Asset Management Club Hertfordshire - 10 September 2015 Output report from:

WORKSHOP: MAXIMISING EFFICIENCY AND MINIMISING DUPLICATION Challenges facing the industry, from rent reduction, welfare reform, right to buy, asset management, resources, repair and more. Challenges

Data management

Asset management system

Lack of use of technology in the AM system and process

Mergers and takeovers, RPs are often focused on internal objectives and goals and may not be proactive in making them happen

Uncertainty on spend due to rent reduction

Effective procurement

Starting to see the pressures from contractors being much stricter on payments terms

Increased tender prices

“lean” on resource and can’t find replacements when people retire

Can’t afford to pay competitive rates to attract the right calibre of staff

Having to do more with less

Having to cut things like 2 year internal K&B refresh (cyclical more of a challenge with leaseholders who will demand you repaint)

Maximising efficiencies and minimising duplication

DLO service to other organisations

RPs helping each other and providing services to each other based on their expertise

JV procurement rather than each doing separately

Partnership working or collaborative approach for sharing cost and learning from each other

Sharing delivery models

Sharing procurement approach

Sharing resources if possible

Sharing processes and systems

Prepare a standard cost benchmarking database and openly share cost and learn from each other

Outsourcing DLO to the public and leaseholders

Sharing price information

Collaborative working and JVs

Herts Asset Management

Group - More than Bricks

and Mortar

10th September

• Transferred from Broxbourne Council in Jan

2006

• Own c 4500 homes including c 700 leasehold

properties and c150 shared ownership

dwellings

• Grown from c 100 to c200 staff

Some numbers:

• We paid the Council c£37M in January 2006

for the homes – (existing use value)

• The Council has received £10.3m from Right

to Buy receipts since 2006

• The Council has received c£ 3.4m under the

VAT agreement since 2006

Some more…• Since 2006, we have invested over £100m in

social housing in Broxbourne : over £62m in refurbishing or remodelling those homes transferred from the Council and the balance in new or acquired homes

• We have paid for this c£100m investment by private borrowings of c£53m, Council/HCA grants of c£9m and trading surpluses of c£38m. Virtually all our trading surpluses are reinvested in social housing.

• This does not include works on site.

Upgrading what we have

Since 2006 we have spent:

- £5M on providing 2,200 new bathrooms

- £9.5M on providing 2,370 new kitchens

- c£8M on regeneration of Coopers Walk and Fishers Close

- Other major works totalling c£40M : such as external wall insulation to improve thermal insulation, 2150 new boilers, 2250 rewires.

Where we work• Most of our homes are in

the Borough of

Broxbourne

• Our first ‘out of Borough’

development is in

Welwyn Hatfield

• Plans for growth focus on

Hertfordshire and Essex,

close to our current

boundaries

• Member of PlaceShapers

• Annual community development budget

increased from zero in 2006 to c£400K

• We’ve invested more than £1.3M in the

community

• More than 78 partners and 79 projects

supported this year

Since 2012 we’ve had 10 apprentices of which 7 gained employment with B3Living after completing their apprenticeship. 1 gained employment locally and1 went onto another apprenticeship with a local company.

This year we have 9 apprentices; 3 trainees currently employed by B3Living and 9 members of staff on sponsorship training courses.

• Activities for young people held, e.g. B3

Fishing, White Water Rafting, Olympic torch event, Take a Bow

• Close working with local partners to

maximise resources available

• Our work with HRC has given residents

pathways into further education, training

and employment

• Our work with local schools has given children opportunities to try different

things and learn new skills.

• Our Governance qualification has

given residents opportunities to gain

skills and experience

• More than 600 local, previously

unemployed residents found work

under our partnership initiatives with HRC, Job Centre Plus and CVS

PLACESHAPERS• A national network of more than 110

community based housing associations, with more than 750k homes

• Formed in 2008 members have signed up to the following principles:-

– We put our residents and customers at the centre of what we do and ensure they have real influence on our organisations.

– We provide more than just landlord services because we care about the people and places where we work.

Placeshapers

• We recognise the importance of a local focus and work actively with our local authorities and other local partners to improve and shape places at both a strategic and operational level.

• We believe there is strength and benefit to residents and stakeholders in maintaining a strong, independent, diverse, values-driven housing association sector

Placeshapers – some common

misconceptions

• It’s just about size? - This is completely wrong. There are some Placeshapers with more than 30000 homes and some with less than 1000

• It’s just for those that don’t want to develop? – Wrong again Placeshapers have more than a quarter of the current HCA development programme.

