Asset Management Strategy

March 2007
This publication is available on request in other languages, in large print, Braille or audio
format. If you need the docu...
CONTENTS


FOREWORD                                                         2

EXCECUTIVE SUMMARY                         ...
FOREWORD*


Successful asset management is fundamental to the delivery of the Business Plan.

The Asset Management Strateg...
3
EXECUTIVE SUMMARY


As the first Asset Management Strategy produced by GHA, this report considers the decision making proce...
The target outcomes and priority actions for each of the five strategic objectives are set out in the action plan
for the i...
6
INTRODUCTION


The aim

The term ‘asset management’ is used to define the process of acquiring, holding and disposing of la...
THE KEY ASSET MANAGEMENT CHALLENGES


The stock portfolio

On 7 March 2003, approximately 80,000 units of housing and asso...
For non-core stock with an anticipated life of more than three years a programme of holding investment,
limited to essenti...
The current approach

The strategy builds on and develops the planning processes and programmes already in place to suppor...
The distinctive contribution of the Asset Management Strategy

The development of an AMS adds to these existing planning p...
OPERATING CONTEXT


Strategic context

The transfer of GCC’s housing stock to GHA was progressed in the context of a Frame...
The availability of these grants together with the terms of the Disposals Clawback and other agreements
influence GHA’s man...
In addition to work undertaken through the triennial demand reviews, GHA undertakes its own assessment
of housing demand a...
As part of the valuation process for SST, GHA disaggregates its business plan across the LHO network to
reflect as closely ...
GHA’S STRATEGIC OBJECTIVES AND PRIORITIES FOR ASSET MANAGEMENT


GHA business plan

GHA’s annual business plan provides th...
Asset management strategic objectives

In setting out how GHA will manage its assets to support its aims this strategy:

 ...
Assessment and planning of future demolition programme

GHA has introduced new processes for clearance and demolitions, in...
As land availability is critical to delivery of the new-build programme, the 2005/06 Business Plan provided
for a Land Acq...
Improving energy efficiency

GHA recognises the impact fuel poverty has on the quality of life and health of individuals an...
Delivering comprehensive community regeneration, and developing GHA’s role in the city’s Community
Planning framework

GHA...
Investment in existing stock will significantly improve housing quality for many tenants with community
care needs. However...
Objective 5: Build asset value

Re-structuring rents and service charges following the rent guarantee

Rental income is a ...
FINANCIAL AND NON-FINANCIAL APPRAISAL


Financial appraisal

There are a number of financial evaluation techniques used reg...
Non-financial, or quality, appraisal

The Asset Management Strategy and investment are designed to achieve key benefits for ...
ORGANISING TO DELIVER THE STRATEGY


In order to deliver the strategic objectives for asset management, the following four...
RISK MANAGEMENT


GHA risk strategy

GHA applies a comprehensive risk management framework. This includes consideration of...
Declining stock performance

Much of the responsibility for management of GHA’s stock rests with the LHO network. The cont...
COMMUNICATION


Successful management of GHA’s assets requires effective communication with a wide range of stakeholders:
...
30
ACTION PLAN
                             Developing a strategic approach to restructuring GHA’s stock
Aim: to make decisio...
To improve         Programme of surveys of local tenant satisfaction and housing needs assessment connected to the        ...
GHA analysis of property investment risk produced for all stock based on updated stock performance          Sep 07
       ...
Gear our activities and investment programmes to deliver better homes
     Aim: To deliver a high quality portfolio that i...
To improve energy     Sustainability strategy action plan implemented                                                     ...
Use our assets and resources to build stronger communties
     Aim: to deliver a stock portfolio that is integrated into s...
To make an        Action plans for GHA’s Housing and Community Care and Equality and Diversity strategies implemented     ...
Deliver tenant and community control
     Aim: to achieve the fullest possible local influence and control over the owners...
To deliver Second   LHO community ownership business cases assessed against GHA business plan                             ...
Asset Management Strategy
Asset Management Strategy
Asset Management Strategy
Asset Management Strategy
Asset Management Strategy
Asset Management Strategy
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Asset Management Strategy

