week, has not been particularly difficult for us.  What has been a bit strange has not getting out and about to far flung places, the length and breadth of the UK, to meet with clients in person – although the enjoyment of being out and about from time to time is certainly counterbalanced by the negatives that I mentioned earlier, and I don’t think most of us have missed it that much.   What has been really positive for us, however, has been the ease with which most of our clients have seamlessly switched to video conferencing for all types of engagement.

Obviously, the most common purpose that video has been used for is for meetings of one sort or another, where face to face dialogue has proved to be, in most cases, at least as effective as meeting up at the office.  We have all, I am sure, noticed a different dynamic in the new environment however.  The most obvious one, at first glance, is the almost immediate move to drop any desire to wear ‘office attire’, with little attention paid anyone to such matters.  Will we ever return to posh suits, I wonder? In fact, the more casual approach which comes with this seems to me to quite often lead to much better and more immediate rapport (and positive environment) being achieved, not only with people that you know well, but also with people that you have just met.  The backgrounds visible (if not blanked out) can also be an interesting point of conversation!  My guitars (hung up in the background) quite often attract a comment or two and my black cat ‘video bombing’ my meetings is also a source of amusement, although even that, these days, is seen as being part of the ‘new norm’.  On the whole, the sector has made the transition amazingly smoothly.

On a more serious level, there are wider benefits including the positive impact that all this has had on the environment, but this important benefit notwithstanding, we must all be alert to the negative aspects of home/remote working. These include the stress of always being seen to be ‘available’, ‘Zoom fatigue’ where people spend all day staring at the screen in meetings with little or no breaks in between, and indeed other side effects which can affect both physical and mental health.  We all need to be vigilant with our teams to ensure that our people are safe and well, from the effect of the virus certainly, but also from the dangers of being cut off from the social benefits of coming to the office and meeting colleagues and having social ‘banter’, for want of a better word.  The benefits of this are not always fully appreciated.

One of the things that I was keen to see develop (post-lockdown), and I am pleased to say that I think it has developed remarkably well, is the move to use video platforms for more complex engagement, with largish groups of executives and non-executives, for example.  Whilst there was naturally initial reluctance with some clients to move to hold board meetings and ‘away days’ on these platforms, with a number of events early on in the development of the outbreak being cancelled, more recently we have seen more and more board meetings being held using video conferencing, and indeed we have attended many of these as advisors to the board or committee and sometimes as part of governance reviews, where we often observe such meetings.

Talking of more complicated engagements, I was recently advisor in the recruitment of an Executive Director for a client in the north west.   From the start of the project we knew there was a possibility that the interviews (stage 1 screening and final stage 2) would need to be held remotely.  Impressively, our client stated from the outset that they would be happy to work with this, and we developed the whole project around getting the outcome from the use of video technology.  The various interviews were held using Zoom and MS Teams interchangeably with barely a single hitch.  The one thing that did go wrong, on one interview, was when one of the candidates forgot to plug in their laptop and the battery failed.  The video technology and the network links all worked without any problem.  Perhaps tellingly, we had great feedback from the client who secured an excellent candidate, but we also had positive feedback on the process from many of the unsuccessful candidates, clearly remarking that the process had been well run.  We now hold interviews, undertake training and perform demonstrations routinely for all manner of client commissions, and we are confident in our ability to do this and in the technology itself.

All of the above leaves us feeling positive about the future of work, and keen to ensure that going forward we optimise our use of available facilities in the delivery of quality advice and services.  Clearly, at some point the need for heavy reliance on video technology will diminish, as lockdown measures ease off, but there is no doubt that our clients and we as advisors will think quite carefully about whether ‘face to face’ meetings, with all that this entails, are always really necessary.

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It just got busier….and more complicated

This time of year is usually a busy time for our finance team, dealing with the year-end, budgets and business planning, facilitating the transfer of information from the FFR and supporting stress testing…….and all that goes with these things.  A few weeks ago, in dialogue with our clients, it became clear that there were added complications this year, unsurprisingly as a direct result of the emerging impacts of COVID-19.  The present and the future was looking extremely insecure and unclear, and it became obvious that many business planning assumptions needed to be reconsidered, including:

• stock investment (emergency, routine and planned work);
• development programmes;
• sales assumptions;
• voids;
• arrears and bad debts;
• customer services;
• supported and sheltered services and support;
• funding costs and funding requirements.

New risks

In response to questions from clients, DTP considered the potential risks facing the sector and how these might need to be reflected in business planning assumptions.  The list emerged from team discussions, client engagement and research from a variety of sources.  We also looked at developing a range of new stress tests, in addition to those derived from existing risk registers and asset and liability registers.

The risks we came up with (and clearly, this will be an emerging situation) included:

• Mass workforce illness;
• Increases in arrears due to illness / loss of jobs;
• Refinancing risk – unable to secure funding;
• Vulnerable customers not getting support – due to illness of staff;
• Working from home – digital solutions;
• Lower demand for repairs;
• Costs of funding increases (as per credit crunch);
• Supplier failures – contractors, service providers etc;
• Valuations impacts? Impairments? Audit completions?
• Pension costs increase;
• Hedging impact (LIBOR) on those with derivatives – ‘mark to market’;
• Deferral of sales assumptions;
• Deferral of RTB sales.

