Housing Development & Asset Management … Joining the dots
As with build costs, repairs and maintenance costs continue to increase, putting pressure on Local Authorities’ Housing Revenue Accounts (HRA). The recent rent cap does not help either and with the nationwide funding constraints, Local Authorities will need to be creative in funding their asset management initiatives.
There will be even more pressure on Local Authorities with older stock which have not been adequately maintained and those with liabilities under the Fire Safety Regulatory changes. This is in addition to dealing with the pandemic of the housing crisis!
Regardless however, the statutory obligation to ensure homes meet the Decent Homes standard, and devoid of category 1 hazards under the Housing Health & Safety Rating System (HHSRS), has to be met by Local Authorities.
The same obligation applies to other Registered providers, but Local Authorities’ funding constraints & other housing-related costs, mean they must dig deeper to address their asset management challenges. Local Authorities will need to find means of ensuring every £ being spent, derives the highest benefits possible for both the Council and residents. We must find ways of getting the last drop of juice from our oranges! This article sets out pragmatic options to consider.
Poorly maintained housing, benefits neither the occupant nor the landlord. On a human level, homes must be safe and decent. Awaab Ishak’s unfortunate and avoidable death due to damp & mould is a case in mind (should never be allowed to repeat itself). From a benefits realisation perspective, it is of no use building new homes at significant expense, if we cannot maintain them adequately to serve their useful life.
The homes we build will be less of an asset without a proper asset management strategy. We are now having to play catch-up due to poor investment in asset management and as it stands, we cannot play catch-up based on business as usual. We must think creatively and join the dots!
Joining the dots….
1. Newly proposed developments:
Get the brief right - & with stakeholder involvement: For example, Housing Management involvement should not be a “bolt-on’’ process. Ensure the intended ‘product’ can be optimally & cost-effectively maintained.
Carefully consider your procurement strategy (i.e., procurement route, Form of Contract & Tendering approach): For example, D&B is only one of many procurement routes available. Is a Design, Build & Operate procurement route better for your specific project perhaps?
Why a 12-month Defects Rectification Period (DRP)? Will a 24 months DRP serve the Council better and assure better value for money?
Seek to get the benefits of product warranties: What is the point stipulating it in the Employer’s Requirements / specifications if your asset management team are not aware of them or will not refer to them!
Use your purchasing power to secure free/low cost extended warranties: Product manufacturers will be open to such negotiations where their products are being specified at scale.
Standardise your specifications to ease asset management: Consider ease of maintenance and ready availability of replacement parts. Think value, not just the initial capital cost.
Which is Value for Money to you?
Design-in maintenance access: Avoid unnecessary high cost of future provision of maintenance access.
Develop a workable maintenance strategy as part of design development: Avoid this being a “bolt-on’’ initiative. Your appointed Principal Designer can assist with options appraisal here also.
No more Joe blogs from 2025: Gas-fired boilers will not be usable for new builds (as part of the Future Homes Standard) and newer technologies such as ASHP. GSHPs, Heat recovery systems etc will need to be maintained. With so many products in the market (mostly from continental Europe), consider having in place a 3–5-year parts and labour maintenance plan.
What about the Building Manual (Health & Safe File and the O&M manual): Who has got these in your organisation? Why are they hardly ever referenced? They are key foundations of effective asset management.
Asset Information: Ensure a detailed and easy to reference asset register exists at project completion, pre-occupation. Supplement with relevant project information, including BIM (as applicable).
Do your bit or lose your product warranty cover: All warranties require the building owner to maintain the asset (including any required periodic servicing) for the warranty to be in force. Consider how best to do this (in-house or outsourced)
Invest time in on-boarding: Well-structured on-boarding of Housing Management staff re: the proper operation of the asset is invaluable. Same with the on-boarding of residents, which housing management can then better facilitate. Supplement with video/audio formats of the Home User Guide (HUG). Use QR code on metal plate affixed to an appropriate location in each dwelling for the HUG. That means it can be updated remotely , cost-effectively and will always be up to date. Effective on-boarding is even more important now with modern technologies being installed in homes.
