Hqn the governor april 2014 by HQN Limited

Governor the

HQN'S MAGAZINE FOR BOARDS, EXECUTIVES AND LEADERS

APRIL 2014

Forward to St Helena We imprisoned Napoleon on this island is it set to be the first ALMO overseas? What providers need to do on VfM HQN's new board game The dilemma triangle

hf:expert

Value for money in 2014 The HCA is raising the bar... The VFM standard will be tougher – we show you exactly how to pass it Tuesday 13 May 2014 Wednesday 14 May 2014 Thursday 22 May 2014

Manchester Bristol London

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The HCA is raising the bar on VFM in 2014. They say they will be tougher. Last year nearly 180 landlords failed some or all of the test.

• Demonstrating savings now and in the future

Will more of you get marked down this year? No. HQN has put together a programme that makes sure you will pass.

• Integrating VFM with your corporate objectives

Our workshop will give you straightforward advice to make HCA letters a thing of the past.

• Demonstrating social returns.

Costs: Workshop: £175

• Ensuring quality is maintained

Discounted rate for Housing Quality Network Members and all specialist network members: £159 The fee includes refreshments, lunch and a detailed e-information pack. Please inform us in advance of any special dietary requirements.

• Communicating with stakeholders

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Our line-up of experts and practitioners

Timings

Follow our advice and meet the VFM standard. Our line-up of experts and practitioners includes:

Registration Start Finish

Find out the mistakes to avoid: we are helping landlords recover from downgrades and respond to partial compliance letters.

• Alistair McIntosh, Chief Executive, Housing Quality Network

Who are we?

Hear how to plug the gaps: guidance, advice, and best practice on:

• Ian Parker, Lead Associate, Housing Finance Excellence Network.

Learn from the best: Ian Parker and Alistair McIntosh have worked alongside providers that won praise from the HCA.

• Calculating your return on assets • Showing how you compare to others

Case studies from trailblazers: practitioners who have got it together on VFM will demonstrate their approach.

10.00am 10.30am 4.00pm

Fast, practical guidance on everything to do with housing. HQN provides high-quality advice, tailored support and training to councils, ALMOs, housing associations and other housing providers. Find out more about us and our network membership by visiting www.hqnetwork.co.uk or call us on 0845 4747 004.

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HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

IT WAS SUPPOSED TO BE SO EASY… Grant Shapps tried to do away with regulation. He wanted to make the TSA toast. Well if the TSA was warm brown bread, then the HCA is Ryvita. It has gone on the most successful diet the world has ever seen and shed a few million pounds. There is just one tiny flaw. The HCA’s powers are far in excess of their capacity to use them. Do you remember when inspectors used to give out star ratings? Housing associations just could not get to grips with it. They kept getting rotten scores. I think we are back there now with value for money. The HCA says that about 180 associations fell short of the mark on VfM. That is the sort of failure rate we saw at inspection. But VfM should be a much easier test. You just have to send in a schoolboy essay. I have looked at lots of the VfM assessments. You get some landlords that really don’t have a clue about what they cost or how to manage their assets. I am in shock. It’s the worst performance I have seen in over 30 years in housing. What on earth were the chiefs and boards thinking of when they signed off the papers? Will we see a cull of the top brass? No. That’s where the Ryvita thing comes in. Landlords are saying that the HCA just did not read all of the paperwork. They didn’t have enough people to do the job. This is why a lot of landlords think they passed the test when the HCA says they failed. If the HCA had only looked at everything then they would have passed, or so the argument goes. One wag sums it up nicely: “At least the Audit Commission read all your stuff before jumping to the wrong conclusion.” Do I buy this? I’m not convinced. No one has read more of these VfM statements than me. I wouldn’t give pass marks to many of them. Still, I am sure everyone will learn the rules and pass the test in 2014. And it could be the least of your worries. The HCA is starting to get tough on gas safety. You will have seen the downgrades because of this. Is this the next big witch hunt? It doesn’t have to be. Let’s take two landlords to show how this works. Both have got a big problem with gas safety. The first landlord tries to brush it all under the carpet. One way or another the HCA gets to hear about it. They throw the book at that landlord.

ContentS 3

It was supposed to be so easy... Comment by HQN Chief Executive Alistair McIntosh

Three little words... Why are so many social landlords struggling with the regulator’s demands over VfM?

Grip of iron Can a new game help boards keep a grip on their businesses?

The eternal triangle A strong approach to VfM is more important than ever, says Sovereign chief exec Ann Santry

“My business is to succeed…” Andy Crowe runs the housing service on the remote island of St Helena

Some clouds on the horizon The regulator's views on risk

A professional job? Can housing still attract skilled board members for free?

Doing OK? MPs want to know if the regulator is looking after tenants effectively From the press Our regular round-up from the world press’s view of governance

Big deal Mumsnet Social engagement Blitz Spirit

How does the other landlord go about things? It spots the problem and talks to the HCA straightaway with a clear plan to sort things out. The HCA takes a much more reasonable approach. It might be possible to avoid a downgrade. This is the good side of the Ryvita. The HCA knows it is short of staff. It can’t see everything that is going on. It really wants you to say when problems are on the horizon and it will reward you for it if it can. It took years to get round the issues with the Audit Commission. The smart boards will work out quickly what they have to do to stay on the right side of the HCA. Sort out VfM and keep it in the loop on safety. You would have to be pretty dumb to get caught red-handed by the world’s smallest police force.

