The Regulator, (the Homes and Communities Agency HCA), is looking for assurance from housing associations through the VfM Statement, that they, housing associations in the main, have a clear and strategic approach to value for money., The Regulatory Framework was published in April 2012 and included the VfM Standard which requires registered providers to articulate and deliver a comprehensive and strategic approach to achieving VfM in meeting their organisation’s objectives. Boards should undertake a VfM self- assessment annually which should be published 6 months after the financial year end and will normally be flagged up in the Annual Report, and (in fuller form) in the audited accounts, as well as being accessible on the Association’s website.
The Statement should be capable of demonstrating to stakeholders how the Standard is being met in a way that is transparent and accessible to stakeholders, and set out how VfM is achieved in delivering stated purposes and objectives and to understand the return on assets measured against the organisation’s objectives.
- set out the absolute and comparative costs of delivering specific services.
- evidence the value for money gains that have been and will be made and how these have and will be
realised over time.
The organisation's key objectives for 2014 are:
- To achieve and maintain standards of Customer Service which equal the best in the sector
- Delivering on time and on budget, as far as it is possible to do so the works on the Gulf Site for 31 new homes and their completion in late 2014
- Delivering the overall budget and giving residents value for money on rent and service charges
- Develop and publish a 5 year strategy including our plans for growth and partnership working
Customer Standards have been depressed this year as a result of our contractual obligations with Keepmoat which has hampered the delivery of the repairs service to tenants. We are recording less tenant satisfaction as a result, but it remains a priority to resolve these matters as quickly as we can and we have taken heed of the cleaning issues raised by residents and are devoting extra resources to this.
We will not be able to complete the Gulf ( Dorothy Hodgkin House) scheme in November as the developer had a number of problems on the site- some self-inflicted – but we aim to be within the GLA cut-off date of the end of March 2015. The land purchase price was effectively below the market rate and the build costs are expected to be in line with the original contract price despite some significant decontamination costs.
The headings used in the Statement below include:
- The cost and quality of services provided and the relationship between cost and quality. Some evidence of gains over time. Benchmarking data. Effective performance management. Tenant surveys.
- The rate of return on assets and the value of holding or possibly selling assets. Stock condition survey and asset management. Demand and markets.
- The assessment has some transparency so peers and customers can easily understand the judgements on VFM being made.
- Stakeholder survey results and social value’ calculations.
- Consideration of different delivery models.
The Board has completed a review on how we report the 2014 Value for Money Self-Assessment in September. The September 2014 Self-Assessment is published on Ducane’s website. (This page.)
The Board believes that the Association does provide Value for Money (VfM), for residents and the public purse and that it has sufficiently considered the cost and effectiveness of its services and assets. The Board however also considers there are still areas where the Association can improve.
Unusually for a housing association, this organisation’s primary revenue stream emanates from postgraduate students, who could opt to live in the private sector. The Association has therefore made stock investment decisions with this in mind in recent years. The asset management decisions taken several years ago to commit a substantial sum, £12m, on a major refurbishment program of 112 flats - the majority of our stock - and building 44 new homes. This has substantially ‘future proofed’ the business by improving the 122 flats making
them fit for 21st century standards of design and running costs by increasing insulation and thereby reducing heat loss, and with new windows, less noise, and reducing running costs substantially. The build process was considered and it was agreed that it would not be cost effective to replace roofs alone- the major building element that was failing at the time, and that with offsite construction of ‘pods’ we would have achieve a reasonable build cost. Also featuring in our decision was the requirement to meet the Governments’ Decent Homes Standard.
An analysis of the viability of converting and upgrading our street property was under taken at the time too. Maintenance costs were increasing on these 9 street properties. The market in student housing was moving towards higher quality, self-contained accommodation, and demand for these older homes was decreasing; but the cost of self-containment and the reduction in rental income made this uneconomic, so they were sold with a surplus made on the historic costs, which part funded the modernisation works described above.