Consider the real value of your Building warranty: For example, note the minimum claim value of NHBC warranty compared to others. Are you getting best value with NHBC? Similarly, does your warranty cover moving equipment such as lifts? Not all building warranties cover lifts!
Consider the most cost-effective and most impactful repairs & maintenance arrangements: Think about how much it costs per unit/annum to repair and maintain; on-cost for administration; resident satisfaction and one-time-fix rate targets; in-house or outsourced? Average overall running and repair cost published by the HCA in 2017 was £3,960/property/annum. That will be circa £5,000/property/annum today. For Housing Associations, within that is the cost of reactive repairs which varies widely subject to stock-age, stock type, specifications , etc but averaging £830/property/annum; & £309/property/annum for planned maintenance. That averages £1,139/property/annum for both planned and reactive repairs – excluding capitalised maintenance & major works. Limited information available on Local Authority spend on planned and reactive repairs suggests a similar spend profile. But is this really Value for Money?
Embrace planned maintenance as a strategy: Reduce reliance on reactive maintenance. It costs more in the longer term; fails to help optimise asset quality; undermines resident satisfaction; carries a higher level of risks; and can result in Public Relations issues for the landlord (for you, the Local Authority).
2. Existing Stock:
As the chart above shows, the default position with RPs is reactive maintenance (routine/day-to-day maintenance) over planned maintenance. This is false economy, and that fact is clearly demonstrated by the high resident dissatisfaction rates and higher than normal expenditure by landlords.
From the limited data available on English Local Authority expenditure covering planned & reactive maintenance (excluding capitalised maintenance works or major repairs) the profile is also reactive repairs-biased at approx. 70:30 Reactive: Planned Maintenance.
It is this ratio which needs to be recalibrated in a structured way to generate better outcomes for the residents and for the Council (including savings- potentially circa 25% on current spend profile). For a Local Authority with (say) 1000 Council Homes, this can equate to an annual saving of £285K!
There are ways the current reactive-maintenance-centric approach could be changed:
Consider procuring on the basis of price/property rather than price per attendance using a Schedule of Rates: This will require prior due diligence, robust asset register and clear justification to demonstrate Value for Money. Should be easy to benchmark against historical and projected spends based on price per attendance. The price/property approach will be an annual cap and will require a willing contractor, well-resourced to share the risk and drive a preventive maintenance regime proactively (as it will be a win-win for them, the residents and the Local Authority – & with better resident satisfaction).
Use your asset register to make the best of applicable product warranties & extended warranties: As with new builds, noted above. This could in fact be a negotiation tool with the contractor where years of product warranties apply on plant & equipment.
Manage information optimally: This is fundamental for effective asset management and for generating maximum benefits. Invest in an effective asset management software or develop a bespoke one which suits your needs.
Establish a Quality Management system for service delivery: This is as much a process management protocol as much as a service management facilitator. Essentially, create a repairs & maintenance system that can run on a conveyor belt & in synergy – assuring Value for Money, resident satisfaction and optimal asset management at each stage. Will also require implementing traditional housing management functions!
Finally, we must not forget to include in the mix of initiatives ( something often overlooked), the need to make developments fit for purpose, long-term.
Some of the costly asset management issues which precipitate residents’ dissatisfaction & complaints emanate from poor workmanship, specifications & oversight at the development phase & where asset management input was lacking. We need to join the dots….& start getting it right at the front-end too, if we are to ensure developments continue to remain fit for purpose. There is a clear business case for this… & guess what?…. it actually costs less, long-term.
Airey Miller is well positioned to assist Local Authorities, Housing associations and other landlords in ensuring their developments continue to remain fit for purpose, long-term and cost-effectively too.
Our work with the LB of Enfield and LB of Waltham Forest is a testament to our success. We commend both Councils for being forward-thinking, for joining the dots and setting up their asset management teams for success in optimising asset value. It is bound to result in higher resident satisfaction and reduced maintenance costs.
Everyone wins with our approach!
Please get in touch.
‘Kunle Awofeso, Director - Airey Miller - Kunle.Awofeso@aireymiller.com