Alistair McIntosh Chief Executive, HQN

All articles in The Governor were written by Kate Murray unless otherwise stated. Designed by Paul Miller

Prontaprint Scarborough

Print management Turnstone Media & PR (www.turnstonemedia.co.uk)

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

THREE LITTLE

wordS If there ever was proof that three simple words can be invested with a whole raft of political significance, then consider value for money.

So why, given this ramping up of the rhetoric, have the regulator’s demands on value for money caught many social landlords, if not napping, then only half awake?

We’ve heard all sorts of rhetoric around VfM in housing over the last few years. There was former housing minister grant Shapps maintaining that the high salaries of senior housing association staff needed to be looked at to see if that was a ‘good way for a social business to spend money that is provided through the hard work of taxpayers, and the rents of tenants’.

Part of the problem is, of course, that value for money in housing means much more than the headline-grabbing comments of ministers past and present. For politicians and think tanks with an eye on the surpluses and assets of social landlords, it might look clearcut: cut away the fat, sell off those expensive homes, do more for less. But for housing providers, value for money is as much about the value bit as the money bit. Demonstrating that you’re providing the services your communities need and want – and that they’re not a luxury – has to be part of the equation too.

Then there was the Policy Exchange’s influential report back in 2012 which urged the sell-off of high value social housing and suggested that housing associations – which had ‘a responsibility to use scarce resources appropriately’ – should engage with the idea if they wished to retain their charitable status. A version of that idea has, we now know, made it into the Homes and Communities Agency’s new funding prospectus, with organisations which bid having to set out how many properties they will sell to fund development and justify why they are not selling more.

Many social landlords have been struggling with the regulator’s demands over value for money. What’s been going wrong?

Certainly the HCA’s regulatory framework recognises the diversity of providers’ operations and stresses that it wants to see from an organisation that it is delivering VfM in an ‘appropriate manner for its business’. So there’s some flexibility there for providers to move beyond the efficiency soundbites and prove the value of what they do. Nonetheless there are still some pretty clear requirements which must be met.

Ramping up the rhetoric

Transparent and accessible

We’ve also seen another ex-housing minister, Mark Prisk, up the stakes on value for money, setting out what he called a ‘something for something deal’. Providers which wanted grant, he said, would need to be ambitious in their plans to maximise their own contribution to development schemes, with a ‘rigorous approach’ to efficiency.

The regulator says the annual self-assessment which providers must publish needs to be robust and should set out ‘in a way which is transparent and accessible to stakeholders’ how they are achieving value for money. And it’s that self-assessment which is crucial in demonstrating compliance with the VfM standard.

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HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

As the HCA puts it: “The regulator will focus on the provider’s published self-assessment on VfM as the key area for its assessment.” Many providers fell at the first hurdle. According to HCA executive director of regulation Matthew Bailes, only a ‘small minority of providers have really risen to the challenge of the new VfM standard’. Most have got ‘some of the way there’ but will need to do better next year. Then there are the 15 which have been downgraded for either failing to publish their self-assessments on time or for failing to produce a robust self-assessment that sets out to stakeholders how they are delivering value for money. Among the downgrades are some big fish, like gentoo, Peabody and Fabrick.

Doran, the HCA’s assistant director of regulatory operations, told HQN’s housing finance conference in January, that much of what she had seen in the self-assessment process was not as good as it should have been given the progress in the sector. “The kind of things coming back I don’t necessarily recognise as the sector I know,” she said. “I know lots of organisations do very intelligent and meaningful things but I don’t think that’s always come across.” Some providers have complained that they were confused by the demands. But should it have been that tough? As Ms Doran said: “A lot of this is about transparency and accountability – making it easy for stakeholders to see how your organisation is doing. In the next round providers can be a bit smarter about this. It’s not prescriptive – but it is pretty clear.”

Intelligent and meaningful Many would argue that the downgrades are not a fair reflection of the good work providers have been doing on value for money. Yet sector-wide, it seems providers are not yet good at getting that across. Indeed Karen

And if they don’t? Value for money in housing is a more complex and multi-faceted thing than the soundbites have ever suggested. But if providers can’t get to grips with the current framework, they may find the environment becomes more demanding, more prescriptive and above all more hostile.

gETTINg IT RIgHT – WHAT PROVIDERS NEED TO DO • Be clear about costs, return on assets and VfM gains • Give evidence of savings – and where the money is being re-invested • Set targets for improvement in areas where costs may seem high

• Use data to compare eﬀectively with other providers • Be clear about the impact of higher cost, but important, services on the business • Give evidence of targets and achievements in delivering real social value

• Set out the information clearly and positively – but without making unfounded claims • Make sure the self-assessment is readily accessible – when it should be.

HQN’s analysis of value for money self-assessments can be found at www.hqnetwork.org.uk

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

GRIP OF

iron The HCA wants boards to keep an iron grip on their businesses. Can a new game help them do just that? Imagine you’ve got a bit of prime development land. Do you sell it for £1m? Team up with a local developer and get a few affordable homes out of the deal? Or take a £10m risk and develop the site alone, reaping all of the rewards if and when the scheme sells well? And should you shut down your building division and make all your staff and apprentices redundant, or invest an extra £1.2m in the hope of landing new work? Then you’ve got to decide whether to shed one in 10 of your housing association’s junior jobs – or a single director’s post in an already tight senior management team. And what about that merger approach from another association which risks getting you in hot water with your local council? Now imagine you’ve got to take all of those decisions in a morning. That’s the situation which faced two teams of experienced board members and senior executives when they volunteered to test out a new tool to help housing organisations negotiate the risks they face in these challenging times. Iron grip has been devised by HQN as a way for boards to hone their decision-making and risk management skills by steering the fictional Anytown Housing Association through a series of very plausible dilemmas.