The combination of the use new build homes using modern methods of construction, the major refurbishment program of 112 homes, and a rolling decant program and a non-standard building contract (NEC), all combined to make this a difficult build process. It is also the case that we continue to press the contractor on a number of latent defects all of which has meant that our repair service has suffered along with some reduction in tenant satisfaction numbers, as we grapple with the contractual issues with the construction company. It is clear that lessons have been learned and the Board have asked for a report post completion on the project so that learning points can be incorporated into future development activity.
The Board monitors a number of key performance indicators at each meeting as shown on a balanced scorecard. The executive keeps steady downward pressure on administration and overall running costs which have decreased in each of the last three years despite increases in stock numbers.
The views of tenants are important and their opinion on the services delivered is measured each year. In the last survey 97% of tenants responding to the survey said they were either satisfied or very satisfied with our services. This represents an improvement on the previous year’s figures. In 2014 we were not surprised to note that tenant satisfaction numbers have not matched last year’s high point because some tenants are dependent on the contractor to carry out latent defect works.
Similarly we test periodically the views about the Association from partners and suppliers in the sector. The Stakeholder Survey DHA is viewed very positively by the people and the organisations with which it does business. A copy of the Stakeholder Survey is available on request – email firstname.lastname@example.org.
We are committed to investing in our staff and rewarding good performance to improve resident satisfaction.
- In 2013 the Board commissioned a Stakeholder Survey in which 34 of our business partners were interviewed by a consultant. Questioned about a measure of professionalism, a high number, 92% of respondents, rated staff at Ducane as either ‘good’ or ‘excellent’ in this regard. Asked to comment on biggest achievement of the organisation in the last 3 years, most noted development activity, but 3 respondents in
particular said that the organisation had ‘continually focused on improving its core business’. Also 100% of those responding to this question, (30 in all), rated Ducane staff as either ‘good’ or ‘excellent’, on partnership working as a team
- A 2013 Staff Attitude Survey found that 100% of staff felt that Ducane HA was a good employer and suggestions for improvement were incorporated into the way we work
- In the annual tenant Satisfaction Survey in 2013 reported an overall satisfaction level of 85.3% with the service in general and 97.3% of respondents said they were satisfied with the maintenance service, but 2014 saw a reduction to 74% which is disappointing but is attributable to the difficulty of getting latent repairs carried out by our main contractor following the major improvement scheme we undertook where we are contractually obliged to require the work to be done by them
We also encourage staff to question how we operate to find ways of providing a better and more efficient service.
Our board members review our work and make sure that we deliver value for money. Members look critically at annual projected budget expenditure and will question staff about increases, seeking assurance that the expenditure is necessary or driven by other factors. Regular financial reporting to the Board members in the form of management accounts, a cash flow projection and a commentary on deviation from the budget. Bank covenant compliance is also very closely monitored and regularly reported on.
As a small Association with a regular development build programme, members are particularly keen to ensure that all financial and development risks are addressed. In early 2014 we completed a round of recruitment for new board members with skills we require in delivering business plan objectives as our Rules specified the retirement of a members who had reached the maximum term allowed. The recruitment process was outsourced to a well know consultant, (Altair), with a recognised pool of skilled and experienced candidates.
We are committed to making sure that residents receive value for their rent and service charges.
- We involve residents in our decision making, with residents being appointed to the board
- We monitor resident satisfaction levels annually, and have just appointed a new board member to lead on housing services
- We meet with residents regularly to identify service improvements, with Board members attending at least twice a year
- We invested in a Ducane HA app and new website which was launched in April 2014, with a resident forum and instant chat facility. We also have a Facebook page which assists us in communication to tenants and others about what we do on a weekly basis. Members recognise this communication process should be more two way, and we continue to work on seeing if we can engender a digital community
1. The Cost and Quality of Services Provided
|Resident satisfaction||2014||2014||Bench mark
|% of residents satisfied or very satisfied with our services||85.3%||74%||96%||89%|
|% of residents satisfied or very satisfied with repairs and maintenance||97.3%||76%||97%||85%|
|% of residents satisfied or very satisfied on VFM for rent||91.6%||85%||89%||85%|
The Board takes assurance on VfM from a number of sources including a benchmarking with other small London housing associations in g320 and the larger grouping of small HA’s who benchmark within SPBM, the SkillsProjects Benchmarking Group. The results of a number of performance indications are shown in the appendices. A summary of key indicators and trends is shown below:
Benchmarking – Quality and Cost
|Other measures||2012||2013||Bench mark
|% of repairs fixed on first visit||100%||99.8%||99.8%||96.1%|
|Average re-let time (days)||data not available||23*||14||17|
|Current rent arrears||0.9%||1%||2.21%||1.52%|
|% void losses||15.08%||2.51%||0.4%||0.47%|
* Void losses are primarily caused by ‘management’ voids incurred through a rolling decant programme towards the end of the Modernisation scheme – the refurbishment of 112 homes. In addition our tenant turnover is also considerably higher than the average with the highest proportion of re-lets in the BMg320 group.