Stress tests

From the range of risks, we developed stress tests which could be run in business plans, to assess the impact of the risks both as single tests and also as multi-variate tests.  We also defined a range of potential mitigations, which included:

• Disposals – less likely to be achievable at market rates;
• Cut back on costs – non-essential repairs / planned work;
• Drawdown of loans/facilities to provide cash in bank;
• Push back on uncommitted development schemes;
• Possible additional income – 80% of wages from the government’s furloughing scheme;
• Redeployment of staff – moving people to other parts of the business.

Advice and Support

Clients have been able to use the advice to update their stress testing, and we have been able to support this process with modelling expertise and through provision of sector knowledge derived from our wide base of clients.

Business Plan assumptions – response

To support all of the above, we have also reviewed our standard Business Plan Assumptions advice note for clients.  We normally issue Business Planning Assumptions guidance twice a year, but we have now moved to quarterly advice notes.  We are clearly in a more dynamic than usual economic environment and things are likely to change more often, at least in the immediate future.

Our business plan economic assumptions are brought together from a range of external sources and compiled in the light of the latest economic data, drawing most particularly on the Office for National Statistics (‘ONS’), the Bank of England (‘BoE’), and HM Treasury.

The very nature of long term business planning looks at projections over 30 years.  Quite rightly, the rapidly changing and profound adverse personal and economic effects of COVID-19 have switched the sector’s operating priorities to those of safeguarding the well-being of its residents and staff, while also assisting, where practicable, in the continuing viability of key suppliers and contractors.

The Regulator of Social Housing has reinforced the people-focussed priorities, especially for the more vulnerable residents in sheltered or care-assisted accommodation, and has promised a pragmatic and sympathetic regulatory response in the face of difficulties for providers, and specifically relating to the submission of FFRs.

In these exceptional and unpredictable circumstances, DTP has adopted an approach of ‘plan for return to normal (in the medium term), sensitise for the worst (in the near term)’.

We have advised clients that:

• Timely and regular communication with lenders is paramount – an obvious point, perhaps, but funding partners will appreciate a dialogue (and are more likely to formulate a supportive response) if and when potential adverse issues (such as pressure on covenants) loom, rather than after the event. Credit committees have long taken comfort from the regulated nature of social housing finance, and the widespread sector practice of operating with at least 18 months’ funding liquidity.
• Existing borrowers are encouraged by lenders to build in more time than the usual two days’ notice for drawdown requests.
• At the time of publishing our latest assumptions, we understand that bank and building society lenders are generally seeking to support existing lenders, rather than look for new clients, while the capital market investors are tentatively returning to selective corporate sectors, although long term credit spreads remain volatile and comparatively high during this period of ‘price discovery’.

The integrity or otherwise of these long term assumptions is inevitably and inextricably linked to the ‘unknown’ of how long and how severe the economic consequences of COVID-19 prove to be.   We believe that the assumptions we have provided will serve as a useful base, but we cannot emphasis and reiterate strongly enough that the much more important discipline is to stress test business plans as never before, particularly looking at extreme increases in arrears, void losses and rental write-offs, especially for the element of rent not covered by Universal Credit.

Should you need support on working through the stress testing process, then please get in touch with our team.

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Chris Shaw of our partner, Shaw, the specialist IT consultants, recently spoke at a seminar we held about the modern workplace. Here Chris gives further insight into how technology will impact on housing associations.

The technology sector doesn’t necessarily have the best track record when it comes to communicating its ideas and innovations. Opaque terms are often coined to describe the latest breakthrough, with little explanation of what it actually means. Terms like the World Wide Web, AI and the Internet Things (IoT) are dreamed up quickly – but it can take years before understanding filters through to the wider public.

I’m often surprised by how far back some tech terms go. Take the Internet of Things. Surprisingly, this term was coined 20 years ago by tech entrepreneur Kevin Ashton. But how many of us who hear the term fully understand it? And how many of us are using it without even realising it? Crucially, even if you don’t quite understand the concept, how might it benefit individuals, businesses and society?

In a classic piece off foresight, Ashton imagined a world where devices and appliances were linked together and connected to the web via a vast network of sensors. This had the potential to make ‘things’ smarter, more efficient and more effective.

Fast forward 20 years and his vision is now a reality – albeit something most of us have only a passing awareness of. By next year there are forecast to be more than 200 billion ‘things’ in the world which have such internet enabled sensors, everything from washing machines and fridges to bins and parking bays.

Our homes are on the frontline of the Internet of Things, and the potential for providers of social housing to reap the benefits are huge.

So where is it already being applied? And what could it mean for providers’ bottom line and operational performance?

Here’s just a few examples of the IoT’s transformational potential for the social housing sector…

Emergency lighting: A critical safety feature in communal areas, it’s essential that housing providers know if this is working or not. In an emergency, such as a fire, this lighting could mean the difference between safely making it out of the building, or not. In the past, problems would only be picked up if either a resident or staff member reported it. Now thanks to the IoT, a sensor can alert the landlord to tell them immediately if there is a fault – and  it can even automatically generate a repair visit.

Smoke detectors: Again, this is another element of facilities management with potentially life or death consequences. As with emergency lighting, IoT sensors can inform landlords immediately when a device fails or if a battery goes flat. That means its repair will be carried out straight away as soon as the fault arises.

