Sunday, 30 April 2017

Housing minister backs sector efficiency scorecard

Housing minister Gavin Barwell has given his backing to a housing association efficiency ‘scorecard’ that aims to help the sector compare performance while driving value for money.

The Sector Scorecard launched this week with the support of government and a raft of member groups from across the social housing sector.

As first reported by Social Housing earlier this month, the Sector Scorecard will measure 15 indicators across five general areas focusing on: business health, development, outcomes delivered, effective asset management and operating efficiencies (more detail below).

The Homes and Communities Agency also said it is looking at the potential to use some of the measures as it reviews its approach to value for money assessments.

Mr Barwell said: ‘I welcome this initiative to develop a set of common efficiency metrics for the housing association sector. 

‘The sector has a vital role to play in providing the homes we need, and housing associations need to be able to demonstrate that they are making the best possible use of their resources to deliver for the communities they serve.’     

The approach also has backing from the National Housing Federation and the Chartered Institute of Housing, along with groups including the London G15 of large associations, the London 320 of smaller associations, Placeshapers and Homes for the North,

The scheme was formed by the Working Efficiency Group during the last 18 months and led by Mark Henderson, chief executive of Home Group, who set out the plans in January’s Social Housing.

Scorecard indicators and how they’re calculated:

  1. Operating margin: to measure the amount of surplus generated from turnover on a provider’s day-to-day activities; indicator of operating efficiency and business health. Could include operating margin split by different activities.
  2. Increase/decrease in operating margin
  3. EBITDA MRI: an approximation of cash generated, presented as a percentage of interest to show the level of headroom on meeting interest payments on outstanding debt. Trend over recent years could be presented along with context; for example increasing debt levels to fund development could cause this ratio to decrease.
  4. Units developed: to demonstrate contribution of the sector to the supply of new homes (all tenures) - subject to ‘peaks and troughs’ of development programmes.
  5. Units developed (as a percentage of units owned)
  6. Gearing: included as a measure of development capacity, but could be used as an indicator of business health. Proportion of borrowing in relation to the size of a provider’s asset base.
    If the ratio is low, this could indicate that a provider has capacity to leverage its existing assets to provide funds for development or new services. A high ratio could indicate that a provider has taken on too much borrowing, which could put its assets at risk. Narrative could provide some indication of whether the current gearing level is considered appropriate. Caution should be applied when comparing different providers, as higher debt levels are associated with recent stock transfers.
  7. Customers VFM satisfaction
  8. Investment in new housing for every £1 generated from operations
  9. Investment in communities for every £1 generated from operations
    For points 8 and 9, the plan is to demonstrate the extent to which providers are investing their own money in new supply, or in other priority areas which generate a social return.
    Narrative in this area could indicate the organisation’s priority areas for investment.
    It was considered important that the framework of measures provide a balanced view, including evidence of the sector’s achievements and social impact, however it would be difficult to apply a consistent measure across all providers.
  10. Return on capital employed: shows how well a provider is using both its capital and debt to generate a financial return. Caution should be applied when comparing different types providers, such as stock transfers.
    It would also be possible to deliver an improvement due to increasing depreciation unless assets are constantly refreshed by capital spend. It should also be recognised that this measure only considers financial return.  Narrative could link this measure to indicators of social return.
  11. Occupancy: demonstrates how efficient providers are at turning around void stock.
  12. Ratio of responsive repairs to planned maintenance spend: effective planning based on detailed stock condition surveys should allow the sector to reduce spend on responsive repairs in favour of planned maintenance. Spend may vary from year to year depending on the timing of planned maintenance programmes.
  13. Headline social housing cost per unit: this is the measure used by the HCA in the regression analysis, and it was thought using this rather than a different cost measure ‘will avoid confusion’.
    Split into:
    Management cost per unit
    Service charge cost per unit
    Maintenance cost per unit
    Major repairs cost per unit
    Other social housing costs - cost per unit.
    There could be a split of the headline social cost per unit into components, or adjusted unit costs can be used to support the narrative. Providers with a large supported housing provision may wish to present the headline unit cost split by general needs and supported housing.
  14. Rent collected: demonstrates the effectiveness of the income management function in collecting rent due and managing arrears levels.
  15. Overheads as a percentage of adjusted turnover: shows the proportion of turnover which is required to pay for overheads. If the ratio is high, this could indicate potential cost savings from improving the efficiency of back office functions

There will also be ‘context information sitting behind these indicators, such as turnover, type of stock managed, geographical spread, number of people housed and number of people provided with services.

Mr Henderson said: ‘I’m grateful to all the members of the group who have worked to agree a set of metrics which I genuinely believe will work for all. We’ve been careful to look at areas which will allow us to compare like with like, while recognising that there areas of difference within the sector.

‘Formulating the 15 indicators is a great starting point, but what we really need now is for the wider sector to embrace this and sign up to the pilot on mass.

‘By gaining the support and involvement of as many providers as possible we’ll be able to further refine the metrics and ensure we have a system which, not only fully reflects the needs of the sector, but acts as robust mechanism for years to come.’

Mr Orr added: ‘It is great to see sector leadership on the important issue of efficiencies. Housing associations need to be able to tell a clear story on how efficient we are and the impact we are making, otherwise others will attempt to do it for us.

‘Having a set of indicators that are owned and reported by the sector would be a real step forward. The proposed pilot will be critical in making sure these indicators work for housing associations in different markets and different areas and give us the information we need to paint a coherent picture of sector efficiency.’

For more information on the Sector Scorecard, , including details of how to sign up, email:

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