  1. 1. Asset Management Strategy March 2007
  2. 2. This publication is available on request in other languages, in large print, Braille or audio format. If you need the document provided in any of these formats, please contact GHA’s Communications team on 0141 274 6309.
  3. 3. CONTENTS FOREWORD 2 EXCECUTIVE SUMMARY 4 INTRODUCTION 7 THE KEY ASSET MANAGEMENT CHALLENGES 8 OPERATING CONTEXT 12 GHA’S STRATEGIC OBJECTIVES AND PRIORITIES FOR ASSET MANAGEMENT 16 FINANCIAL AND NON-FINANCIAL APPRAISAL 24 ORGANISING TO DELIVER THE STRATEGY 26 RISK MANAGEMENT 27 COMMUNICATION 29 CONSULTATION 29 ACTION PLAN 31 APPENDICES 43 1
  4. 4. FOREWORD* Successful asset management is fundamental to the delivery of the Business Plan. The Asset Management Strategy is informed by three-year demand reviews led by GCC and Communities Scotland and three-year investment plans agreed between LHOs and GHA. The key elements are: • Investment in improving the physical quality of houses, to meet the promises made to tenants, and in achieving the Scottish Housing Quality Standard • Demolition and new-build programmes • Regeneration of failing neighbourhoods. We are investing substantial sums of money in improving homes, inside and out. This essential upgrading and repair work is intended to protect and sustain our assets for the future and to break the historic cycle of investment followed by decline. Housing needs will change over the years and we appreciate that while we must do all we can to preserve the fabric of our buildings, we cannot dictate what people want in their homes; that will be for our successors to determine with tenants at the appropriate time. GHA will take a strategic approach to asset management to make best use of finite resources to meet our housing priorities and objectives. Our approach: • Identifies and minimises risk • Identifies problems and develops solutions • Avoids surprises • Ensures informed decision-making • Delivers a progressively stronger base for the Business Plan. Extracted from the GHA Business Plan 2007/08. * 2
  5. 5. 3
  6. 6. EXECUTIVE SUMMARY As the first Asset Management Strategy produced by GHA, this report considers the decision making process about future housing stock and the best ways to support community regeneration. It also outlines an inclusive framework for determining housing need and demand. The asset management aims were first identified in the GHA Business Plan 2005/06 and continue to inform the objectives and strategies that are discussed throughout this report. The principal objectives include: • Delivering a strategic approach to re-structuring GHA’s stock portfolio • Ensuring GHA’s activities and investment deliver “better homes” • Use assets and resources to build stronger communities • Deliver tenant and community control • Build asset value. Given that many of the issues raised being multifaceted and long-term, GHA recognises the importance of working in partnership with key stakeholders. Some of the fundamental challenges asset management must tackle concern the stock portfolio including the variety of properties, the amount of investment required to improve general standards and matching housing need with available stock. The Asset Management Strategy highlights the need to efficiently reduce the stock base and how to manage and maintain the stock to ensure long-term sustainability. The intricacies and scale of this requires working with both local housing organisations (LHOs) and tenants to ensure the best outcomes are achieved. Not only must the approach taken be flexible enough to incorporate the wide range of priority issues, it must also consider and reflect the external legislative, contractual and regulatory constraints within which GHA operates. The strategy develops GHA’s current approaches to planning already in place. It gives a single strategic framework which will help to deliver successful, mixed tenure neighbourhoods, assess the impact of GHA’s assets on Second Stage Transfer and determine how well the assets meet GHA’s corporate objectives. The operating context is affected by statutory and regulatory frameworks as well as comprehensive legislation. The Transfer Agreement between Glasgow City Council (GCC) and GHA regulates the terms on which the stock was transferred and has several constraints in place about how GHA can utilise its assets. Funding streams from the Scottish Executive are conditional and have considerable impact on asset management. The loan agreement with the funding consortium governs GHA’s access to borrowing and contains several conditions that affect the management of property assets. The decline in demand for social rented housing is of particular importance. This strategy outlines the objectives of the 2005 Demand Review and predictions for housing demand for GHA stock. The next review is to be commissioned in 2007, for publication in 2008, in light of which GHA will review its business plan assumptions. Successful community ownership requires robust asset management and this strategy document provides a foundation on which GHA will exercise effective stewardship of the properties while it owns the stock. The key objectives will chiefly be met through close working partnerships and various planning processes including future demolition programmes, new-build programmes, local-level delivery and policy development. It is clear that improvements in energy efficiency, environmental sustainability and modernising the services will all play an important role in delivering “better homes”. This report also emphasises the importance of community regeneration and discusses the role the Community Planning Partnership has in facilitating deliberation between stakeholders. GHA is a staunch supporter of local level involvement and also supports ways to implement tenant empowerment, equality and diversity. 4