Occupancy detectors: It’s critical social housing providers have data on how many people are living in each of their properties. IoT sensors can now be fitted to a device such as a smoke detector to provide reliable information on the occupancy rates of a property. Again, this accurate data can be seamlessly relayed back to the provider with no need for anyone to visit the property and check.

Safe and sound: IoT sensors can be linked to items such as a kettle to help keep tabs on elderly or other vulnerable customers. For example, if a resident generally gets up at a similar time of day and makes a cup of tea, a sensor can send an automatic alert when that happens – or more importantly when it doesn’t happen. If the sensor has picked up cause for concern a task can automatically be generated for a support worker to pop round and check on the customer.  This application is not just useful from a safety point of view but also in terms of promoting independence and reducing loneliness among such client groups. IoT sensors can also be used to send alerts if a door or window is left open, or if a resident with dementia wanders beyond a designated area.

Damp proof: Extractor fans in bathrooms which are triggered when a light is switched on are critical to reducing condensation and ultimately damp in a property. IoT technology now means it is no longer necessary to wait for the tenant to inform you when it breaks. Instead, the whole process is automated from failure alert to repair booking.

At present use of IoT among social housing providers remains low. In its 2017/18 market intelligence report, Housing Technology Magazine found 46 per cent of RPs said the IoT was important to their overall strategies. However, only 6 per cent actually had a strategy in place to take the technology forward. I anticipate that will improve in the next few years.

Ultimately, this matters because the IoT can help providers to reduce their operational costs, deliver an improved service to customers and improve their control of the built environment and assets they manage. Providers can gain greater insight into the performance and reliability of those assets, deliver a more proactive repairs service and take more informed future investment decisions.

However, barriers do still exist to wider uptake. What’s been missing to date are enterprise-wide solutions, with IoT applications often developed to solve specific issues and to work with individual devices. That’s changing, and there’s a real prospect now of having IoT systems which don’t rely on multiple manufacturers and suppliers. This should reduce the overheads and increase uptake in my view.

Just as VHS and Betamax once tussled it out for prominence in the home video market in the 1980s, with VHS eventually emerging victorious, so we are now seeing a maturing of IoT technology. Providers are developing a range of sensors and hubs, at lower cost and with wider ranging connectivity solutions and enterprise platforms. These are efficiently able to receive, consume and act on the data supplied by IoT sensors. And they can do so in a connected and seamless way.

That will mean IoT initiatives which are truly delivered at the enterprise level – rather than focused on an individual business silo. Hopefully that’s a tech breakthrough we can all understand.

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So money would appear now to be no object. Ten years of austerity has been replaced by a government committed to spend, spend, spend. Whether it’s cash for day to day items or long-term investment, the country’s “new” Conservative government certainly appears to be of a very different hue to those led by David Cameron and George Osborne.

While the social housing sector will no doubt welcome much of this week’s budget, the devil still remains in the detail. I suppose all budgets are about promising jam tomorrow. But this one in particular felt as though there was a wide gap between what’s being promised, when it will be delivered and how it will be paid for. Certainly don’t expect to see the benefits of extra infrastructure spending in a hurry. For this reason a full and comprehensive judgement on all the budget’s measures will have to wait.

But what do we know now? What will give the sector grounds for optimism, and what will be cause for concern? And what was missing from Rishi Sunak’s first budget?

Housebuilding and finance

How much money the government will make available for affordable homes is always a headline grabber for the sector. And a multi-year settlement of £12 billion is certainly significant. It may well be “the largest cash investment in affordable housing in a decade” but it won’t be enough to build the amount of homes needed. Indeed, an amount close to this is probably needed every year rather than over the lifetime of this parliament.

A couple of decisions around finance are also welcome. The Bank of England’s 0.5% base cut (not a budget measure obviously) and a 1% reduction in the cost of loans to councils via the Public Works Loan Fund may help kick start development. The latter of course will benefit councils rather than Registered Providers.

Providers have been operating in a low interest environment for over a decade but further temporary reductions in the cost of borrowing will provide welcome assistance for registered providers as they plan how they will manage the impact of the Coronavirus pandemic.

Conspicuous in its absence however was the subject of home ownership – and right to buy. Again we are seeing a marked shift from the Cameron/Osborne years where the emphasis was mostly on measures to boost private ownership.

More detail is needed on much of this from the government in the coming months. So, how will the £400m for development on brownfield sites be spent? Where will the £1.1 billion for the Housing Infrastructure Fund Go? While this does look like new funding, the original allocation drew criticism as it was skewed towards areas were affordability was an issue. This meant northern local authorities benefited less.  Will this geographical basis of allocation be addressed with this next tranche of funding? Will the rhetoric of levelling up be matched by reality?

Also, how will the planning system be reformed to boost housebuilding? Details on that are expected to come from the Housing Secretary soon.

Measures to help tenants and employers

Measures to help the low paid and people on benefits are of course of primary concern to those who provide affordable housing. And the chancellor did give some reasons to be cheerful for social housing tenants, whether they are working or rely wholly on the welfare state.

For those in employment, rises in the National Living Wage and increases in the NI threshold are significant.

