Stock transfers, ALMOs and DLOs – future prospects?

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Stock transfers, ALMOs and DLOs – future prospects?

Does self-financing herald the end of stock transfers?

Lambeth have set up a Housing Commission to look at its housing options and we were pleased to be invited to submit evidence to the Commission. Please see our full report, The future of housing in Lambeth.

From our experience working with the various players in the housing sector, there are a few things that we think local authorities should be thinking about when making their choices and that providers should be focussed on when making their pitch. It is far from a done deal that self-financing and retaining stock will be the best solution in every case. Or that stock transfer or an ALMO model of management is the same thing that was being offered five years ago.

Some key things to consider when determining the future direction of stock investment/improvement are, once the HRA settlement-now likely in December /January 2012 is announced:

How much control does the authority wish to retain?

A number of authorities have brought – or are contemplating – bringing their housing management back in house, to increase their control and because the prospect of HRA reform may mean they can borrow to meet outstanding decent homes or stock improvement commitments. But there are risks;

  • not losing the success of the ALMO model in delivering improved services to tenants and improved quality of repairs and maintenance;
  • not losing the benefits of having delivery separated from strategy, or of having a dedicated special purpose vehicle already within the council’s ownership;
  • or if a decision is made to outsource or transfer then how do you ensure adequate accountability from the new organisation?

What do you want your housing management service to deliver?

Is it just the core service or a wider offering, such as regeneration, community engagement and development? The most successful associations and ALMOs offer more than just a housing service. They contribute to area renewal and regeneration and supporting delivery of the authority’s strategies.

What are the best options for closing the investment gap?

HRA reform may well bring new opportunities for genuine self-financing. However, it is important to run the numbers for retained stock, for outsourced services and for transfer. Borrowing rates will vary and 5% difference in interest rate borrowing from the Public Works Loan Board to borrowing on the bond market could have a dramatic impact on the number of kitchens and bathrooms that can be replaced or improved.

What are the best options to drive efficiencies?

There are cost savings and efficiencies that can be generated through shared services, between authorities, or ALMOs, or through procurement of services from the private sector. Rochdale Council is delighted with the efficiencies achieved by working with an external supplier – Morrisons – who work across a number of authorities and are able to deliver cost savings in maintenance costs through economies of scale. In the London Borough of Hackney, having the Chief Executive of the ALMO also acting as the Director of Housing for the Council has the potential to generate significant savings. Sharing of back office services is a real option for some. In Kent, a group of authorities, Canterbury, Dover, Shepway and Thanet, have gone one step further and have one ALMO responsible for all of their housing stock. A number of housing associations are now looking at having their own direct labour organisations to drive efficiencies in the supply chain.

How do you ensure that the gains of tenant engagement and accountability are maintained?

Organisations are developing thinking around the Council and Community Organisation (CoCo) model, which sees devolution of control to residents. It retains tenants at the heart of decision making, whilst ensuring the authority retains a stake in the company and its key role in developing housing strategy.

The co-regulation and transparency agenda of the social housing regulator the TSA, and going forward the HCA, will almost certainly require the development of Tenants Panels, increased transparency of decision making and a greater demonstration of accountability to local stakeholders. The bar is therefore being raised on how providers work with and provide information to their residents.

In some instances, bringing the management back in house may improve this accountability. In other instances, an external provider, whether that is a local association or the private sector may already be doing just that and more.

What is clear from all of this is that where once stock transfer, PFI or setting up an ALMO were the only options for generating enough finance to meet an authority’s stock investment needs, we now have a wider set of options. Self-financing adds to the list, but it should not just be assumed that it will be the answer in every case.

For associations and the private sector recognising that authorities now have choices, means that when making your pitch you need to be even closer to understanding what they need from you.

Steve Douglas and Michael Appleby