  7. 7. The target outcomes and priority actions for each of the five strategic objectives are set out in the action plan for the implementation of this strategy. Significant changes will take place over the year ahead; therefore the Asset Management Strategy and Action Plan will be reviewed by September 2008. It is clear that financial benchmarking and development of a strategic asset appraisal tool will help GHA to fully understand its financial investments. A non-financial appraisal of investment projects, based on the GHA Design Guide and introduced in March 2006, will continue to be developed. In order to deliver the strategic objectives for asset management, internally GHA will give priority to: • Governance and corporate responsibilities • Developing GHA’s strategic planning framework • Establishing an asset management system • Monitoring and evaluation. These priorities should allow for a consistent approach across the board and help to review and guide the way asset management moves forward. A comprehensive risk strategy is also outlined in the strategy and the main risks featured include the uncertainty around demand, Second Stage transfer, achieving assumed Right-to-buy receipts and the long-term sustainability of assets and the investment programme. However, the corporate risk register is monitored by the Audit Committee and executive management on a six-monthly basis The underlying theme of working partnerships runs throughout this report and effective communication is vital to maintain channels of discussion between LHOs, GCC, Communities Scotland, tenants, lenders and many others. Informed awareness and building trust are core communication objectives and set out to develop the credibility of the organisation and gain support amongst key stakeholders. A draft Asset Management Strategy was issued for consultation in June 2006 and this revised edition has been amended to reflect the feedback obtained as well as organisational developments since the draft was issued. GHA has entered an important phase in its development and this strategy shows that delivering quality services, improving neighbourhoods and investing in progress are all important components of meeting the asset management aim. 5
  8. 8. 6
  9. 9. INTRODUCTION The aim The term ‘asset management’ is used to define the process of acquiring, holding and disposing of land and property assets. These assets should be managed to support GHA in delivering its overall business objectives, including the delivery of community ownership. GHA’s asset management aims, first identified in its 2005/06 Business Plan and which continue to inform this strategy are: “to deliver a housing investment and new-build development programme that will turn GHA’s housing portfolio into one that, in ten years time, is part of a new sustainable housing system in Glasgow within which GHA’s stock is: • Of a quality, type and location to meet the needs of a wide range of current and future customers, including those with particular needs • Environmentally sustainable and energy efficient • Capable of being managed and maintained economically in the long-term • Integrated into successful neighbourhoods which promote strong communities and enhance community development • Creating places that generate civic pride.” To achieve these aims, the Asset Management Strategy (AMS) must extend beyond property investment and maintenance to encompass other areas of policy and practice that impact on the sustainability of the stock. Objectives To deliver these aims, GHA has identified the following principal asset management objectives: • Develop a strategic approach to re-structuring GHA’s stock portfolio • Gear GHA’s activities and investment to deliver “better homes” • Use assets and resources to build stronger communities • Deliver tenant and community control • Build asset value. The strategy The strategy identifies: • The key asset management challenges and how the strategy enhances the existing planning processes • The context in which asset management takes place including the relationship with community ownership • GHA’s strategic objectives and priorities for asset management • How risk management is being addressed and plans for improved techniques to appraise investment projects and programmes • Arrangements for delivering the strategy • Communication and consultation. The AMS outlines a comprehensive and robust framework for assessing housing need and demand, making decisions about the future of the stock, and implementing community regeneration. This is the first such strategy produced by GHA and many of the issues raised are complex and long-term in their impact. GHA recognises the importance of continuing to develop the strategy in consultation with key stakeholders and to reflect changes in the operating environment. 7
  10. 10. THE KEY ASSET MANAGEMENT CHALLENGES The stock portfolio On 7 March 2003, approximately 80,000 units of housing and associated assets transferred from the ownership of Glasgow City Council (GCC) to GHA. By April 2006, through demolitions and Right-to-buy (RTB) sales, GHA had a portfolio of just over 74,000 houses, land, shops, offices and lock-ups. While the housing stock is hugely varied, it is heavily dominated by smaller units and flatted properties. Only one fifth of the stock is “own door” properties and cottage flats. City-wide, there is a significant mismatch between identified housing need and demand and the size, type and location of available housing. When the stock was acquired from GCC, it had been starved of investment for many years; the need to address this being the key driver in GCC’s promotion of the stock transfer to GHA. GHA is now four years into a ten-year investment and demolition programme, and plans to provide 3,000 new-build homes for rent, with a further 3,000 provided by other registered social landlords (RSLs). These new-build properties will be used as reprovisioning for tenants affected by demolition of GHA properties. A Housing Futures Assessment process underpins GHA’s approach to asset management. Through this process, stock is categorised into: • Core stock which is considered to have a long-term future • Stock to be demolished. Transitionally, a significant portion of the housing