Leazes Homes Value for Money Self - Assessment 2016/17 1. Introduction 1.1 Leazes Homes is a small Registered Provider of social housing and as at 31st March 2017 had 591 social housing units. We are a charity, were incorporated in April 2009 and granted charitable status in January 2010. 1.2 Leazes Homes was set up by Your Homes Newcastle and Newcastle City Council to improve the supply of affordable homes. Following changes to the organisation’s Articles of Association, Leazes Homes became a private registered provider of social housing. Your Homes Newcastle provides housing management services to Leazes Homes and Newcastle City Council provides repairs and maintenance services. 1.3 This is the first Leazes Homes Value for Money Self-Assessment, but we did produce a Value for Money Statement for 2015/16. 1.4 We aim to develop and improve our Value for Money Self-Assessment as we grow so we can demonstrate to our stakeholders that we are achieving value for money in delivering our purpose and objectives. 2. Homes and Communities Agency’s Value for Money Standard 2.1 We are regulated by the Homes and Communities Agency. The Homes and Communities Agency now requires registered providers, which own fewer than one thousand social housing units, to publish an annual Value for Money selfassessment. 2.2 The self-assessment should:
Enable stakeholders to understand the return on assets measured against the organisations objectives; Set out the absolute and comparative costs of delivering specific services; and Evidence the value for money gains that have been and will be made and how these have and will be realised over time.
3. Delivering our Business Plan 3.1 As detailed in our 2015-18 Business Plan the strategic objectives of Leazes Homes are to:
Develop an operational model which enables the efficient development of new affordable housing; Become a preferred partner of related organisations in the social housing field; Be a landlord of choice for affordable housing tenants in the north east; and Develop a specific focus on special needs developments.
3.2 Our Management Team monitor our operations monthly against the following areas to ensure that we are delivering against our Business Plan and operate within the budget agreed by Board. Management Accounts 1. 2. 3. 4. 5.
Income and expenditure account; Overheads analysis; Feasibility costs analysis; Balance sheet; and Cash flow
Analysis 1. 2. 3. 4. 5.
Service charges by scheme; Arrears analysis; Welfare reform and housing benefit; Repairs and maintenance; and Work in progress
3.3 The following tables show our actual spend against our budget for 2016/17 and how that expenditure has increased or decreased in total per property, over previous years. Housing Management 2016/17 Budget Actual spend 331,000 304,000
Cost Per Property 2016/17 2015/16 543 504
Service Charges 2016/17 Budget Actual spend 1,354 1,208
Cost Per Property 2016/17 2015/16 2,159 1,714
Repairs 2016/17 Budget Actual spend 313,000 370,000 Overheads 2016/17 Budget Actual spend 183,000 192,000
Cost Per Property 2016/17 2015/16 661 615 Cost Per Property 2016/17 2015/16 343 332
Housing Management costs increased by around 8% during the reporting period and service charges have increased by around 26% during the reporting period. During 2016/17 we increased the number of units by sixty three with fifty six units being supported housing units. Repair costs have increased as more new build units come out of the defect period. We are amending the way we budget for repair costs to ensure that our budgets more accurately reflect our costs. 4.
Assets
4.1 Leazes Homes added a further 64 units to its housing stock in 2016/17, which is an increase of nearly 12%. This included:
8 general needs units, including 7 units for older people; A 42 unit supported housing scheme for older people; and A 14 unit scheme providing housing for people and their dependents subject to or at risk from domestic violence.
4.2 The majority of new units completed in 2016/17were supported housing units, which is in accordance with the objective of the 2015-18 Business Plan to develop a specific focus on special needs development. Focusing on supported housing development helps Leazes Homes to maximise the impact its resources have in delivering against its charitable objects, which are set out in the organisation’s Articles of Association. 4.3 The majority of Leazes Homes units have been built within the last 9 years with two schemes totalling 115 units acquired from other Registered Providers of social housing. All schemes are subject to a rigorous development appraisal with the Board setting the following performance requirements:Benchmark 30 Year Net Present Value 60 Year Net Present Value Payback Year Minimum I&E Balance 30 Year IRR%
0 0 30 0 5.43%
60 Year IRR%
5.43%
5. Key Achievements 5.1 During 2016/17, we made progress in delivering against the Leazes Homes 2015/16 Value for Money Statement Action Plan. The following actions were completed:
Produce planned maintenance programme for each scheme; Set annual targets for value for money and monitor targets; Review arrangements for the provision of Housing Management Services; Review performance of grounds maintenance Contractor; Update information provided to tenants at sign up; Undertake STAR survey; Publish Value for Money Statement on website; and Produce Annual Report for stakeholders.
5.2 The value for money outcomes delivered in 2016/17 include:
Negotiating reductions with our Housing Management Service provider. The reduction being £10,000 for 2016/17 and £20,000 for 2017/18; Securing reductions to the costs of delivering repairs and maintenance services with our Repairs and Maintenance Service Provider. The reduction being £30,167 for 2016/17 with approximately the same reduction for 2017/18; and Commissioned an External Review of Delivery Models by Housing Quality Network (HQN) which provided clear recommendations for the future delivery arrangements of key services.
