HQN blog: Balancing the scales in asset management

A 'state of the nation' blog by Mike Victory-Rowe, Lead Associate for the Asset Management Network.

The world of social housing asset management has changed dramatically in recent years due to two significant events.

The first of these was the four-year 1% rent reduction, which is still playing out now. The challenge for housing associations has been to achieve cost saving to maintain a financially viable business. The sector has, largely, successfully risen to this challenge, but it has had to make substantial changes to do so. Whilst many have achieved savings through organisational restructures and redundancies and measures such as cutting community investment, in many cases the most significant savings have been achieved by cutting back on repairs and maintenance expenditure. According to the Regulator of Social Housing’s global accounts, the biggest reduction of all has been in major repairs investment.

Last month, the ratings agency Moody’s published a report looking at how housing associations have mitigated the financial impact of rent cuts through a range of cost savings and finds that over the four years of the government’s 1% rent cut (a net loss of £600m over the four years), about 70% of revenue lost in social housing rental income “is likely to be mitigated” through “significant savings” from repairs and maintenance and cutting jobs.

Then, one year ago this month, 72 people died in the Grenfell Tower fire, focusing minds on why property maintenance and investment is so important. As a bare minimum, this tragedy has prompted many housing associations to update fire risk assessments and review fire safety measures - but the majority have also taken a wider look at all compliance areas to ensure their properties are safe.

Social housing organisations have had no choice about reducing expenditure. Their core income has been cut whilst pressure to build new homes has increased. But the overriding responsibility to ensure tenants have safe and Decent Homes now and in the future has not gone away. It never did. Grenfell opened our eyes but should they have needed opening?

Here are some questions we all need to think about: How confident are you in your organisation's approach to asset management? What changes did you make in response to the rent cut, and are you confident that they stand up to scrutiny, especially in the wake of the Grenfell disaster and everything we have learnt from it? And is the data and business intelligence which underpins your asset management decisions robust and accurate, so that you have assurance that your decisions are based on the right facts and assumptions?

What you do next is critical. Your approach to asset management and property maintenance has a major impact on customer satisfaction, financial planning, social and community objectives and your relationships with key stakeholders. It’s about understanding your properties, communities and people. It’s about managing and improving the performance of your property assets based on really good data and business intelligence. It’s about recognising and managing the risks and the costs and delivering value for money. And most importantly, it is about ensuring safe, secure and sustainable homes for your residents.

Success will not just be achieved simply by putting in place a new strategy. Organisations will need to adopt an innovative and agile approach which is underpinned by strong strategic asset management and property maintenance, a robust understanding of current and future demands on your business, a commercial approach to understanding cost and decisions, effective leadership, the right skills and culture and the data and systems necessary for effective delivery.

My advice is to investigate the ‘what’ and ‘why’ of your current approach to asset management and property maintenance and then to assess where you are now and explore within your organisation where you want to be and show how you can get there.

The bottom line is to ensure tenants have safe and Decent Homes in places where people want to live. Appropriate levels of funding are crucial to achieving this.

For more information on the Asset Management Network, click here.