stock is identified as having an uncertain future and is to be appraised before a decision on its future is made. GHA’s approach to stock appraisal involves working closely with local housing organisations (LHOs), tenants and other key stakeholders. To deliver the aims and objectives set out in this strategy this appraisal must increasingly involve consideration of the long-term costs and benefits associated with each group of properties. To inform identification of stock in need of appraisal, GHA operates a city-wide stock classification process. This is undertaken in partnership with the LHOs managing the stock and is informed by an analysis of historic performance of the stock and current demand. By 1 April 2006, 49,000 units had been identified as core stock considered safe for investment. GHA’s investment programme is targeted on this stock to deliver the transfer commitment for all GHA’s sustainable properties to be warm, dry and modernised over the first ten years from transfer. While this investment programme proceeds, planning for the future of the remaining stock and the demolition and new-build programmes is also being undertaken. A number of areas have been identified where some form of master planning or options appraisal study is required to properly inform long-term decisions. At 1 April 2006, approximately 10,000 units were included in defined regeneration areas and 8,300 units were in smaller groups of stock requiring appraisal. A further 6,600 properties were included in GHA’s three-year demolition programme. Based on demand projections prepared by Glasgow University before the stock transfer, GHA is currently planning an overall demolition programme of approximately 19,000. This reduces GHA’s stock base in line with projections of long-term decline in demand for the city’s social rented housing. However there are significant uncertainties about these demand projections and GHA’s demolition programme may change. Around half of the planned demolitions have been identified. It is anticipated that the remainder still to be identified will be low demand tenement and multi-storey stock, much of it within regeneration areas. Many critical decisions will be needed in the years ahead, particularly in relation to under-performing non- core stock to determine: • Which stock is sustainable and can be retained • Which stock will not be retained and whether it should be demolished or disposed of for alternative use • Where replacement new-build should occur. 8
  11. 11. For non-core stock with an anticipated life of more than three years a programme of holding investment, limited to essential elements, is already underway. This programme is being reviewed with LHOs to determine how best to maintain the momentum of long-term change while delivering sustainable housing conditions for tenants living in stock with an uncertain future. This is a significant issue for tenants living in stock that will remain occupied for the medium-term only to be demolished as part of a regeneration strategy. Detailed consultation with these tenants is required. The pattern of housing tenure is changing, with a majority of households in the city now in the private sector. However, much of GHA’s stock is concentrated in areas in which social renting is the dominant tenure. Increasingly, areas of dominant social renting are also areas of concentrated deprivation, with upwards of 80 per cent of GHA stock in the most deprived sectors in the city. There is evidence that a high level of deprivation places stock at risk from falling demand. Achieving more mixed and mixed tenure communities may be one of the means of addressing this issue. GHA’s first Asset Management Position Statement, published in 2006, provides full details of the stock, classification, demand and customer base and non-housing assets. The GHA Investment Plan 2007-10 details GHA’s capital programme. Both publications are produced annually. GHA has a private and public funding package in place and firm plans to deliver its improvement, demolition and new-build programmes. However these programmes are being undertaken in a complex and changing environment, where community ownership is a key factor. It is therefore essential for GHA to have a robust and widely accepted strategy in place to support regular review and guide future decision-making. The priority issues In summary, the priority asset management issues facing GHA are: • The significant planned reduction in the stock base, how and when the relevant stock should be identified and how the reduction can best be achieved • How to deal with or turn around poorly performing stock, the amount of which outstrips the current planned level of demolition • Tailoring the portfolio and stock investment to meet or exceed the Scottish Housing Quality Standard (SHQS), the changing demand picture and a changing customer base and higher customer expectations • The planned programme of new-build housing and how this opportunity is best used to meet GHA’s asset management aims • How to then manage and maintain the stock to ensure long-term sustainability • The scope for facilitating mixed tenure development where appropriate to enhance long-term sustainability. In addressing these issues, the complexities and challenges that are unique to the GHA initiative need to be taken into account. These include: • The scale and complexity of the GHA stock portfolio and the post-transfer timescale for investment • The commitment to deliver community ownership subject to tenant ballot, a fair deal for tenants, no impact on GHA’s repairs and investment programme and financial neutrality to GHA • The need to allocate available resources, taking into account that LHOs are developing increasingly radical and ambitious plans for their communities with a push to drive up improvement standards • The need to balance the aims and objectives in the Asset Management Strategy with the aspirations of the LHOs and tenants to deliver the best outcomes for all parties • The need to manage and mitigate risk directly relevant to asset management. The approach to asset management must be sufficiently flexible to take account of these issues as well as the wide-ranging external legislative, contractual and regulatory constraints within which GHA operates. 9