6. Gains 6.1 During the year cashable gains were achieved as a result of reviewing existing agreements and undertaking procurement exercises. Savings included:
Reduction in housing management costs - with a saving of £10,000; Reduction in repairs and maintenance costs – with a saving of £30,167; and Reduction in cleaning costs of £4,000 following a building cleaning procurement exercise.
7. Efficiency 7.1 The table below details key measures of the efficiency of the organisation.
Operating surplus
2017/18 budget £1,396
2016/17 budget £1,118
2016/17 actual £1,306
2015/16 actual £925
(Turnover less operating expenditure) Operating margin (Operating surplus as a % of turnover) Return on assets (surplus as % of value of homes)
26.28%
26.13%
30.46%
25.87%
2.13%
1.83%
2.13%
1.89%
7.2 Operating margin is a key measure of the efficiency of the organisation. Operating margin has increased year on year from 2015/16 and is forecast to improve in 2017/18. 8. Benchmarking 8.1 As part of the Review of Delivery Models Housing Quality Network (HQN) benchmarked the key cost areas of housing management and repairs and maintenance. 8.2 For housing management costs, HQN reviewed two types of organisations similar to Leazes Homes. These two types of organisation were: Councils / Arms Length Management Organisations that have set up local housing companies like Leazes Homes; and  Registered Providers with a similar number of properties. 8.3 The review compared Leazes Homes’ housing management costs with ten other organisations. The review stated that the current management costs for Leazes Homes compared favourably to small providers with only one organisation with a lower management cost. 8.4 Benchmarking of repairs and maintenance costs included comparing a basket of repair jobs across providers. The review concluded that the rates were competitive and represented good value for money. 8.5 Although the benchmarking undertaken by HQN indicates that the current arrangements for providing housing management and repairs and maintenance services were delivering value for money, the recommendation in the HQN report was that these services should be put out to tender in the market place. Reasons for this include:-


Putting these services out to tender demonstrates Leazes Homes commitment to seeking value for money for the services supplied to its tenants and ensures compliance with requirements; and More innovative means of delivering services might well emerge during the tender process.
8.6 The Board of Leazes Homes agreed the HQN recommendations. The recommendations are to be implemented over the next 2 years starting with the procurement exercise for a housing management service provider in 2017/18. This is the key VFM Action for 2017/18. 8.7 Performance is monitored against a number of indicators. A summary of our performance against similar providers for some key performance measures is set out below:Comparison against HouseMark (Your Homes Newcastle benchmarking group consisting of 24 organisations)
The average number of days taken to re-let void properties The average number of days taken to complete repairs Rent and service charge arrears on current tenancies Properties with a valid Gas Safety Certificate Void rent loss due to empty properties Overall satisfaction with service
Leazes Homes 2016-17 32.1
Quartile performance 2016-17 Median
4.8 days
Upper quartile
1.6%
Upper quartile
100%
Upper quartile
1.37%
Middle lower
92% general needs housing. 91% supported housing.
Upper quartile
Performance is at upper quartile with the exception of two measures. These are the average number of days taken to re-let void properties and void rent loss due to empty properties. The organisation provides supported housing for a number of vulnerable groups and in some instances it can take time to move tenants into available properties. We are aware of this situation and performance monitoring reports identify those schemes, which have higher than expected re-let periods or void rent loss.
Providing supported housing helps Leazes Homes to maximise the impact its resources have in delivering against its charitable objects, but the organisation also understands the detrimental impact that void properties have on the financial performance of the organisation. We are therefore reviewing with partners, the allocation process for our supported housing schemes. Comparison against the 2016 HCA Global Accounts (Entity Unit Cost 2016. Comparison against 40 Providers, with less than 1,500 units).
Management costs Repair costs (Maintenance and major repairs) Service Charge Costs Operating margin
2016 Leazes Homes average cost per unit
2016 Quartile performance
£504 £615
Upper quartile Upper quartile
£1,714 25.87%
Bottom quartile Middle lower
Operating margin for 2016 was in the middle lower quartile compared to 40 providers with less than 1,500 units. However the performance in 2016/17 was significantly higher at 30.46%.The budget for 2017/18 is 26.28% so there is an improving position regarding operating margin. Our service charge costs are in the bottom quartile. We do have a high percentage of supported housing schemes. Around 40% of our housing units in 2016 were either supported or older persons accommodation. If supported housing schemes are excluded then the 2016 average service charge cost per unit is in the middle upper quartile. However we recognise that this is an area that we need to review as a priority. 9. VFM Actions 2017/18 9.1 The table below details Leazes Homes value for money actions for 2017/18. Complete VFM selfassessment. Determine VFM targets for inclusion in Quarterly Performance Monitoring Report. Complete procurement exercise for housing management service Complete procurement
Target date August 2017
February 2018
Anticipated outcome Compliance with Homes and Communities Agency’s VFM Standard Embed VFM in Leazes Homes
March 2018
More effective and efficient services
January 2018
More effective and
exercises for grounds maintenance and building cleaning services. Produce Value For Money Strategy
Revise approach to budget setting for repairs to ensure that budgets more accurately reflect expenditure Review allocation process for supported housing schemes Review scheme service charges
efficient services
March 2018
January 2018
Embed VFM in Leazes Homes. Improve and develop our approach to VFM. Better financial management.
March 2018
Improved financial performance
March 2018
Improved financial performance