“IT’S CRISIS TIME ALL ROUND”

“The Homes and Communities Agency talks about associations needing to stress-test their organisation against multiple scenarios,” says HQN chief executive Alistair McIntosh.

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“What we are trying to do is replicate the crises an association might face in as safe a way as possible. No one dies, no one gets downgraded – but you do get to see how the decisions you take might cause further problems and reputational damage down the line.” Once the two teams testing out the game get to work, there’s plenty of heated debate, some razor-sharp questioning – and a little bit of light relief – as they work out which way to take their new association. Will they keep their strategic objectives in mind as they wrestle with the decisions out in front of them? How cautious should they be? For one of our teams, taking on the development scheme alone soon becomes a no-brainer, after one of their number asks: “How hard is it to sell homes in prime location? How risk averse do you need to be with a good site?” In the other team, the more cautious approach prevails, and they decide to sell the site and forfeit the potential surpluses. Every decision the teams make is fed into the computer, so that the financial implications of going for that new development, or turning down that merger, can be seen as the day progresses. By the time they’ve worked through their first series of dilemmas, they’re told they’re in danger of breaching their loan covenants as the economic environment worsens. And a series of extra problems are thrown up as a result of the decisions they make. There’s interest from the housing press when they opt to pay off a director as part of their central services review and the discovery of a colony of bats holding up that second new development they’re contemplating. “It’s crisis time all round,” says one team member as they look to balance their budget, while maintaining services

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

and support for residents struggling with welfare reform. Both teams show their mettle when it comes to decisionmaking. As one participant says when they’re discussing their fictional cuts: “It’s about how strong the board wants to be – we’ve got choices and we have to make difficult decisions about services not being at the level we might ideally want as that just isn’t realistic in the current environment.” There’s even an element of ruthlessness – ‘kill the bats’ is one of the more flippant suggestions of the day. But mostly, the participants agree as they come together to discuss the day, they are able to pull together to make decisions in the best interest of their organisation. And mostly they feel they have balanced their business decisions with the core values and ethos of the association

they are supposed to be running. “You can’t do things entirely from the heart – but you can’t leave your heart out when making decisions with your head,” is how one participant puts it. Neither of the teams ends up steering their organisations into financial catastrophe – despite both deciding against the merger which might have cushioned them from the worst of their financial problems. And the verdict from the teams? Making their decisions, even when you’ve faced similar dilemmas before, was both challenging and enjoyable and stretched them in new ways outside of their usual board settings. “It’s a reminder,” says one, “that things can be all rosy one minute – but one bad decision and everything changes.” For more details on Iron grip, contact Anna Pattison on anna.pattison@hqnetwork.co.uk or 01904 557197

WHO TOOK PART: Suzy Brain England, OBE, chair, Derwent Living Keith Ramsay, Incommunities Group (chair, commercial board) Amanda Garrard, managing director, east, Together Housing Group and board member, Leeds Federated Housing Association

Howard Roberts, executive director, business resilience, Helena Partnerships (and who was put on the board at Cosmopolitan to assist with the turnaround) Andy Orrey, chief executive, North Lincolnshire Homes, and board member at Leeds and Yorkshire Housing Association

Bob Barr, board member, Helena Partnerships Ingrid Fife, chair, Halton Housing Trust Lesley Burrows, chair, Calico Group Mike Birkett, chief executive, Calico Group

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

The choices housing providers are grappling with can sometimes seem fiendishly complicated. But Sovereign chief executive Ann Santry has a neat way of distilling them into one simple diagram. Her dilemma triangle – with quality at one point, quantity at the next and affordability at the third – makes plain the factors big developing associations like Sovereign need to weigh up when they want to build new homes in these challenging times. “The country needs more new homes, we are encouraged to build new homes and we want to do that,” she says. “But we do want rents that really are affordable to people in the greatest need and that’s becoming more and more challenging.” From modest beginnings as an early stock transfer in West Berkshire with some 7,000 homes, Sovereign has become a significant force with 37,000 homes across the south and south west. Development has always been a strength at Sovereign, says Ms Santry, and the association is currently building around 1,200 homes a year. But with grant rates shrinking, and the full impact of welfare reform still uncertain, all associations are having to look long and hard at their future development – and Sovereign is no exception. The spectre of welfare reform “There’s no doubt that the world we are operating in is more complicated. We are in a much riskier environment,” says Ms Santry. “For us, the number one risk is the spectre of welfare reform on the horizon.” In particular, she warns, the impact of Universal Credit and any potential change to the benefit change could hit developing associations hard.