At the same time, measures to help employers and small businesses in the wake of the Coronavirus are also good news for RPs. The government’s response to this was comprehensive, and although by their nature measures are temporary, they will help many RPs. Help around statutory sick pay should ease the burden, while the targeting of some measures at SMEs which employ less than 250 people will see many smaller RPs benefit.

We are currently working with a number of RPs to ensure their business continuity plans are as robust as they can be. Coronavirus is a significant part of this and some clarity around the above issues in relation to sick pay will assist them with this process.

Indeed, stress testing of business plans should now include the impact of a potential pandemic on cash flow and business continuity. RPs must start to think comprehensively about how they will weather the storm. And they will be looking for further assurances and support from the government beyond today’s budget measures.

Infrastructure and flooding investment

Increased spending on infrastructure and the government’s so called ‘levelling up’ agenda was a much anticipated element of the budget. £600 billion over this parliament is indeed a massive amount. But again, delivery is everything and many big ticket projects, especially around transport, will take years to come to fruition. Similarly, we will have to wait and see what additional funding for metropolitan mayors – including the new West Yorkshire mayoralty – will mean in reality.

Measures to move 750 staff from the Treasury, business and trade departments to an economic campus in the north of England and long-term more than 22,000 civil service jobs out of London, could also have an impact. Just how significant an impact and over what time period remains to be seen.

Of perhaps more immediate concern are measures to prevent flooding and to help communities recently affected by severe winter storms. This is of great interest to many RPs especially those with a significant proportion of their homes in at risk areas who are often faced with exorbitant buildings insurance premiums. Flooding also hits tenants, many of whom cannot afford contents insurance, so investment targeted at flood defences to protect vulnerable communities is welcome.

Homelessness

When it comes to tackling homelessness the government’s focus remains on the more visible rough sleeping element of the problem. The budget had an eye-catching announcement of a new £650million fund to pay for 6,000 new places for rough sleepers to live. The big question is whether this will be for short-term accommodation such as hostels or long-term permanent residences for homeless people.

RPs will undoubtedly be on the frontline when it comes to delivering on this agenda but unless concerted action is taken to address the causes of homelessness (for too long put in a box marked “too difficult”) they will be limited in what they can do. Registered providers are constrained by the amount of housing they have and waiting lists which never seem to budge.

The sector will be expecting more from the government than the measures announced in the budget, welcome though they are.

Building safety and green measures

The budget’s new measures to tackle high rise building safety in the wake of the Grenfell tragedy were broadly welcomed by the sector. The government deserves credit for recognising that the problem of cladding goes far beyond Aluminium Composite Material – and for its commitment to provide the resources to deal with the problem (a £1 billion fund to remove all unsafe cladding from residential buildings above 18m). For RPs with high rise buildings who have been ineligible for ACM funding this will come as an immense relief.

When it came to improving housing’s green credentials, the budget was less impressive. In fact, I heard nothing in the Chancellor’s speech which even acknowledged this as an issue.

Being a government which “gets it done” on the environment didn’t seem to include the built environment at all. So, if RPs are to make their homes net zero carbon in the next few decades they will need resources and a plan from government for how it will improve existing housing stock. In 2050, 80 per cent of the country’s homes will be houses that are already built. A strategy for funding the retrofitting of existing buildings is therefore critical.

The road ahead

In the short-term, much will depend on how the Coronavirus develops, and further action may be needed from the Chancellor to stave off the economic impact. The government anticipates its effects will be significant but temporary – and yesterday the chancellor promised to do whatever was necessary to support the economy.

Meanwhile, the sector will be awaiting clarity on many of the measures mentioned above. In some areas (reform of planning policy for example) we can expect detail sooner rather than later.

In other areas, social care for example, the Chancellor’s failure to mention the subject is a cause for concern. Indeed, while health was rightly front and centre stage in discussions on the Coronavirus, the impact on social care was forgotten. Nor did the Chancellor provide any detail on the government’s long-term plans for social care policy or funding.

Overall, the budget may have provided some welcome news for the social housing sector. Many questions, however, remain unanswered. Perhaps our second budget of the year in the autumn might provide some answers.

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In my recent blog I explained the different ways in which the Regulator of Social Housing approaches different types of group structure in the sector.

But what things might the Regulator be concerned about if you adopt a group structure?

The Regulator’s main concern is around governance and risk.  The Regulator is wary of group governance structures which are overly complex. Different entities may have different legal, governance and organisational structures but it’s essential that these are joined up. Crucially, they should be fit for purpose – that is they should have the capacity to oversee risk and ensure proper controls are in place.

One of the issues the Regulator has focused on is non asset holding registered provider parents. This model of group structure, usually has the parent having just one asset in their portfolio, just to prove they are a registered provider. The concern can be about creating unnecessary corporate complexity which risks a lack of focus on the social housing assets.

These organisations may be engaged in very little diverse activity of the kind which warrants a group structure. Some may be gift aiding the profits of, for example, private house sales back to the registered provider and using a group structure to do this. However, the returns on such investments can be quite small – so providers should be routinely asking themselves: is it really worth doing this? Is this model the best way to deliver our strategy? Are we really adding value?

Ultimately, the Regulator is keen to see the simplification and streamlining of organisational structures – and the above model can be seen as acting against that.

