The government has made it clear that it expects Housing Associations to improve their performance through efficiencies. Responding to the challenge will become an increasingly high priority for the sector. Housing Associations now need to find further costs savings, look for different ways to raise income, and consider the opportunities for providing your services in new ways.
Below we set out the seven key areas where Housing Associations can look for cost saving and deliver great efficiencies.
Commercial Leases in the private sector are often drafted to ensure that the landlord does not have to pay any rent – or other income – towards the cost of repair or other services, and this is known as a ‘clear lease’.
One of the challenges in the sector is to reduce as quickly and much as possible the gap between what Housing Associations spend on services and what is recovered.
Do you know what your shortfall is and the actions you are taking to reduce it?
Whilst the sector is starting to recognise the value of its assets, there is a lot more to be done to ensure they are being used most effectively, particularly non-housing assets.
Consider whether you need all of your offices to deliver your services. Is there a strategy in place to get the most from your commercial portfolio?
This is becoming an increasingly serious issue for the sector, following the recent SHPS Valuation. The Regulator is taking a keener interest in ensuring that boards have carefully considered their pension liabilities.
Now is the time for Housing Associations to proactively consider their pension strategy.
Are your employment contracts fit for purpose? Have you got a sensible and commercial suite of employment policies to help managers ‘manage’ pro-actively and without creating risk to the business?
Many Housing Associations are also taking the opportunity to review the structure of their workforce and are considering robust performance management, re-structures, or possibly redundancies, to ensure a streamlined and efficient operating model.
It’s also sensible to regularly review your system of pay and reward including considering the range of benefits you offer and whether these are cost effective.
Firstly, despite recent dire warnings in the press, the Solar PV market is not dead yet, but it does need to be looked at differently, for example by considering ‘rent a roof’ deals with developers, rather than DIY schemes.
Secondly, it is time to look again at the VAT savings that can be delivered through cost sharing vehicles (with other housing associations or public bodies) and the formation of wholly owned design and build companies.
Thirdly, Housing Associations need to be bolder in what they can charge for providing services, for example, Consents to Assignments and Licences. A final consideration is whether greater time and investment should be given to the exploring opportunities to merge with other Housing Associations to deliver greater savings and cost efficiencies.
Skilful contract management on its own may not be entirely sufficient to deliver the extensive savings that are needed in the foreseeable future, but it can certainly contribute and it is a relatively painless place to start.
Do you know what your five biggest contracts are and whether they allow you to generate further efficiency savings that you are not taking advantage of?
Do you know how many of your Development Agreements are conditional and could be brought to an end or re-negotiated?
Many Development Agreements are conditional on certain events or pre-conditions occurring, and it may be possible to terminate them if they have not been satisfied.
This could include different ways of carrying out developments by sharing risks and rewards differently, thinking through which services do you have to provide. Which services could you stop providing or provide elsewhere?
Over the next few months, we will be producing a series of practical articles analysing these challenges and opportunities in more detail. We will be giving practical advice and tips to enable Housing Associations to improve their performance by reducing costs and increasing income, and by thinking outside the box to identify new ways of providing services.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com