“If the cap goes down to £21,000 [as george Osborne is reported to favour], we just won’t be able to develop new homes. Our capacity, like all housing associations, is finite,” she says. So, how then, are associations to continue delivering on their core mission for as long as they can – which for an association like Sovereign, working in expensive parts of the country, means producing affordable homes for those who need them? For Ms Santry, the key is to be as efficient as possible, an approach she says her association has had before VfM became a buzzword. Critical mass “Value for money has underpinned everything we have done in recent years, even if we didn’t necessarily say that was what it was,” she says. “We could see the business could be better structured.” Sovereign’s efforts have focused in a number of areas. One of the most significant has been stock rationalisation. When Ms Santry took over as chief executive in 1999, the association had 10,000 homes in more than 70 local authority areas. Now it has more than three-and-a-half times as many – but in fewer than 60 local authority areas. Its first stock rationalisation, in Cornwall, came about, says Ms Santry, because ‘we didn’t have the critical mass in Cornwall, and we would never have the opportunity to build that critical mass’. That process of ensuring the association has the right geographical ‘footprint’ continues, as does a focus on asset management, looking at the stock portfolio and where it’s sensible to invest. Investment in communities There has been concern in some quarters about the

THE eternal

triangle

Housing associations are having to make some tough decisions. That means a strong approach to value for money is more important than ever, Ann Santry tells The Governor 8

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

encouragement to housing providers, seen most recently in the Homes and Communities Agency’s grant prospectus, to sell off their higher value stock to fund more homes elsewhere. But Santry is pragmatic. For her, the right asset management choices might be more likely to be about replacing low density sheltered housing with new homes, for example, than selling off all the best stock ‘in communities where we have invested and want to continue to invest’. “Associations are independent business and they have choices,” she says. “The government through the HCA prospectus is suggesting we should look at asset sales but there is no obligation. We are big property owners and it is perfectly reasonable that we should look at our stock and make choices – but they are our choices.” Another prong of Sovereign’s approach to efficiency has been a restructure, collapsing its group into one legal entity. This has then allowed it to look at costs in areas like back-office and in-house maintenance and these, together with procurement efficiencies, have delivered savings of some £16m over three years. Business model ”All businesses, whether in the public sector or private sector, have a responsibility to be as efficient as possible,” says Ms Santry. “If you are efficient, you generate a surplus and frankly we are in good position as housing associations as anything we make goes back into business. As a business model, housing associations are fantastic and we are able to make choices.”

people from the private sector. It’s a move that has helped speed up necessary changes, she believes. “We have tried to attract people from the private sector who can enhance what we do. What that’s done is bring in new ideas – some of which are a bit racy but many of which have added value and challenged what we do,” she says. “But fundamentally we are still social business. We do things more commercially than we used to but it hasn’t changed our culture.” Her own leadership style is to cultivate the talent around her to help her ensure Sovereign can continue to carry out its social mission. “Ultimately as a leader you can’t have all the ideas or all the answers. You need to work with a talented bunch of people,” she says. “I’m the guardian of Sovereign; I didn’t create it. I need to make sure the organisation stays fit for the future so that it can continue to do the things it wants to do.”

“THERE’S NO DOUBT THAT THE WORLD WE ARE OPERATING IN IS MORE COMPLICATED. WE ARE IN A MUCH RISKIER ENVIRONMENT”

AFFORDABILITY

Housing associations have moved on, she adds, but they can still hold fast to their special mission. Her own organisation has brought in a number of

Ann Santry

QUANTITY the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

HE’S BEEN VERY CLEAR THAT HE’LL ONLY BE BORROWING THE BEST FROM UK HOUSING POLICY

Andy Crowe as Napoleon

“MY BUSINESS IS TO ” SuCCeed... It’s one of the most remote and beautiful places on the planet. But St Helena has its share of housing problems and is looking for new ideas to help sort them out, as Alistair McIntosh explains 10

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

great news, i thought, we’ve won a job in St Helena. But what’s the snag? The only airport won’t be open for a few years. That’s torn it.

In his spare time he has been developing plans for up to 350 ‘exemplar’ homes without an on-island architect, surveyor or engineer.

St Helena, which lies more than 1,200 miles off the coast of Africa, has always been hard to get in and out of. That’s why we forced Napoleon to move there. You’ve got to say that it’s a tough place to use as a launch pad for a war in Europe.

It's an exciting challenge. What would you take to an island that’s had none of the baggage of new initiatives, launched with a fanfare and then quietly dropped, or patched-up policies that we’ve seen here over the last few decades? That needs to fund new homes, bring its existing stock up to scratch and help both those who want to rent and those who want to get on to the housing ladder?

Andy Crowe now runs the housing service there. When he’s not doing that he has a sideline as the island’s number one Napoleon impersonator. It’s a big change from his days as a housing inspector in the UK. But he really wants to bring the housing service up to scratch. There are only about 200 homes under his remit – but there’s a lot to do. The homes have got to be overhauled. They need an incredible amount of work doing to them. How can you pay for that when the rents are so low? Tenants are paying an average of £16 per week for government homes. But just like in remote parts of Britain, it costs more to fix things when they do need major work. You need to bring all of your building materials in from South Africa or the UK by boat. It looks like rents will have to go up. But there is no housing benefit system to help people on low incomes. Andy is working hard to put one together. I’m not so sure that he’ll be borrowing our bedroom tax idea. He’s been very clear that, starting with a blank sheet of paper, he’ll only be borrowing the best from UK housing policy.

The government in St Helena has asked us to see if a stock transfer or ALMO would work. Right at this moment the low rents and high costs of work may well rule out a transfer. It would need a huge dowry to make it stack up. An ALMO might be the right answer. It would unify the service and start to get to grips with the problems. If it did as well as the English ALMOs we could see real progress. It would give us time to get the benefit system sorted out and begin working on the homes. Once the business was on an even keel it might be the time to think about transfer. The airport should help too. It will bring more tourists and money to the island. It should mean more jobs for local people. If they could pay a bit more in rent it starts to get a lot easier to fund the work to homes that we need to see. I’ll keep you up to date with my weekly Skype calls to Andy. "My business is to succeed, and I'm good at it." Napoleon

ST HELENA AND ITS HOUSING St Helena, a British overseas territory, was uninhabited when it was discovered by the Portuguese in 1502. Access to the island is currently via the Royal Mail ship St Helena, which sails between Cape Town, Ascension Island and St Helena. In November 2011, a contract worth some £240m was signed to build an airport on the island – a development which is expected to bring in some 30,000 tourists a year.