The Regulator is also concerned that a group structure with an unregistered parent will mean the registered provider within the group is not sighted or consulted on decision making elsewhere in the group. This is a particular concern if decisions are made which may impact on its ability to comply with regulatory standards. Or it could diminish its capacity to protect its social housing assets. In such instances a root and branch governance review of your group structure with particular focus on risk flows, controls and internal communications may be required and this is something which DTP can support you with.

The Regulator ultimately wants to see the registered provider  at the forefront of any decision making within the group. That should always be at the forefront of your mind.

Don’t necessarily be put off if your instincts tell you the Regulator may not like the structure you have chosen. It’s not necessarily a red light. If your business case is strong, your governance is robust and the aims and objectives of your group businesses are clear, there may be a good case for sticking with it. And remember: the Regulator cannot compel you to carry out a change of group structure. It can only take action to address the registered entity If it believes a group structure threatens the compliance, viability or effectiveness of the registered provider within the group (because that is who it is responsible for regulating).

Perhaps the best way to avoid these issues in the first place is to ask some basic questions before you dive headlong into the creation of a complex group structure. If you only want to diversify from your core social housing activity in a small way then it may be changing to a group structure isn’t helpful or necessary. Ask yourself is there another way to do the things you want to do without fundamentally altering your group structure? What you don’t want to do is create a number of new organisations which can end up lying dormant or threaten your very viability or the robustness of your governance.

Finally here are my top tips for successful group structures …

1. Ask yourself why you want to do something which is different to or could risk your core social housing activity. Why is it important? This has to be the first question you ask yourself.
2. Be clear on the purpose of all of the organisations in your group; set out clearly what each can and cannot do.
3. Focus on ensuring your group structure is designed to ensure you can deliver on your purpose and your strategic aims and objectives.
4. Make sure you have complete clarity on governance between charitable and non-charitable entities within the group.
5. Have an investment policy which is clear about how the Registered Provider in the group will be expected to support any diverse activity and the agreed parameters for this. As part of this, be aware of what limitations may be placed on you by charitable or exempt charity status.
6. Ensure you have an experienced and knowledgable company secretary. Crucially, they should know the constitutions of the group entities inside out – around charitable status restrictions for example. A good company secretary is there to keep you on the straight and narrow, to advise you of conflicts of interest and to ensure that you remain compliant with your own legal documents as well as external requirements.
7. If your group structure has arisen as a result of growth through acquisition or merger with other providers, make sure you focus on integration. The Regulator take a keen interest in how you are bringing together sometimes different business cultures. How are you making that work? Are you delivering on the promises you made around the business transformation potential of the new group – around issues like IT, service delivery, back office functions etc. Again, be prepared to be asked about this by the Regulator.
8. Make sure you understand how risk flows within your group. Ultimately, that means knowing where your money comes from for investment, what are the returns and what controls do you have in place. The Regulator is, of course, most interested in the risk exposure of the Registered Provider(s) in the group – which are usually the source of most of the funding required.
9. Stay committed to ensuring you have enough money to do the things you want to do – to achieve growth, invest in stock, and anything else.
10. Always be on the lookout for anything which might threaten your ability to deliver on your core aims and objectives. Leakage of cash or underperformance will quite rightly lead to serious questions from the Regulator. Be prepared to answer them.

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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.

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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

1. Public spending. Firstly, if Boris Johnson delivers on his campaign pledges then we may have seen the back of Cameron/Osborne’s era of austerity. Don’t expect a reversal overnight of a decade’s worth of public spending cuts. But we’ve certainly been led to believe that resources may not be quite so scarce in the coming years.
2. Interest rates. All the market and Threadneedle Street indications are that for the next year at least, low interest rates will continue. That’s good news for providers’ borrowing costs and ability to borrow.
3. Majority rule. A return to single party majority rule does at least bring a degree of certainty and an ability for the government to get things done. Property sector health and safety issues could be one area which benefits. However, we are probably unlikely to see bold measures on regulation. And a thumping majority for the winning party does of course limit opportunities for parliamentary scrutiny.
4. An end to Brexit uncertainty. We will be leaving the EU and the remain cause has died for now at least. All the stress testing providers have been doing for Brexit is about to be put into action (see also reasons to be fearful!).
5. Social housing white paper. This looks like it might see the light of day in spring and will focus on tenant empowerment and consumer regulation. Again, bringing some certainty to housing policy going forward.
6. Early encouraging signs? The Queen’s Speech saw the government commit to the continuation of the affordable homes programme and to the implementation of the first phase of the Grenfell Tower inquiry recommendations. These are to be welcomed.
7. No sign of shared ownership ‘right to buy’ – yet. This planned extension of right to buy wasn’t in the manifesto or the Queen’s speech, which will come as a relief to most in the sector.
8. First Homes. The Queen’s Speech saw the government commit to a new scheme to ensure access to discounted homes for key workers and local people. The scheme will see these two groups given the opportunity to buy homes at a 30% discount, and the right will be protected by covenant.
9. Commitment to end rough sleeping by 2025. This is an ambitious target, let’s hope it’s delivered on.
10. The changed nature of the Conservative base (see also reasons to be fearful). Boris Johnson has been keen to point out that his new fan base in the North and Midlands may well have temporarily lent him their votes. Could this result in a more benign Conservative administration from the point of view of the social housing sector?

