Optimising Life Cycles of Social Housing Assets

Strategically managing homes for positive social, financial and dwelling yield outcomes.

Ian AiyathuraiAccess Housing Australia Ltd

Government and Community Housing homes (assets) are ageing and declining in volume.

Assets are being managed on a run to eventual failure basis.

The competency of asset management is different to housing services. This needs to be addressed.

Social Housing Snapshot

“We cannot solve our problems with the same thinking we used

when we created them.”- attributed to Albert Einstein

Asset strategies need to consider life cycle planning to ensure optimum outcomes

(financial, social, housing yield) are achieved.

In the International Standard ISO 55000, asset management is defined as “the coordinated activity of an organisation to realise value from assets”.

Amongst other things, an Asset Management Strategy would typically include the decision making criteria that are used to undertake life cycle cost and risk analysis to

determine the optimum asset interventions (IS0 55001).

What ISO says about Asset Management

It is a broader view than just the maintenance of physical equipment.

Major airlines renew their fleet well before technical failure to maintain commercial viability.

They understand and proactively address their cost curve.

3 6 9 12 15 18 21 24 27

Airline Average Age

Cathay Pacific 8.6

Jetstar 9.4

American Airlines 11.1

Qantas 11.2

British Airways 13.8

United Airlines 15.7

Average Life Cycles (Years)Commercial Viability vs Life Cycle

Fleet Renewal Case Study: Airlines

Airline fleet renewal enables sustainable commercial viability.

Source: https://www.airfleets.net/ageflotte/fleet-age.htm

Life Cycle Cost Curve – Social Housing

State Governments and Community Housing Providers tend to hold assets over the entirety of their useful life on a run-to-failure asset model.

Maintenance interventions extend asset life but at the expense of commercial viability.

Maintenance Costs (New vs. Aged)

0

20

40

60

80

100

120

Tho

usa

nd

s

Age 0-15

Age 15-30

Significant increase in maintenance expenses as assets age!

Failure to renew social housing assets on a regular basis results in them eventually declining and exiting the sector without being replaced.

Regular asset renewal offers a mechanism to refresh the composition and location of assets, enabling the portfolio to stay relevant to evolving social, demographic and demand changes.

Implications for asset portfolios

Timely renewal results in replacement of assets well before the end of their physical life cycle, resulting in an increase in housing supply in the broader market which also helps to address housing affordability.

Implications for housing economics

Base assumption: In an ideal state ~$ 120 Billion of assets, ~300,000 housing assets

Implications – Ideal State*

Ideal State ~NumberAssets Under Management 300,000Annual Redevelopment Program 15,000

Likely Annual Impact * ~Number Value ~$Billion

Savings in long term maintenance spend Significant

Boost to Economic Activity (replacement spend) 15,000 ~5+

Increase in housing supply (new homes created) 15,000 Significant

Increase in housing supply

* current condition of aged social housing assets however limits marketability.

• Policy settings on assets to mandate life cycle management.

• New asset management competencies in social housing.

To deliver positive outcomes, we need:

Increased supply to the established housing market.

Increases in sales, developments, partnerships and activity.

Improved and sustainable cost positions.

This will result in:

We cannot solve our problems with the same thinking we used when we created them.

Proactive Life Cycle Management enables:

• ongoing re-alignment of portfolios to meet changing demand;

• improved resident experience;

• increase in housing supply;

• assets to remain in an optimum age range;

• renewal whilst replacement is still viable; and

• reduced maintenance exposure

In Conclusion

Questions

Thank You

Ian AiyathuraiChief Financial OfficerAccess Housing Australia LtdP: (08) 9430 0900E: ian.aiyathurai@accesshousing.org.au