The population, currently 4,500, is now rising for the first time in many years – and rents in the private sector and house prices are going up as a result. Houses can now sell for more than £100,000, beyond the means of most local people, and rents of £400 or more a month are now common for private sector two-bedroom homes, compared with an average of around £66 for a government home.

There are some 70 households on the waiting list for government homes and although the government says it would like to build more, it says it has to balance that with other priorities such as its hospital, police and fire stations. Planning permission has been granted for a first development of at least 60 homes and an international design competition has produced a plan for sustainable homes to be built almost entirely from local materials.

St Helena has now adopted a national minimum housing standard for its government homes – but only eight meet the required target so far. It has also been looking at other areas: a rent guarantee scheme, criteria for its housing register, options to help first-time buyers onto the housing ladder and ways of improving tenant participation on the island. KM

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

SOME CloudS ON THE HORIZON The need to manage not just risk but multiple risks has been the key theme of the regulator in recent times. So it’s not surprising that its new assessment of the financial state of the sector goes big on the ‘R’ word. The sector is, the HCA says, financially robust overall – but understanding and managing an increasing range of risk will become even more crucial in the months and years ahead. Some of the risks the regulator identifies are not new: managing debt and finance risk or development programmes may be increasingly complex today, but essentially they are an extension of what associations have been doing for years. But there are newer challenges: the affordable rent regime, as well as changes to rent setting, welfare reform, and diversification into new areas. It all adds up to an environment where providers will need to be prepared for change, according to HCA director of regulation Matthew Bailes. Changing economic conditions “While the sector continues to perform well, low interest rates play an important role in these figures, so providers need to ensure that they can manage higher costs of debt and any impact on sales if and when interest rates go up,” he said when the global accounts were released in March. “And the sector must manage the risks arising from an increased level of development activity that will largely be funded through debt and cross-subsidy from sales. The sector needs to be prepared for changing economic conditions and potentially adverse changes to the operating environment – it is vital that boards effectively

the Governor APRIL 2014

manage and mitigate an increasingly broad range of risk exposures.” Evolving risk So where does the regulator see risk evolving? Key concerns are volatility in the finance market. More than £18bn of debt is subject to variable interest rates – and if rates do rise to pre-credit crunch levels, that would mean an increase in costs for the sector of some £800m a year. And with the capacity of lending from banks limited and more providers turning to the bond market, there are ‘different risks and different challenges’ to manage, the HCA says. Then there’s exposure to the housing market. Nearly a quarter of the total surplus recorded by the sector in 2013 came from surplus on the sales of fixed assets (£466bn) – so any shift in the market will have a big impact both on the cross-subsidies available for new homes and to cover interest costs. Add to that welfare reform and rent policy with their potential impact on cash flow. Even on this year’s global accounts – for the period before the bedroom tax kicked in – the proportion of bad debts reported as a percentage of gross rent increased by 8.1%. So a strong financial performance again by providers – but some clouds on the horizon. All of which allows the regulator to stress its value for money message once more. It’s a message that will become ever louder in the months and years to come.

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

NUMBER-CRUNCHINg

WHAT THE REgULATOR SAYS:

Turnover has increased by £1.1bn (8%) to £14.9bn (2012: £1.1bn and 9%). Of the increase 37% was attributable to stock transfer providers (2012: 31%) and 63% to traditional providers (2012: 69%).

on risk: “The sector needs to be prepared for less benign economic conditions and potentially adverse changes to the operating environment. It is essential that providers can effectively manage and mitigate an increasingly broad range of risk exposures. In this context, the challenge for providers is to fully understand the interrelatedness of different risks and have strategies in place to mitigate the ﬁnancial impact of the simultaneous crystallisation of multiple risks.”

The operating surplus of the sector increased by 19.5% (£629m) to £3.8bn and the operating margin increased from 23.4% to 25.9%. The surplus after tax for the sector totalled £1.9bn compared to £1.8bn in the previous year. The Gross Book Value of housing properties increased by £7.4bn (6.3%) to £126.0bn. In 2013 the total grants (social housing grant and other capital grants) reported on the balance sheet increased by £1.6bn (3.6%) to £45.4bn. Total debt increased by £3.6bn, to more than £52bn. The sector is increasingly accessing bond markets with £3.2bn of bonds issued in the year. Reserves increased by £2.7bn, to £23.3bn. As at March 2013 the sector had re-invested £11.9bn, or 82% of its revenue reserves in the acquisition and development of fixed assets.

on surpluses: “The sector has demonstrated a strong financial performance in recent years. This is projected to continue in the future, with a forecast retained surplus of over 10% of revenues in each year. The sector is forecast to continue to grow its surpluses with revenues rising at a faster rate than operating costs. This offsets the impact of increased interest costs as a result of an anticipated increase in effective interest rates and additional borrowings.” on costs: “With increased focus on diversified activity, welfare reform, new funding streams, income volatility and Affordable Rent, it is important providers continue to control their cost base. Delivering efficiency savings or providing enhanced services for the same money will be increasingly challenging for the sector, especially as it comes under greater scrutiny.” on value for money: “The majority of providers sought to address the specific requirements of the standard to some degree. However, the extent to which they did so varied significantly. Some self- assessments provided external stakeholders with sufficient information to reach an informed judgement about all aspects of a provider’s performance against the expectations of the standard. However, many others were less transparent, and had evidence gaps which would make it more difficult for an independent observer to reach an informed conclusion on one or more of the standard’s requirements.” Source: 2013 global accounts of housing providers, HCA