The Board recognises that one of the key drivers is void loss and it monitors this closely and recently noted the decreasing loss of rent from this as homes return to be let. However it should be said that having few tenants in receipt of Housing Benefit has boosted our collection rates, together with a push to collect rent via direct debit.
Also the Board note the value of having a high performing in house maintenance team in that it adds to tenant satisfaction scores and reduces VAT costs.
The Board have taken comfort from the historically positive levels of tenant satisfaction, and consider that the slightly higher operating costs that the median in the sector for similar sized organisations, is acceptable as this seems to be validated by elevated customer satisfaction levels, and will be mindful also of the alternative destination in the private sector accommodation for our client group.
Economies of scale and unit costs should reduce as the organisation increases in size and this is an objective of the Board.
|Operating Costs||2012||2013||Bench mark
|Weekly operating cost per property (£’s)||95.96||95.22||74.04||No data available|
|Operating Costs as a % of turnover||61.7%||50.8%||74%||70.6%|
|Average weekly management cost per dwelling (£’s)||27.11||24.94||16.91||1.52%|
*Housemark data not available. SPBM (SkillsProjects Benchmarking Group) is a wider group that g320 and not restricted to London. In future it may be that we can include House Mark data against these measures.
The Board recognises that reducing running costs where practicable and sensible to do, should be encouraged. Operating costs as a percentage of turnover have decreased steadily each year since 2011 when running costs were at 74% of turnover. The net effect is to reduce the impact on rents and retain cash for development activity – which at present is limited as our gearing covenant poses a constraint.
The Board has for several years been particularly concerned to ensure that budgets have been trimmed as far as
reasonable in order to reduce running costs in an environment where it made sense to do so to avoid adding to covenant breach risk. The CEO has encouraged managers in previous years to come up with cost saving and more efficient ways of working. The in-house maintenance team establishment was reduced by one four years ago and the housing management team expanded by one this year in response to different work requirements.
2. The Rate of Return on Assets
|Surplus for the year – net income||289.1||366.3||733.6|
|Average total assets (net of grant)||12,930||14,218||15,554|
|Return on Assets||2.17%||2.42%||4.59%|
The Board has considered what modest increase in rents might generate more income that could be directly used
to build more homes. Our rents are at an average of 59% of market rents. The Board has asked for modelling of
rents across both client groups at 70% of market. Initial work on this suggest this increase will generate
considerably more capacity to build more homes, mindful of our gearing restrictions.
|Earnings before Interest and tax||379.9||515.9||978.6|
|Capital employed (net of grant)||12,964||13,712||14,855|
|Return on Capital Employed||2.93%||3.76%||4.59%|
We are committed to investing in our homes to make sure they are fit and attractive to live in for the 21st century.
In 2011 we started a major programme of investment across the majority of our housing stock to maintain high standards of living enjoyed by our tenants. This was completed towards end of 2012 at a cost of circa £12m for a complete new fit out of existing 112 homes and the building of 44 new homes.
The newly insulated walls, new high spec windows and the air source heat pumps in the new homes all reduce running costs for residents.
As a result of our investments in the housing stock, it will be noted from the above table that not only return on assets improved but also return on capital increased as a result of increase in rental income and savings on operating costs.
We also have a stock condition survey on all our homes that predicts when we are liable for replacement of building components over the next 25 years and this enables us to plan on future expenditure necessary for the upkeep of our homes.