  12. 12. The current approach The strategy builds on and develops the planning processes and programmes already in place to support asset management, which are listed below. Identifying what stock GHA needs • projecting demand for GHA’s stock • assessing the stock identified for appraisal through the Housing Futures Assessment process • working with LHOs to finalise the classification of the stock into core stock or stock for disposal or demolition • working with LHOs, GCC as the strategic housing authority, and other RSLs to plan the new-build re- provisioning programme. Managing the stock Developing, with LHOs, arrangements for: • radically improving housing services • meeting a range of community care needs and for houses in multiple occupation and furnished lets. Improving and maintaining the stock • assessing the condition of the stock and planning for delivery of the SHQS, as a minimum, by 2015 • working with LHOs to upgrade the core stock and provide holding investment for non-core stock with a lifespan of more than three years • implementing cyclical maintenance and responsive repairs • assessing the requirement for converting layout or use of properties and for adaptations. Dealing with surplus stock • assessing how to deal with surplus stock through demolition or disposal • implementing the demolition programme. Delivering community regeneration • developing and implementing the Neighbourhood Renewal Strategy • participating in Community Planning structures • working with LHOs, tenants and strategic partners to develop and implement plans for GHA stock at local level • delivering GHA’s new-build programme • improving design quality in accordance with GHA’s Design Guide. Procurement • developing and delivering long-term procurement for capital works • procuring revenue maintenance from March 2008 onwards. Effective management of non-housing assets • reviewing the portfolio of shops, offices, garages and lock-ups, community facilities and other non- residential property assets. 10
  13. 13. The distinctive contribution of the Asset Management Strategy The development of an AMS adds to these existing planning processes and programmes and makes a distinctive contribution by highlighting the links between analysis of housing need and demand, the inherited and future investment programmes and the need to take account of wider community regeneration and community ownership. The strategy gives GHA a single strategic framework, implementation of which will inform: • The costs and benefits of owning specific pieces of land and groups of stock • An assessment of how well the assets meet GHA’s corporate objectives • The difficult decisions about when and where to invest in the existing stock, demolish unviable stock and develop the new-build programme • How best GHA can contribute to the development of successful, mixed tenure neighbourhoods • The impact of GHA’s assets on the delivery of Second Stage Transfer (SST). 11
  14. 14. OPERATING CONTEXT Strategic context The transfer of GCC’s housing stock to GHA was progressed in the context of a Framework Agreement between GCC and the Scottish Executive. The Statutory Consultation Notices issued to tenants before the ballot provided guarantees and commitments on rents, investment levels and timescales, repairs and maintenance, delivery of housing services through the network of LHOs, tenant participation and control, and SST. Statutory and regulatory framework As an RSL, GHA must comply with and is affected by wide ranging legislation, for example: • The Housing (Scotland) Act 2001, which includes requirements in relation to the statutory provisions for the disposal of assets, assistance to the local authority to address homelessness, and to consult with tenants about standards of service and any proposals for service delivery which affect them • The SHQS, the national target for warm, dry and decent homes, which requires to be met by 2015 • The Housing (Scotland) 2006 Act which gives local authorities powers to designate Housing Renewal Areas and the Scottish Executive powers to direct RSLs, including GHA, to delegate functions to LHOs • The Charity and Trustees Investment Act (Scotland) 2005 which governs charitable organisations and impacts on GHA’s ability to reclaim VAT on much of the investment programme expenditure via a Development Agreement between GHA and GCC with the agreement of HM Revenue and Customs. In addition, GHA is subject to regulations and inspection by Communities Scotland against comprehensive Performance Standards. Of particular relevance to GHA’s asset management are resource management (GS1), risk management (GS4.4), and stock management (AS2.2). These are detailed in Appendix 1. Contractual framework The Transfer Agreement between GHA and GCC governs the terms on which the stock transferred to GHA. In addition to the requirements to deliver on a range of commitments to tenants, the agreement places constraints on how GHA can utilise its assets. These include: • The Disposals Clawback Agreement, which restricts GHA’s ability to benefit from the disposal of land or properties, subject to Scottish ministers’ discretion • The Land Protocol, which sets out provisions for GHA and GCC to resolve the treatment of GHA-owned land surplus to its re-provisioning needs • The Regeneration Scheme Agreement, which requires: GHA to pass back vacant sites created from specific demolitions approved by GCC pre-transfer into council ownership; regulates the hand-back process and apportionment of costs; requires GCC to provide 200 new build units at no cost to GHA (or an agreed financial sum) as a contribution to GHA’s business plan • Service level agreements and inherited contracts mainly relating to maintenance of GHA properties and adjacent land including un-adopted roads and footpaths used to access GHA stock • provision of accommodation to homeless applicants and of temporary furnished flats • the RTB Sharing Agreement, which governs the distribution of receipts from RTB sales between GHA and GCC. The Scottish Executive’s various funding streams to GHA also have conditions attached that have a bearing on asset management. For instance: • £20.6m towards the cost of GHA installing central heating systems to deliver the Scottish Executive’s “Warm Deal” programme • £114m towards the cost of demolitions, including repurchase of properties bought under RTB and payment of Home Loss and Disturbance • £113m towards the cost of GHA’s new-build programme. 12