Reasons to be fearful

1. An end to Brexit uncertainty doesn’t mean Brexit won’t cause damage. Passing the withdrawal agreement, formally leaving the EU at the end of January and entering the transition phase is only the end of the beginning. It is not “getting Brexit done”. We face at least a year of protracted trade negotiations with the EU. Housing associations will still have to plan and stress test for an uncertain future – and get ready to put those planned mitigations to the test. Whatever deal is struck it is unlikely to be as favourable as current tariff free single market and customs union arrangements. Housing associations which haven’t taken Brexit stress testing seriously need to do so now. Brexit is about to move from highly probable to a near certainty.
2. Who is Boris? Will the social housing sector get the liberal Boris Johnson (“a more Brexity Michael Heseltine”) or the populist, hard right demagogue? Only time will tell, but the sector should certainly expect major change from a PM who is, if nothing else, a disruptor. Don’t expect “more of the same” – including those of us who work in the social housing sector. Will he pander to the right wing Eurosceptic wing of his party or tack towards the centre? Will the new Tory MPs from working class constituencies in the North act as a positive influence on the PM? These are the great unknowns of a Boris Johnson premiership. For now at least.
3. Scotland, when will ye go? The SNP’s landslide in Scotland mirrored Boris Johnson’s stunning victory in England. But pressure for a further Scottish independence referendum is already growing. If Boris Johnson grants Scotland additional investment and special treatment in relation to the EU this could, however, be good news for Scottish social housing providers. With the Labour party currently in disarray, the Scottish Nationalists are also set to prove a critical opposing force to the new Conservative government.
4. Rent review. Registered providers will be watching to see what the government decides on social housing rents. There is pressure from the treasury and an increase certainly seems the least likely option, despite the fact that the former administration agreed a rent settlement some months ago. We saw the early months of Cameron/Osborne’s rule tear up a recently agreed settlement – there’s nothing to suggest this couldn’t happen again. The new government might be tempted to take steps which put money in the pockets of some its new working class voters, even though a rent cut doesn’t really achieve that.
5. The focus will probably be on home ownership rather than affordable rent. All the PM’s previous signals and utterances on housing have suggested widening opportunities for people to buy are his priority – not social housing. Right to buy will continue to be a focus with the manifesto suggesting this would be widened to all social housing tenants.
6. Social cohesion and hate crime. All the signs are that this will remain a challenge for social housing providers in a social and political environment which remains divided and fractious. Will Boris Johnson’s talk of ‘One Nation Conservatism’ be more than just rhetoric?
7. High expectations in areas which have switched to the Tories. Many of the places which turned blue on December 12th, in Labour’s former “Red Wall”, will be expecting much from the new administration. These are places with higher levels of social housing than traditional Tory shires. Power often disappoints, so how will they react if the new government doesn’t deliver? A huge test for the government will be the extent to which they invest in these communities – and whether they make a difference to the lives of those who live there.
8. An imminent reshuffle. This is most likely to come in the new year and could well see further changes at the Ministry of Housing, Communities and Local Government. Continuity has not been a byword for the sector in recent years.
9. More welfare reform. Universal credit will almost certainly continue under the new government. Will further welfare reform be on the agenda? It’s a strong possibility, and whatever it looks like, it will definitely have an impact on social housing tenants.
10. A new focus on existing assets rather than new build. This could prove to be one of the unintended consequences of a new emphasis on building safety, especially if matters are formalised with new legislation.

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.

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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.

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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.

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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:

1. Get your documents in order. The IDA process starts with making sure you have all the required documentation and it is up to date and contains all the necessary information. This is likely to include: business and financial plans, stress testing and mitigations, management accounts, internal audits and plans, risk assessments and board and committee papers.
2. Be ready to demonstrate good governance. The regulator will want to see board and committee meetings in action and will want to interview your board chair. If a committee is overseeing a risky element of the business they may wish to interview the chair of that committee as well.
3. Governance, governance and governance. So it’s not just your people who will need to demonstrate their commitment to good governance (see above). You’ll also need to show your corporate governance credentials in other ways – for example, by demonstrating all your returns are filed correctly and that you take performance reviews seriously. Are your Companies House/FCA/Charities Commission records accurate? Are you operating within the purpose set out in your constitution?
4. Think about value for money. The regulator will want to see evidence that you are taking this issue seriously and that you have a strategic approach. Be fully prepared to demonstrate this.
5. Don’t get stressed. But do think about stress testing though – what assessments have you made of the key risks to your business, what mitigations have you planned and how would you recover in the event a risk became a reality?
6. Where did others go wrong? IDAs have of course led to some RPs being downgraded. Take some time out to look at some examples of these. What went wrong? Is there anything you could learn from them?
7. Cast your mind back. It’s important to think back to your last IDA as you prepare for your next one. What did it tell you? and what did you learn?
8. Take stock. The RSH is seeking assurance on stock condition survey data and how it feeds into long term maintenance plans. Be ready to provide assurance on stock condition and planned spending.
9. Give voice to tenants: This is a key area of focus now for the regulator. You will be asked how you hear the voice of tenants in governance and decision-making. Again, Grenfell is a factor in this, along with the social housing Green Paper.
10. Ask for help. As I said in my last blog, think about getting in external help if you think you need it. And if you do, it’s best to bring this in early in the process. For example, would an external review of board papers or meetings, as well as interview coaching, help you prepare? Contact DTP if you think we can help with this.