A committee of the Board, (the Development and Asset Management Committee), is responsible for both development and asset management (of our homes), and meets at least quarterly.
We have invested in our existing and new homes in recent years. Some of this was ‘delayed’ expenditure on flat roof replacement for example as the buildings were over 30 years old. However most of that cost was to make sure that these homes were fit for purpose for the 21 century, both in internal fitting out, appearance and lower running costs.
As most of our residents (postgraduate students), have a choice to live in our homes or the private sector, it is vital that we ensure that those homes are attractive places to live in.
We monitor how quickly we can re-let our homes at the end of a tenancy and this is a key measure of the demand for our homes and our efficient in house decoration and repair service.
Vellacott House was not included in the main modernisation contract as it was built later - in the late 1980’s – but we do have a rolling programme of improvements both to the rooms themselves and for the kitchens areas on each floor.
The efficient use of land
At Ducane we have a limited amount of available land. Our homes on the Du Cane Road are bounded by a busy road and a railway line. In the past number of years we have made the best use of our land ‘footprint’. Firstly we built Du Cane House on an existing play area - 10 new flats for key workers, plus new offices and added parking, as well as a new play area, all on the old site of the playground.
In London land is at a premium. As a result we have made the most of the buildings we have by building homes in the land and air space available to us for example additional floors on top of 5 blocks and two infill blocks occupying the air gaps between blocks. This recently provided 44 new homes on our existing site.13 Value for Money Statement 2014 September
Our latest development is on a site that adjoins our land on Du Cane Road – a former petrol station. The Gulf site was acquired at a cost effective price and together with an existing strip of land, when combined means we can provide 31 new homes for key workers in early 2015 on the site (Dorothy Hodgkin House). This scheme uses all the available land between the railway line at the rear and the road at the front.
We are always seeking to strike a balance between good homes well provided for and overall costs. In the example mentioned above, we decided to save costs on providing an expensive underground car park, and provide adjacent parking which is already available and only metres away.
We recently initiated a conversation with Places For People (a large national housing association), to use their very substantial procurement capability to deliver cost savings to Ducane and also g320 members. This can range from advice on procurement, to the use of their OJEU compliant framework of suppliers and consultants. This is part of a longer term goal set by the Board to make best use of collaborative cost sharing initiatives.
|Debt per unit managed||£32,165||£30,203||£32,145|
|Adjusted net leverage||43.8%||41.1%||41.5%|
|Interest cover to EBITDA||1.88:1||3.08:1||5.14:1|
Our budgets have regularly included targets for efficiency gains as well as improvements to services. Some of these improvements have necessitated prudent investment, for example in our older homes.
Planned investment in our existing homes and new developments are very carefully costed and scrutinised to ensure we are keeping within prudent limits on borrowing. We directly employ consultants to advise on the development process and progress chasing.
Bank lending is about half of our existing debt and the gearing covenants are the most critical. and during the Modernisation works programme we came close to the limit specified in our loan documentation (65%) as income decreased during the works and borrowing increased. The Board and Executive have given thought to how the Association might pay down its existing bank debt and what the impact on the I and E would be as a result.
4. Stakeholder Survey
Professionalism and the performance of staff was one area that the independent survey tested with stakeholders in 2012. The report says,
All participants responded to this question. Comments made by respondents indicated an appreciation of the helpfulness of staff and their willingness to listen and assist.
This was an area where the scores were outstanding - 92% of all participants rated DHA as ‘Good’ or ‘Excellent’, and for a small organisation to achieve such a result is remarkable. A proportion (47%) had no significant exposure to the staff but nevertheless on the experience they did have, (largely from contact with the CEO), were able to assess the organisation. There is a strong perception that
DHA is a well- managed, organised and led organisation.