  15. 15. The availability of these grants together with the terms of the Disposals Clawback and other agreements influence GHA’s management of its property assets and the financial implications for the association of pursuing other strategies. Funding conditions The Loan Facilities Agreement between GHA and its funding consortium, which governs GHA’s access to borrowing, contains several conditions that affect the management of property assets. These include the requirement for the consortium to have a fixed charge over all GHA’s properties, a three-yearly stock re- valuation and stock condition survey update. These conditions are set out in more detail in Appendix 2. GCC Local Housing Strategy and Housing Investment Strategy GCC’s aims and objectives as the strategic housing authority for the city are set out in the Local Housing Strategy (2003–08). After the stock transfer, GCC took over responsibility from Communities Scotland for disbursing the city’s housing Development Funding budget, primarily used to fund new-build housing by RSLs and other housing providers. GCC’s Investment Strategy identifies the four key issues that guide how and where GCC will direct its housing investment funding: • Neighbourhood renewal - addressing neighbourhood decline and building attractive places for people to live • Balancing supply and demand – improving the supply of affordable public and private housing in the city • Raising housing quality – tackling the problems of poor quality housing • Responding to changing housing needs – providing appropriate housing to match people’s changing needs and the needs of homeless people. The Investment Strategy also identifies a range of priorities for each issue. Many of GCC’s housing investment funding priorities influence the way GHA manages its property assets. The priorities of particular significance are set out in Appendix 3. The Local Housing Forums, now established in each of the Community Planning Partnership areas across the city, will be involved in updating Area Development Frameworks (ADFs), which provide a local dimension to the city-wide Local Housing Strategy. ADFs identify sites viewed by GCC as appropriate for housing and provide the local context for submissions by RSLs and other developers seeking housing investment funding. The council’s relevant Area Committee will formally approve ADFs. Housing demand GHA’s investment plans and demolition assumptions are developed in the context of regular demand reviews commissioned by GCC and Communities Scotland. The first three-year Review of Demand for Social Rented Housing reported in January 2005 was used as a baseline the Scottish Executive projection of households to 2013. The objectives of the 2005 Demand Review were: • To produce a robust estimate of demand in the social rented sector for 2012 and 2016 • To improve understanding of demand trends and influences on demand within the sector • To examine the impact of affordability and quality on movement between the social rented sector and other tenures. The review covered both GHA and other RSLs. The specific projections for GHA stock indicate a ‘most likely’ demand projection of 51,000 units by 2016; this projection is 5,000 units lower than GHA’s current business plan stock assumption for that date. However, the broad range of the projections in the table below also illustrates the degree of uncertainty in the longer-term with GHA’s 2016 stock assumptions, ranging from an under-provision of 5,000 units to over-provision of 22,000 units. The next review is to be commissioned in 2007 for publication in 2008, in light of which GHA will review its business plan assumption. 13
  16. 16. In addition to work undertaken through the triennial demand reviews, GHA undertakes its own assessment of housing demand at city-wide and local levels. Much of this is focused on the nature of demand expressed directly through the Waiting List, for applicants to be housed by GHA, and the Transfer List of existing GHA tenants applying to move to another GHA property. Through analysis of these applications, GHA has identified eleven ‘GHA Housing Market Areas’ defined by the area preferences expressed by applicants. Comparison of GHA stock assumptions with Demand Review Projection 2012 2016 Demand Review – range projected for GHA stock 49,000 – 64,000 34,000 - 61,000 Demand Review – mid-point projection for 59,000 51,000 GHA stock GHA 2005/06 Business Plan estimate of 64,000 56,000 stock Variation between GHA business plan + 5,000 + 5,000 estimate and Demand Review mid-point Rent levels The average rent for GHA properties in the 2006/07 Business Plan is £54 per week, among the highest for any RSL or local authority in Scotland. At the point of transfer, GHA gave guarantees to tenants designed to reduce the differential between GHA rent levels and those charged by other RSLs. The guarantees limit rent increases for all tenants to no more than the rate of inflation until March 2008 and for transferring tenants to no more than 1% above inflation for the period from March 2008 until March 2012. GHA will implement the rent guarantees in full. The structure of rents operated by GCC and inherited by GHA at transfer has not been subject to comprehensive review for over 20 years. The variations between individual rents do not reflect tenants’ perceptions of value and all tenants meet the cost of many