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

As boards professionalise, can housing still attract highly skilled board members who want to give their time for free? When Janet Davies advertised for four new board members for her housing association, she was astonished with the response. “We had 50 or 60 responses and I did the ﬁrst sift, expecting to be able to eliminate a lot of them,” says Ms Davies, chief executive of Women’s Pioneer Housing. “But there were about 40 fabulous applications. We saw some real high-ﬂiers and we have ended up recruiting four really special individuals.” Her new recruits are a solicitor and director of business operations for the Crown Estate, a judge, a former global head of sales for Shell aviation and a communications consultant who has worked at British Airways, Deutsche Bank and the BBC. It’s a crop of talent that gives a lie to the view that a smaller housing provider like Women’s Pioneer, which doesn’t pay its board members, can’t attract the same high-level skills as the increasingly professionalised boards of larger housing organisations.

“People are out there and they are willing to help. You just have to pick the right communication channels to reach them,” says Ms Davies. “There are lots of good people out there who just need to be identiﬁed.” There’s no doubt that in an increasingly complex and risky environment all housing providers need to ensure they have the right people on the board. Of course that doesn’t necessarily mean there’s no place in housing governance for the voluntary ethos. But the national debate would sometimes suggest otherwise, both in housing, where professionalisation is often seen as the obvious answer to the growing demands on boards and potential diﬃculties in recruitment – and beyond. Take for example education secretary Michael gove’s criticism of ‘local worthies’ on governing bodies as he called for governance in schools to be modernised. “We cannot have a 21st century education system with governance structures designed to suit 19th century parochial church councils,” he said.

A proFeSSi 14

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

Of course, schools, which until recently exclusively sat under the control of local authorities with their own governance back-up in case of problems, are different from stand-alone housing associations where board members have always had full responsibility for their organisations. Nonetheless, it could be argued that the ‘local worthies’ Mr gove castigates are not so far from the caricature of the old-style housing association board member ill-suited to the demands of the modern housing business. Paying competitive rates, so the argument goes, is the only way to attract the best board recruits in a competitive ﬁeld. Yet smaller housing associations like Women’s Pioneer can clearly attract high-calibre volunteers. And many believe it’s their smallness itself that can be a positive factor. “We had some people with really senior demanding jobs who could see how much commitment we were asking for and they were saying to us this is manageable,” says Ms Davies. “I wonder whether with some of the board jobs in bigger organisations, you’ll have time or travel commitments that make them a bit harder to take on.” John Delahunty, chief executive of Innisfree Housing Association and chair of the g320 group of smaller housing associations, says many high-ﬂiers prefer to give their time for free to smaller organisations. “I don’t see a problem for smaller organisations in managing to go forward and continue to have really

good governance,” he says. “It’s not the case that you can’t get people with the right skills to govern an organisation either because they are not paid or because it is too small. There will always be some people whose taste is to give their time to a bigger more corporate organisation. But there are very many highly skilled and highly able people who make a positive choice to go for an organisation for its immediacy and closeness to its mission.” It’s that sense of organisational agility that’s a real attraction with small organisations, Mr Delahunty believes. And just as he enjoys his own chief executive role, with its mix of strategy and more hands-on work, so voluntary board members at small organisations get to do the high-level strategic stuff but with more proximity to the frontline. “There is more of a closeness,” he says. “Board members are able to see more readily how the mission of the organisation is being delivered. There is an immediacy of being able to see with an injection of governance what comes out as a result of your input.” Ms Davies too believes good potential board members like the clarity of purpose in a smaller organisation. Then, just like her new recruits, they feel they can throw themselves in 100%. “These are people who are taking it incredibly seriously and not just dipping in and out,” she says. “I’m already feeling they are adding a huge amount of value.”

onal JoB? gOVERNANCE INTO THE FUTURE: SOME PERSPECTIVES “Increasingly people are beginning to understand that the job of governance itself is a particular skills set. It’s not so much whether you’ve worked in the private sector or been a captain of industry, but whether you really get the role in helping to shape the business and holding the executive to account.” david orr, chief executive, national Housing Federation “Being a board member now is harder than it was. Having a hugely skilled board like Peabody’s makes life a bit easier because it’s very complex stuff we’re dealing with these days.” Malcolm levi, vice chair, peabody trust “There are people who want to make a contribution. It’s not always about being in the immediate locality – there’s no single dynamic. But we do get the quality and depth of people.” John delahunty, chair, g320 group the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

DOING

oK? MPs want to know if the regulator is looking after tenants effectively. What can it tell them?