What Placeshapers do

• A network of good practice (and some

cathartic listening) among like-minded

organisations

• A voice for like-minded HA’s

- with Government

- with other bodies

• Promoting what’s important to us and

our communities

Safety Compliance(Managing significant risks and the

challenges for the sector)

Asset Management Club

10 September 2015

Introductions

Dave Asher

CMIOSH, DipOSH, DipRSA, RMaPS, FRSPH, MIIRSM

Principal Designer/H&S Consultant

Sheffield (JRP North)

25 years + H&S experience mainly in engineering & construction

P/T Prison Chaplain (HMP & YOI Doncaster)

Fire Legionella Asbestos Gas

Agenda

General H&S

Health and Safety at Work etc. Act 1974

Management of Health & Safety at Work Regulations 1999

Fire Safety

Statistics (2012-2013) 41,000 dwelling fires 350 fire-related deaths (865 in 1979) More than 50% of victims were 65 or older 38% of deaths in dwellings with no smoke alarm

Fire Safety

The Regulatory Reform (Fire Safety) Order 2005

Building owners must carry out a (suitable and sufficient) fire safety risk assessment and keep it up to date (common areas)

Then ensure that adequate and appropriate fire safety measures are in place to minimise the risk of injury or loss of life in the event of a fire.

Legionella

200-300 cases per year (50-70 year-olds) Incubation period 2-10 days - typically 3-6days Legionella pneumophila - 23 sub types HSE view Legionnaire's Disease as “preventable”

assuming management failure!

Legionella

Identify and assess sources of risk

If appropriate, prepare a written scheme for preventing or controlling the risk

Implement, manage and monitor precautions

Keep suitable records

Appoint a competent person

Asbestos

Every week...... 4 plumbers die 20 tradesmen die 6 electricians die 8 joiners die

AT LEAST 4000 deaths a year (and rising!)

Control of Asbestos Regulations 2012

ACoP (L143) HSG264 (Survey guide)

Asbestos

Asbestos

Duty-holders must;

Take reasonable steps to find out if there are ACM’s present, including location and condition

Presume materials contain asbestos unless there is strong evidence that they do not

Maintain suitable records

Assess the risk of anyone being exposed to fibres from the materials identified

Asbestos

Prepare, implement, monitor and review a suitable management plan

Provide information on the location and condition of the materials to anyone who is liable to work on or disturb them

Gas

Landlords must;

Ensure gas fittings and flues are maintained in a safe condition.

Gas appliances should be serviced in accordance with the manufacturer’s instructions by a competent person.

Ensure an annual safety check is carried out on each gas appliance/flue.

Gas

Landlords must;

Before any new lease commences, ensure checks have been carried out within one year before start of the lease date, unless appliances installed for less than 12 months.

Ensure all installation, maintenance and safety checks are carried out by a Gas Safe registered engineer;

Gas

Landlords must;

Maintain records of each safety check for at least two years;

Issue copy of the latest safety check record to tenants within 28 days of check being completed, or to new tenants before they move in.

Gas

The Regulations specify the gas safety matters to be covered.

You should not assume that an annual service inspection meets the safety check requirement, or that a safety check will, on its own, be sufficient to provide effective maintenance.

Ask the advice of a Gas Safe registered engineer.

Do You Comply? The Art of Managing Safely

Compliance hotspotsWhat is “real-time” complianceCan I say with certainty “ I am compliant”What is Q SAFEManaging compliance

Fire regs as an example state

The Regulatory Reform (Fire Safety) Order 2005. You must appoint a 'responsible person' The order is sometimes called the Fire Safety Order or the RRO it came into force in 2006

Article 17 of the Fire Safety Order requires a suitable maintenance regime to ensure relevant equipment is kept in an efficient state.

Both HSE and Brigade officers are now looking for as “real-time” and up to date information as can be possibly be provided

So will you become V3/G3 because of record keeping and/or management gaps?

We have developed Q SAFE in response to a clients request for better systems

It is:

An Asset Management and Compliance App based on QR codes that provides certification details, repairs history and H&S notices such as Fire, Legionella, Asbestos and Gas (FLAG) reports.

Right to buy and housing associationsCatherine Hand, partner, Trowers & Hamlins LLP

Presentation ——10th September 2015

What do we know?

● Not a great deal

● Housing Bill expected in October – Brandon Lewis said

this to the CLG Committee on 7th September

● Manifesto promise – unlikely to be dropped

● To be based on council right to buy – but council’ do

not borrow money in the same way so its not a simple

copy across

How does Council RTB work

● Have to be a secure tenant for 3 years – reduced from

5 years this May

● For council tenants that might be a lifetime secure

tenancy or a “flexible” fixed term one

● Discount rates - he maximum discount is £77,900

across England, except in London boroughs where it’s

£103,900. It will increase each year in April in line with

the consumer price index (CPI).

Council RTB cont.

● Houses

• 35% discount if a public sector tenant for between 3

and 5 years.

• After 5 years, the discount goes up by 1% for every

extra year of being a public sector tenant, up to a

maximum of 70%

● Flats

• 50% discount if a public sector tenant for between 3

and 5 years.

• After 5 years, the discount goes up by 2% for every

extra year of being a public sector tenant, up to a

maximum of 70%

Can it be stopped?

● You can’t sue Parliament!