services, not just those in receipt of the service. GHA has therefore embarked on a full review of its policy for rent setting and services charges. This will impact on the valuation of groupings of stock and on the city-wide valuation of GHA’s assets. Community ownership GHA is committed to the delivery of community ownership. During 2006, we participated with the Scottish Executive, GCC and other key stakeholders in a Joint Team on SSTs. This team reported to the Minister for Communities and the GHA Board as well as the Ministerial Progress Group (MPG) in December 2006. The then minister confirmed to the Board that the Joint Team Report and the valuations completed for Community Ownership Intentions demonstrated the substantial financial challenges associated with SST. The Minister acknowledged the Board’s obligations to ensure financial neutrality on GHA, and ensure there is no detrimental impact on the level of investment and services that tenants receive. In turn GHA’s Board noted that in addition to these prevailing conditions for any transfer, any dealings undertaken on community ownership should be fair for all tenants. The minister stressed the need for early progress on those transfers which had a realistic prospect of succeeding, but indicated that a substantial re-structuring of the LHO network would need to be explored in order to create a new affordable structure of fewer sustainable organisations for the delivery of SST. Asset management is a long-term activity and subject to successful community ownership, GHA sees itself as a transitional body. The Asset Management Strategy provides a basis on which, for however long it owns the stock, GHA exercises effective stewardship of the properties. This means that risks to the viability of successor landlords may be reduced; by removing as much as possible of the stock with an uncertain future, addressing issues of potential future low demand and investing in stock with a sustainable future. 14
  17. 17. As part of the valuation process for SST, GHA disaggregates its business plan across the LHO network to reflect as closely as possible the income and expenditure within the plan for each group of properties. In this way, as adjustments are made to the stock base, as investment is undertaken, and as GHA’s service planning develops, the valuations placed on GHA’s properties will reflect the decisions made in implementing this and other GHA strategies. 15
  18. 18. GHA’S STRATEGIC OBJECTIVES AND PRIORITIES FOR ASSET MANAGEMENT GHA business plan GHA’s annual business plan provides the long-term strategic framework for the organisation, demonstrates how it is approaching the transformation of its stock and identifies the funding arrangements to deliver this. In 2005/06, GHA undertook a fundamental review of its business plan with the resulting strategic focus on: • Delivery of promised improvements to GHA’s core stock over an initial ten years to allow maintenance of the stock for a 20-year period thereafter • The faster planned disaggregation of GHA, through SST • An increase of 5,000 units to GHA’s demolition programme over ten years • An emphasis on neighbourhood standards and management, with a new Neighbourhood Quality Improvement Fund, additional resources for the Neighbour Relations team and implementation of the new-build programme • A new Housing Quality Improvement Fund to improve investment standards • Key service priorities including welfare benefit support, the Furnished Let Service, neighbourhood renewal and housing support services for vulnerable tenants • Supporting staff through continuous change • Supporting the emerging RSLs in the LHO network to deliver quality management and community empowerment and control. The 2006/07 Business Plan built on this approach, emphasised an accelerated investment programme, sustained community regeneration and improved services. It confirmed the commitments to strengthening the capability and capacity of LHOs and a planned pathway to community ownership, while detailing the major challenges presented by SST and the impact of these on the timescale for its delivery. Asset management aims and target outcomes GHA’s 2005/06 Business Plan defined the aim of the Asset Management Strategy as being: “to deliver a housing investment and new-build development programme that will turn GHA’s housing portfolio into one that, in ten years time, is part of a new sustainable housing system in Glasgow within which GHA’s stock is: • Of a quality, type and location to meet the needs of a wide range of current and future customers, including those with particular needs • Environmentally sustainable and energy efficient • Capable of being managed and maintained economically in the long-term • Integrated into successful neighbourhoods which promote strong communities and enhance community development • Creating places that generate civic pride.” GHA will achieve these aims by: • Working closely with tenants, LHOs and other stakeholders • Investing in the right stock • Facing difficult decisions about stock and neighbourhoods • Implementing cyclical maintenance and refurbishment • Keeping the strategy sufficiently flexible to accommodate community ownership plans. 16