MPs were blunt. In their view, the housing regulator considers looking after tenants’ interests as a distraction from its main job of looking after the money. That verdict from the Communities and Local government select committee, published last autumn, came after Homes and Communities Agency regulation chair Julian Ashby had been given quite a grilling by committee members on the consumer standards side of his job. Was it true, he was asked, that a layperson might say of the HCA, ‘hold on, here’s a body which is simply rubberstamping and saying that everything is OK’? To whom should tenants look to protect their interests? Hadn’t the changes in regulation led to a situation where tenants were in a ‘substantially weaker position’ than they had been before? Consistent response The HCA has had a consistent response to such questions. As Mr Ashby pointed out, its remit is not what it once was – and it can’t be expected to go beyond its new boundaries. “Our power to monitor the effectiveness with which landlords are undertaking the consumer standards was removed by the Localism Act,” he told the select committee. “It has left us with two specific roles: one to set standards and the other, which is described as a backstop role, to take action where there may be systemic breaches leading to serious detriment.” Nonetheless, MPs were seemingly not impressed that for more than 400 complaints over the consumer

FROM THE

preSS Ever wondered how to get your team to have more ‘eureka’ moments? It’s all down to understanding the brain better, People Management tells us. Reporting on a Chartered Institute of Personnel Development study, the magazine says ‘embracing neuroscience’ can help staff innovate. Recommendations include using critical thinking tools and training programmes that ‘unlock

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employee insight and intuition’ and drawing on the example of innovators like Einstein and Apple’s Steve Jobs. National Sickie Day – the Monday in February when more employees call in sick than on any other day of the year – may sound like a bit of a joke. But it’s a potentially costly one, Management Today reports. It quotes the Employment Law Advisory Services’ estimate that the day costs employers around £34m. But according to Cary Cooper, professor of organisational psychology and health at Lancaster University, there’s room for a sympathetic approach. “Smart bosses know when to show a little understanding – when to say, ‘OK, take a day off, just don’t abuse my trust’,” he told MT. Meanwhile the sickie problem more widely is down to staff who actively hate their jobs,

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

standards not one – at the stage when they took evidence – had been judged to be a case of serious detriment. “Are you just as complacent looking after the interests of tenants as you are in managing the financial viability of housing associations?” asked Mark Pawsey MP. Confusion Fast forward a few weeks, to the HCA releasing its review of the way the new regulatory regime was working on the consumer standards side. The HCA had already conceded, in its formal response to the select committee report, that it was aware that there was a ‘confusion’ between its role and the way in which complaints were dealt with by housing providers themselves, local scrutiny and the ombudsman. But it was confident, it said, that the review would ‘help stakeholders understand the role of the regulator under the new legislation’. So how does that claim hold up? Does the HCA review bring new clarity to the regulator’s role? Certainly there are examples of what the regulator is looking for – and more often what it’s not – when it decides whether it will intervene on the consumer side. But you can’t help but feel the review won’t allay parliamentary concerns. As the regulator underlines, the threshold for regulatory intervention on consumer standards was always intended by government to be ‘significantly higher’ than for the economic standards. “Failure to meet one or more of the consumer standards does not in itself lead directly to a judgement of serious detriment by the regulator,” the review says. “As set out in the regulatory framework, we consider that the

according to a Work Foundation study reported in the Mirror. Disengaged staff are three more times likely to call in sick and four times more likely to quit their jobs than their engaged colleagues. A ‘whole cadre of women who broke through’ has been poleaxed by the government in its changes to the way quangos are run. Writing in the Guardian, Polly Toynbee says the government has shown ‘remarkable disregard for good governance’ by removing chairs of quangos after three years. “A chair takes time to settle in, to first understand an organisation and then to grasp its levers and set it on course,” she says. “An effective chair is not, as the government suggests, ‘a mere figurehead’, but a guarantor of good management.” Particularly shocking she says, is the loss of women chairs,

meaning of serious detriment is when there is risk of, or actual, serious harm to tenants.” In the one case identified in the period up until the review, centring on gas servicing, there was a clear breach of gas safety legislation requiring annual checks. When a case surrounds gas safety, with the potential for carbon monoxide leaks or an explosion, it’s pretty clear cut that the serious detriment test has been met: indeed the second case understood to be considered as serious detriment also concerns gas servicing. no statutory duty But what about other potential breaches of the home, neighbourhood or tenant standards? The case studies in the review suggest that demonstrating both a breach of a standard and the potential for serious harm is quite an ask under the current regime. In one case, involving a tenant who was hoarding, an inquest found that had there been earlier and more effective intervention the tenant would not have died. Yet the regulator found that as the landlord had no statutory duty to deal with the hoarding, it could not be seen as a breach of the home standard. In another case, this time from a disabled tenant who could not access his landlord’s complaints policy because he could not use the internet, the regulator said even if there had been a failure to meet the standard there was no evidence of serious harm. The case studies make for interesting reading for providers. But do they answer the MPs’ questions? They certainly reinforce the regulator’s point about its narrower remit. But until there are fewer complaints hitting MPs’ postbags, and a recognition that the other routes for complaints are working, the political pressure is likely to remain.

including Sally Morgan from Ofsted, Lisa Jardine from the Human Fertilisation and Embryology Authority and Suzi Leather from the Charity Commission. “This government has crossed new red lines. No regulator with quasi-judicial functions should be a political appointment,” she says. Being a good manager is a skill you can learn over time – but leaders are born not made. That’s the view of Asda chief exec Andy Clarke, whose own route to the top began as a shelf-stacker in a supermarket after he left school at 15 with just one O-level. According to a report by City A.M. on his lecture to a future retail leaders event, more younger people are needed in boardrooms – but the right help and support is crucial for would-be leaders. “get yourself a mentor. And if you already have one, get another too.”

the Governor APRIL 2014

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

GOVERNANCE round-up

Big DEAL The words Big Society, once on every dutiful minister’s lips, are rarely spoken now. As a fascinating analysis from Stephen Jeffares at the Institute for Local government Studies at the University of Birmingham has shown, mentions of the concept by politicians and in the media have died away, to the point where ‘at some point in 2014 we will not speak of Big Society again – it will be the end’. But does the passing of David Cameron’s pet project spell disaster for some of the smaller charities the Big Society promised to promote? That’s one of the suggestions that comes out of a recent report by the Centre for Social Justice, the think tank set up by Iain Duncan Smith. As the report points out, in a climate of austerity, the Big Society concept increasingly became seen as a cover for cuts. Meanwhile, some of the aims of the Big Society to encourage more social action, greater community empowerment and greater charity involvement in public services remain unfulfilled. “Important steps have been taken towards [achieving the Big Society’s] goals yet there is still further to go,” wrote Danny Kruger, former speechwriter for David