• and they can legislate to make owners sell – CPO,

leasehold enfranchisement

● Human Rights Act angle – deprivation of property

without compensation – so discount refunding is crucial

● Refunding discounts – will that happen? It does with

right to acquire – by statute – but the money is in the

DPF – not free to spend it as you wish.

● Money to refund discounts to come from council sales

of high value voids – but will the sums add up?

● Where are the lenders in all this?

• charges automatically released under PRTB

• reasonably relaxed so far

• not a disaster scenario

• possible issues for an RP tight on security – will

they be able to put money in a charged account?

• May need to have more security available

• experience of PRTB and with LSVTs

● Impact on business plans

● Exemptions – sheltered housing? Current RTB

exemption not absolute. supported housing? Rural

housing?

Practical issues

● What about existing rights/obligations/restrictions on land?

S.106 agreements that say it must always be social housing.

Up to purchaser whether to accept title or not.

● When the legislation comes through, review standard leases

and transfers to make sure they work with the legislation

● Look really carefully at service charge provisions for flats and

for houses in estates – do they work? Will they deal with

changing circumstances? Make sure the purchasing tenants

understand what they will be paying for.

● Get the plans right – preserve your ability to redevelop

estates in the future so that estate boundaries and rights can

be varied

Current Strategic Challenges Facing us all

• Coping with 4 year rent cut • Welfare caps, removal of HB for Under 21s

• Living Wage – increased care costs• Pay to Stay

• Right to Buy• Increasing regulations – IDAs and VFM statements

• Changed political climate• Potential mergers, take overs

• Viability concerns• Maintaining Development Capacity

Impact of Rent Reductions

Impact on Services and Asset Management

• Do we look to change our offer? – review scope of

repairs and performance standards• Enforce compliance with tenancy conditions

• Maximise service charge recovery• Basic Decent Homes only with focus on H&S

• Extend lifecycles, ensure investment is returned• Cut back on capital spend

• Can we now afford anymore energy efficiency?• Sell all high value and low NPV homes when void?

• Mergers, shared services and facilities, joint

procurement and delivery

Impact on Valuations

Accounts valuations (EUV-SH) – will be affected as

must reflect full impact of rent cuts – likely to fall

by 20% - 30% or more

Trigger impairment review/covenant breach?

Loan Security EUV-SH valuations – notimmediately affected by the rent cuts as

s.20 draft Bill contains Mortgagee/Successor

exemption

Impact on Local Authorities

• First time direct government control on LA rents• No opportunity to ‘catch up’ rents below target

• Pay to Stay receipts to be returned to government• Loss of development capacity

• Tension with existing stock investment vs new build• Impact on Repairs &Maintenance programmes

• Forced sale of high value voids• More partnership working

Active Asset Management

Declining NPVs of assets (some may go negative) More shared procurement and delivery

No longer tolerate poor financial performance Investment standards of major works reviewed

Create more efficiencies – reviews of in house

services, DLOs, structures and external contracts Opportunities for redevelopment, tenure conversion?

Build skills base of staff to actively manage a more

diverse portfolio Stock rationalisation – opportunities

Services

Cost management Project management Building surveying

Strategic asset managementPlanningHealth and safety

Sectors

Hospitality ResidentialRetail

InfrastructureData centresOffices

Asset Management

Operational challenges by Sean Tobin

Inflationary pressure

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

0

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013 2014 2015

% c

han

ge

Pri

ce

All in tender price index (TPI

Year On Year

Start of Recession Climb out Double dip Forecast

2007 2008 2009 2010 2011 2012 2013 2014 2015

Index 245 246 217 217 221 223 236 254 266

On Year 6.50% 0.40% -11.80% 0% 1.80% 0.90% 5.80% 7.60% 4.70%

The forecast

0%

1%

2%

3%

4%

5%

6%

2015 2016 2017 2018

Tender price change (as at 5th Dec 2014)

Contractors recovering loss

• Sub-Contractors on site frequently changing

• Lack of partnering ethos

• Payment delays to sub contractors

• Claims and inflated variations

• Cash flow (both for contractors and consultants)

• Contractors insolvencies?

Resources

• Skills shortages

• Recruitment

• Staff retention

• All levels

Value for money

• Lack of quality information – uncertainty on spend

• Cost over run

• Benchmarking

• Lack of performance management

• Lack of risk management

• Too many duplication

How can we manage inflationary risk in the future?

• Agree a realistic fixed price addition.

• Agree a part fixed sum with a separate client contingency

• Consider ways to engage the supply chain and mitigate wider risks associated with the recovery phase including incentives and risk reward mechanisms. For e.g. Sales/Overage agreements

• Talk to your Contractor, what’s their attitude to supply chain payment?

• Design procurement to attract the right capacity, not to drive a price.

• De-risk projects through design assurance and effective coordination.

• Additional vetting at just prior to contract commencement

• Select right team, right experience with key contact and relationships at a high level to deal with challenges

Workshop

Workshop

• Challenges

• Maximising efficiency

• Minimising duplication