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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 …

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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.

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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.

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This DTP Views is from the fonder,  Georgia Parker, of our partner, Whole Spectrum.

‘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?

• 87% of employees worldwide are not engaged at work
• Companies with highly engaged workforces outperform their peers by 147%
• Higher engaged teams are 21% more productive
• High levels of engagement can reduce absenteeism by up to 41% and staff turnover by 59%

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.

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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:

1. Who and how I am at work impacts on
2. How the team functions and
3. How the task gets done and
4. The dynamic of this affects me and my performance

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.

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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.

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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!

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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.

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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.

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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 14^th 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!

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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.

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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.

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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.

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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.

• For more insight into the sector’s response to the new Value for Money Standard read the first edition of DTP Exchange, our twice yearly thought leadership report on the social housing sector. DTP Exchange features interviews with 19 chief executives and sector leaders as well as expert commentary from a housing lawyer on the key issues facing RPs right now.

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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.

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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.

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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.

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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 21^st century, bringing real value to the overall understanding of business improvement, whilst utilising genuinely effective contributions from our most important stakeholders.

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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 economy

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.

Regulation

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.

Development

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.

Governance

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.

And finally

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.

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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.

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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
rules’.

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!

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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.

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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.

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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.

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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.

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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 Homeless Link has pointed out, 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.

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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

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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.

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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.

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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.

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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’.

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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.

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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:

1. Be prepared

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’.

2. Make sure all your relevant documents are fit for purpose

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.

3. Facts and figures

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.

4. What’s your story?

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.

5. Practice makes perfect

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.

6. Good governance

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.

7. Assets and liabilities register

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?

8. Value for money

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.

9. Know your costs

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.

10. Keep calm and carry on!

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!

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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.

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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?

• Governance and leadership – defined roles and responsibilities to ensure accountability for data quality with policies and procedures. Accurate and consistent data should mean there is only ever one version of the truth.Systems and processes – that secure the quality of data • People and skills – training staff with the appropriate knowledge, competencies and capacity for their roles.
• Data use – robust reporting providing good quality data that informs management, allows improvements to service delivery and promotes accountability to customers, stakeholders, local residents and auditors.
• Data security – ensuring data collected is secure and only used for authorised purposes.

If you need to justify why investment in data should be a priority, here is a summary of just some of the likely benefits:

• Easier, fact-based strategic decision making
• Early warning of emerging problems, so minimising their impact
• Prioritising where investment in time and money will achieve greatest results
• Customer segmentation: recognising challenging tenancies (often far fewer in number than you think), tenancy balance, repairs spend, rechargeable repairs, ASB, complaints, no access issues and amounts of contact
• Ensures governance objectives are monitored, minimising audit related disruption
• Ensures the effective management of assets
• Better management and reduction of maintenance costs
• Allows enquiries to be resolved swiftly on first customer contact
• Supports the introduction of true, automated self-service
• Improves staff performance, management and development

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.

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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…

• Start off by asking what services are you trying to deliver locally in the communities where you operate. How well are those communities being served currently by local organisations – especially those you are already working with as partners? Could coming together be of mutual benefit and allow you to deliver a better service to communities?
• Make sure the partner organisations understand what is involved in working with a housing organisation – how they operate and what they can and cannot do./li>
• Appoint somebody independent to advise on this and also to explain how the process of acquisition works. DTP, for example, can help you establish early on if an acquisition will work or not, before you have invested too much time and resources.
• Make sure your own board has the capacity and skills to deliver on your ambitions – for a programme of acquisitions to work the board needs to be focused on working with the executive to grow the group. The Chair in particular has to buy into it.
• Take time to set out what benefits you both want to gain from the arrangement – and what issues you have concerns about and how you will address them.
• Often partners can be worried about giving up their independence so it pays to work out ways you can provide reassurance on this.
• Put together a statement of intent once you’re sure the acquisition is worth pursuing – then develop a detailed business case before carrying out all appropriate due diligence.
• Governance/structural issues have to be made a top priority – the future success of your new organisation depends on these.
• Ensure absolute clarity over financial arrangements – there can be no room for doubt or uncertainty on this aspect.
• Legally, once you become a subsidiary you are a subsidiary – there’s no way back. That of course underlines the importance of getting things right before a partner signs on the dotted line.

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.

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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.

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‘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?

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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.

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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.

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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.

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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!

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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…

