Government Business

In the current uncertain financial climate, how can landlords be confident they are maintaining the right properties in the right places in the right condition? Sounds an obvious question, doesn’t it? In spite of the volume of stock condition data oozing out of property databases and the blizzard of performance information available to analyse, it has proven surprisingly difficult to gauge the business performance and future prospects of different house types throughout different areas and estates.
    
Future investment planning
We are almost in the post Decent Homes era. Landlords still face daunting challenges around future investment planning. We all want to live in a warm, comfortable home at a cost we can afford and located in a safe, well looked after place; tenants are no exception. Rising customer expectations of social landlords are reinforced by higher regulatory standards focussed on meaningful customer involvement in policy and decision making. An ageing housing stock needs constant investment for repair or renewal. The national imperative for an 80 per cent reduction in carbon emissions by 2050 against 1990 levels is forecast to become a regulatory requirement in some form. Such challenges are framed in the context of less public subsidy and overall tighter budgets.
    
To get far in responding positively you need a structured way of understanding both the business performance and future prospects for different groups and types of properties across the whole stock. Such an approach requires tools that are able to deal with complex data, yet be easy to use and focus on the most useful indicators drawn from the landlord’s existing data. Outputs should produce easy-to-follow results which non-technical people can understand and use to support investment planning decisions – such as Board members and tenants. As one client put it: “I want to be able to put all the data into a pot, press a button and see a set of traffic lights.” In essence, that’s what we have achieved.
    
Innovative approach
Through experience of supporting our clients with the strategic and financial planning of asset management, we have developed an innovative approach and built it into an analytical model, a Housing Futures Assessment Tool (HFAT). We firstly examine the financial performance of areas, estates and stock archetypes within them. These include rents and service charge income, void rent loss, planned maintenance assumptions and ongoing revenue costs. Using an NPV calculation over a 30 year period, the life of the business plan, landlords are able to evidence the comparative financial performance of widely differing archetypes such as high rise flats and sheltered housing.
    
This only paints part of the picture as it so far tells us little about demand. Alongside the financial analysis we also examine the future prospects of that stock as places where people want to continue to live. We have identified up to eight indicators that can be gathered from the landlord’s own sources, including stock turnover, tenant satisfaction, new tenant rehousing priority and NHER rating. By their nature some are qualitative measures and involve an element of structured value judgements. The aim here is to provide comparative and weighted evidence that supports or challenges the financial performance assessment. We are all familiar with the situation where well maintained stock in an unpopular area is hard to let or where some difficult to maintain stock rarely becomes empty because of what it is and where it is. This analysis provides the evidence to support or modify that ‘gut feeling’.
    
The outputs from both sets of data are a series of user defined ‘traffic lights’ which we have found are the most straightforward way to summarise and express complex comparative information. In this way we are able to assess the long term value of different types of stock in different areas to help shape future investment decisions. From this a landlord will have sound evidence to decide which stock is safe to invest in (the majority hopefully), identify those groups with a question mark over them and confirm which groups of failing stock need a fundamental appraisal about their future. The process itself offers the additional benefit of checking the validity and consistency of existing data and assumptions. It also brings together housing management expertise with property management expertise by placing financial and non financial analyses side by side. As an aid to performance management we would expect to see improvement measures introduced to tackle the worst performing stock and to re-run the tool every year to measure that improvement.
    
Shaping the future
This approach helps to empower decision makers, and involve tenants in shaping the future of their homes and communities. It gives a degree of confidence that stock investment choices are based on sound evidence that consider future prospects as well as financial performance.

For more information
Tel: 07813 586 529
E-mail: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
Web: www.is4.org.uk