MuMSNET How good at you at networking? The answer might depend on your gender, according to a survey from law firm Trower and Hamlins. The survey suggests women are more likely than men to believe that networking is important – but much less likely to actually get out there and meet their peers. Only a quarter of women surveyed said they networked at least once a week, compared to 46% of their male counterparts. In the mid-career phase the differences were even more striking, with men over 35 more than twice as likely as women to network once a week or more. Perhaps counterintuitively. the difference doesn’t seem to be down to parenting responsibilities. Although many of the women who took part cited family commitments as

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Cameron and chair of the CSJ’s voluntary sector working group which produced the report. “Volunteering seems to have risen slightly and some government initiatives are attempting to build this further, but there has certainly not been a radical upsurge in community action. Power has indeed been devolved to local government; but not – as intended – from there to local communities.” The report focuses on several key problems it sees as holding the voluntary sector, and smaller charities in particular, back – including ‘red tape and regulation’ and a tendency of local authorities to turn to the private sector rather than the voluntary sector when they outsource services including care for homeless or older people. Information from Freedom of Information requests showed that 55% were giving a smaller proportion of their contracts to the voluntary sector in 2011/12 than in the previous year. http://www.centreforsocialjustice.org.uk/UserStorage/ pdf/Pdf%20reports/Vol-sector-final-release-13-12-13.pdf

a reason for less frequent networking, the survey actually showed very little difference in how much women with children networked compared to those who had no children. And what about where to network? We’ve all heard the tales of men networking on the golf course and in the bar. But interestingly the survey showed little difference between where and how men and women network. As Tania Tandon, employment partner at Trowers & Hamlins, explained: “The 'old boys’ club' is still often blamed for perpetuating the glass ceiling and hindering women's progression to the most senior roles. But the professional women we surveyed appear just as likely as men to network at sporting events as conferences and seminars. There are, of course, several debates to be had about the reasons for women networking less when it arguably matters most, but what the results of this survey support is that whatever the reasons are, it is more about women and men, mothers and fathers making choices at what is perhaps a critical time in their careers than about established barriers and prejudices.”

HQN’S MAgAzINE FOR BOARDS, EXECUTIVES AND LEADERS

SOCIAL

engageMent

if you’re a regular tweeter or Facebooker, you’ll know that many working in housing have launched themselves enthusiastically into the social media world.

7.6 million following the top 100 charities. On Facebook, the top 100 housing associations had just over 54,000 likes, compared with more than 11 million for the top 100 charities.

And a good thing too: there are debates to be had, insights to be shared and news to be publicised. But are housing organisations really making the most of this new world? Or are they just talking to themselves, rather than using these channels to engage with their tenants and their communities? For while there are some great examples of housing organisations using their online and social media platforms to inform and discuss with their peers, their stakeholders and their communities, there are also plenty of examples of those who haven’t quite got it yet.

And the report suggests, that with most housing associations having fewer than 500 likes on their Facebook page, they are still uncertain how to get the most impact from their social media presence.

According to a new report on housing associations and their use of digital and social media, associations are well off the pace set by the charity sector. Visceral Business, which produced the report, looked at the website and social media activities of some 275 associations. It says the top 100 of those together had more than 259,000 Twitter followers – dwarfed by the

“The housing sector has yet to incorporate the voice of its main stakeholders and those who use its services, the residents,” the report says. “Despite resident satisfaction levels routinely at 90% or above, housing associations in this year’s top 100 have less than 0.5% of the engagement levels of the top 100 UK charities on Facebook. It’s early days for digital engagement.” So what more do housing organisations need to do? The report offers a few pointers – more work on specific online resident communities, more investment in account management and training among other things. But beyond that, housing providers will need to engage with some big questions. Who are we talking to online and on social media? Who should we be talking to? And how can we make it engaging – and fun – to do so? http://www.visceralbusiness.com

BlitZ SPIRIT Amid the attacks on benefits scroungers, the tabloid tales of ‘broken Britain’ and the fears of even more austere times ahead, where is the drive to support some of our most deprived communities to come from? As housing organisations will testify, there’s plenty of that new buzzword – resilience – at neighbourhood level. And according to the IPPR, that spirit, combined with new powers devolved to community level, could help residents create real change in their areas. In a report marking the end of the first phase of the thinktank’s Condition of Britain programme, the IPPR suggests there are grounds for optimism, despite the huge challenges communities face. “We have found a wealth of energy, creativity and resilience

in families and neighbourhoods across Britain,” the report says. “Many people are committed to helping themselves and others, and to working together to build a better society... Britain is not a country of helpless people dependent on the state, or of passive victims of austerity or the market.” The report calls for rejuvenated town and parish councils to be able to act on a local level to tackle problems like anti-social behaviour, social exclusion and a lack of support for the most isolated. It also says there is a need for ‘strong city and county leadership’ to solve local housing problems, and more support for local projects addressing segregation, social exclusion and anti-social behaviour. http://www.ippr.org/publication/55/11645/ the-condition-of-britain-interim-report the Governor APRIL 2014

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