1. Create a board that works best for you – for your organisation’s specific culture, behaviours and standards. Off the shelf doesn’t work – and creating a better board isn’t always about “professional” members or having less of them. Spend some time thinking about how best your board can work together. Be clear about what your mission and values are – and make sure your board know what’s expected. Take a step back sometimes and ask – what is the real purpose of the board and how can they really improve governance?
2. It’s not about the money. There’s been a big focus on paying boards in recent years and while I’m not saying payment is a bad thing, it isn’t a panacea either. I’ve done recruitment exercises with boards that pay and boards that don’t – and both have produced excellent outcomes. I remain to be convinced that pay is a key driver of performance. One recruitment exercise we worked on was offering people significant amounts of money to sit on the board. The result was candidates presenting who had literally no idea what kind of organisation they were walking into.
3. Terms of office. This is something we really have to look at in my view as boards need continual renewal to keep them on track. We need to move to annual contracts as standard with renewal on the basis of good performance. Nine year tenure should not be a given and the emerging norm of two terms of three years followed by exceptional one year membership up to a maximum of three further years seems better to me – to balance continuity, refreshment and the practicalities of succession planning.
4. Personal responsibility should be a top priority. Board members should not expect to be spoon fed information and to have everything done for them. For example declaration forms and standard returns are the responsibility of the board member to complete. It’s up to board members to ask themselves: am I still fit to be a director? Do I have any conflict of interest I need to declare? I’ve come across cases where board members have said they didn’t do it because they weren’t sent the forms by the governance team. It’s no excuse! This is an often neglected area and is not given the importance it should be.
5. Best behaviour – you must give absolute clarity on the behaviour you expect from your board members. How people treat one another is central to the success of a board – affecting how well people work together and how effective they are. It’s also about how people listen to one another – and how people react when decisions go against them. If the board reaches a consensus and it wasn’t the way you wanted things to go, sometimes you have to suck it up and come back to the next meeting with a positive attitude. Clearly, we want board members to be independent minded and challenging – but we also need people to be constructive and supportive.
6. Make an appraisal of the situation – my view is we need a much more rigorous approach to board member appraisal. More self-reflection is required and tough questions need to be asked. Am I still the right person for this role? Openness and honesty have to be the watchwords – for both the board member and the person carrying out the appraisal. It needs to be far more than a box ticking exercise and requires a proper dialogue between the member and the chair. Just saying you attended meetings isn’t enough – board members must demonstrate how they have added value.
7. Get the right skills set. This requires a degree of bravery I think and it’s something I’ve seen recently with at least two stock transfer associations I’ve worked with. The new National Housing Federation Code of Governance introduced last year is in part acting as a driver. In particular it said members nominated by other bodies have to go through the same selection process as other board members. Some boards are seeing this as an opportunity to shift the balance of their boards from the traditional ‘representative’ model to a greater focus on capability and competency. If it means boards are selected on the basis of their skills and experience that’s a good thing surely? The two organisations we worked with have certainly ended up with boards which look to have excellent potential.
8. Don’t tolerate poor performance. You don’t have the luxury to carry members who are not contributing. If people consistently don’t turn up, or do come and don’t contribute, it’s time to ask are they right for you? If people are consistently asked for comments and feedback and they don’t provide them – that should also raise alarm bells.
9. In the chair – the chair’s role is vital and a board can stand or fall on their performance. The chair is there to set an example, and lay out what’s expected of the board. They must have an excellent grasp of what makes good governance standards. The chair’s relationship with the chief executive is also important – but it’s important the chair doesn’t become a ‘second CEO’. It should be close but not too close, and needs to rest on good communication and support. The chair is also an important symbol to the outside world of your organisation. They need to be out here and have a visible and a positive profile.
10. Don’t underestimate your company secretary – there was a time when this role was just about the agenda, the minutes and administrative matters. But in my view this role should play a far bigger part in overall governance and proactive strategic planning. The company secretary has the potential to be that steady hand on the governance tiller. Compliance, risk management – these could all fall within the scope of the company secretary. And they should do in my view.

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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.

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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:

1. Reduce avoidable contact – Re-engineer processes so that the majority of issues can be resolved on the first contact. Providing easy access to the information needed to achieve this is key and an essential part of moving services online.
2. Promote existing digital options – If you have good existing digital services, you must promote them. Do not expect customers to simply find and use them.
3. Prioritise the services to take digital – Where can the greatest savings be made by taking processes online? Focus tends to be on those where there is a high volume of transactions (for example responsive repairs), potential for financial losses (for example service charges and voids) or where there are known service delivery failures. A Manchester based landlord saved over £350,000 p.a. by changing the way they managed responsive repairs and void management. Many quick wins can also be achieved, so delivering immediate savings.
4. Transform the business to be digital by default – Customers need to want to communicate ‘digitally by choice’. Ensure online services look appealing and are easy to use. Also ensure that re-engineered processes are truly digital and do not require manual intervention, otherwise they will prove less efficient and less convenient for customers to use.

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:

• Both changes in operation and culture are required and hence initiatives need to be driven from the top, ideally championed by the CEO. Support must be provided to ensure objectives are achieved in the long term, identifying teething problems and introducing further innovation where appropriate.
• Review how success has been achieved by others, don’t try and ‘recreate the wheel’.
• Incentives, often financial, are commonly offered to encourage customers to sign up to the use of digital services.
• The introduction of digital services is often accompanied by the provision of customer assistance and training, ‘Assisted Digital’, ensuring appropriate help is given to any tenant unable to use their digital account. This would for example include help with a UC application. Importantly, such initiatives can often attract grant funding.

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:

• Improved customer service, available 24/7
• Significant reduction in communication costs
• Liberation of office space, allowing staff more flexible working
• More effective delivery of services off-site and in the customer’s home
• Significant reduction in the operational cost of providing repairs
• Reduction in paper and postage costs
• Improved, real-time business intelligence
• Increased customer engagement and participation
• The ability to reach and attract a wider range of customers
• Reduce void times
• Manage online the entire end-to-end sales/application process
• Automate the lettings process and increase private rentals
• Demonstrate improved security and create a full audit trail
• Improve the ability to collect service charges and to sell additional services

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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.

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