5. Estimating Social Value
The g320 commissioned work from consultants Cohesia to summarise and report on measuring and reporting on social value. The social benefits listed below have been selected from those social value estimates. The research looked at a number of sources of independent evaluation of social value, and rather than attempt to replicate the work done elsewhere, we include a selection of social benefits and the calculated cash values per person per year. This work is important because in the absence of other measures more appropriate to the private sector such as cash, turnover and profitability, these measures attempt to put a cash value on less easily measured outputs. The source document is a piece of work carried out by HACT see http://www.hact.org.uk/measuring-social-impact-community-investment-guide-using-wellbeing-valuation-approach
|Valuation||Job-specific skills (value to individual aged under 25 who lives in London).|
|Description||This valuation is the average value to an individual of acquiring new skills from training at their employment or at a job centre.|
|Valuation||Feeling of being in control of life (value to individual aged 25-49 who lives in London).|
|Description||This valuation is the average value to an individual of feeling that they are in control of what happens to them in their life.|
|Benefits||£1,291 per person per year (2014).|
|Valuation||Feeling of belonging in a neighbourhood (value to individual aged under 25 who lives in London).|
|Description||This valuation is the average value to an individual of feeling like they belong in their neighbourhood.|
|Benefits||£9,409 per person per year (2014)|
|Valuation||Living in a “good place to live” (value to individual aged under 25 who lives in London).|
|Description||This valuation is the average value to an individual of living in a neighbourhood that they think is a 'good place to live'|
|Benefits||£2,252 per person per year (2014).|
|Valuation||Living in a “good place to live” (value to individual aged 25-49 who lives in London).|
|Description||This valuation is the average value to an individual of living in a neighbourhood that they think is a “good place to live”.|
|Benefits||£1,048 per person per year (2014).|
|Valuation||Membership of social group (value to individual aged 25-49 who lives in London).|
|Description||This valuation is the average value to an individual of being a member of a social group.|
|Benefits||£1,048 per person per year (2014).|
|Valuation||Not being worried about being a victim of crime (value to individual aged under 25 who lives in London).|
|Description||This valuation is the average value to an individual of not being worried about being a victim of crime.|
|Benefits||£1,721 per person per year (2014).|
|Valuation||Not having a problem with anti-social behaviour (value to individual aged 25-49 who lives in London).|
|Description||This valuation is the average value to an individual of not having a problem with anti-social behaviour in their local area.|
|Benefits||£7,124 per person per year (2014).|
|Valuation||Not having a problem with vandalism or graffiti (value to individual aged under 25 who lives in London).|
|Description||This valuation is the average value to an individual of not having a problem with vandalism, graffiti or other deliberate damage to their property or vehicles.|
|Benefits||£5,579 per person per year (2014).|
|Valuation||Regular conversation with neighbours (value to individual aged 25-49 who lives in London)|
|Description||This valuation is the average value to an individual of having a regular conversation with their neighbours.|
|Benefits||£2,443 per person per year (2014).|
There are other benefits which have not been quantified and relate more specifically to Ducane, such as,
- The value of safe and secure homes for overseas students and the value added to their learning, much of which is ultimately deployed back in their countries of origin
- The value to the local economy of students spending money
- The value of homes freed up in the private rented sector not used by our residents
- Being relatively central – Zone 2 for access to work and study
- Support for residents newly arrived in the UK
6. Managing performance
- We review our performance continuously and check how we compare to other small and large housing associations. We aim to remain among the best for quality of services. To do this, senior staff reviews the costs of our activities and identify how we can improve.
- We benchmark our services with others in g320 (small housing associations working in London) and work to make savings by buying goods and services in partnership with others and look for new ways to work with partners so that we provide real value for money.
- We report at each board meeting on a range of key performance indicators on a balanced score card format with reference to progress over time, see below.
7. Different Delivery Models
The Association has taken into account how it might in the future re-structure its ‘corporate arrangements’ to deliver a better outcome to existing and future tenants. The Board, for example, keeps under review the ‘structural’ options that might add to its ability to better deliver on its stated objectives. Merging with another similarly sized organisation, or joining a group structure of a larger HA, have been considered in recent years for example.
However the primary goal in any such consideration is the net impact on the tenants current and future, and what value that might be driven through such an exercise, as well as the impact on staff and the possible loss of the association’s unique selling points.
SPBM Report for 2013/14
(click to enlarge)
(click to enlarge)
(click to enlarge)
Balanced Score Card
(click to enlarge)