  19. 19. Asset management strategic objectives In setting out how GHA will manage its assets to support its aims this strategy: • Reflects the operating context outlined on page 14 • Consolidates the existing approach rather than representing a fundamental shift in strategy • Builds on GHA's experience of the stock in the period since the transfer • Feeds into the delivery of community ownership. The five strategic objectives detailed below form the basis of the strategy. Objective 1: Develop a strategic approach to restructuring GHA’s stock Working with strategic partners to identify and respond to changing demand GHA will continue to work with GCC, Communities Scotland, LHOs and other RSLs to better understand the housing market in the city. Actions will include: • Further research into demand at local level and the link between demand and housing quality • Examining the causes of the high level of tenancy failure in certain areas, particularly among tenants who were previously homeless • Use of local tenant satisfaction surveys and social surveys connected to the investment programme to understand the needs of current and future tenants • Research targeted at groups with particular needs, such as black and ethnic minority groups, disabled people • Ongoing review of provision for temporary accommodation for asylum seekers in the light of government decisions and legislative changes. Consideration of disposals and alternative uses for surplus stock To date, decisions about the future of GHA stock have been either retention for improvement or demolition. In the longer-term, for certain groups of properties, there is a need to consider other options for surplus stock, which may be sustainable and have potential for alternative use. The flexibility to consider such options may be particularly important for the smaller bodies taking stock from GHA through SST. Disposal or transfer to an alternative use could benefit the local community and support regeneration objectives. Potentially, it could yield cost savings, minimise resource waste, facilitate low cost home ownership and minimise disruption to tenants and the wider community. For example, disposal might be the preferred option for vacant tenements that are surplus to identified local need for social housing, but are attached to occupied GHA stock and located in an area where there is a demand for other tenures. This could also assist in the process of creating more sustainable mixed income neighbourhoods. In general, disposals other than SSTs would be of vacant property. For any tenanted stock, the provisions of the 2001 Act regarding tenant consultation would apply. Any proposals for disposal would require full consultation with GCC, the LHO, local tenants and other key stakeholders. It is recognised that GHA must address the relevant conditions of the GCC / GHA Transfer Agreement and other constraints, including statutory consents for disposal. 17
  20. 20. Assessment and planning of future demolition programme GHA has introduced new processes for clearance and demolitions, including financial appraisal, improved re- housing planning and resident consultation processes, and effective linkage to new-build re-provisioning. The environmental treatment of land being retained by GHA post-demolition must also be taken into account. Provision for particular needs GHA will work with LHOs and other stakeholders to identify the need for both temporary and permanent accommodation, including the potential for adapting mainstream accommodation, to meet particular needs. GHA’s new-build properties will meet barrier-free standards, be accessible to all and capable of future adaptation. Planning will take in to account the need for housing with support for a range of client groups and for the particular housing needs of the city’s increasing proportion of households among the black and minority ethnic communities. Planning for delivery at a local level The recently introduced three-year investment plans allow GHA and the LHOs to plan a rolling programme of activities. In future these plans will be increasingly linked to the planning processes of other stakeholders, in particular the Area Development Frameworks produced by the local housing forums. Decisions about which stock to retain or demolish, and where to build and for which client groups should be taken in the context of robust neighbourhood strategies and analysis of local demand. In many areas there will be a mix of tenures and landlords, sometimes with significant tenure change planned. Working effectively in such areas requires joint strategies or at least regard for the wider context when considering: • Whether and on what basis GHA should retain and invest in this stock • For what end use the stock is to be retained • The alternatives to retention and investment in the stock • The impact on GHA’s tenants of the alternative approaches • The impact on GHA’s Business Plan and its asset base • Development of sustainable proposals for SST. For GHA, an important target outcome of any neighbourhood strategy will be to deliver a sustainable stock base and growth in the value of its housing assets. Achieving this at local level is the key to developing a housing system across the city that has the flexibility to cope with changing needs. Neighbourhood strategies may emerge from a number of routes including: • The development plans being prepared for the transformational regeneration areas • Preparation of local strategies by LHOs • The work of Community Planning Partnerships and Local Housing Forums. As the neighbourhood strategies emerge, GHA will work with LHOs, tenants and other stakeholders to develop detailed implementation plans that will feed into investment and service delivery and inform proposals for SST. Planning and Delivery of GHA’s new-build programme GHA plans to provide 3,000 new-build units as re-provisioning for the clearance programme, 200 of which will be developed by GCC. Subject to resolution of funding issues, GHA will develop the remaining 2,800 in line with its New-Build Strategy. This sets out the planning assumptions, allocated by GHA Housing Market Areas, for delivery of the first 2,000 units over a five-year period. The 800 units not included in the current planning assumptions will be allocated as the programme develops. The Housing Futures Assessment and related financial appraisal processes will be used by GHA and LHOs to identify properties where demolition and some replacement new-build housing offers better long-term value than retention and refurbishment. 18
  21. 21. As land availability is critical to delivery of the new-build programme, the 2005/06 Business Plan provided for a Land Acquisition Fund of £9 million over three years. All new-build will comply with GHA’s Design Guide and current guidance on good practice including Housing for People with Varying Needs and the sustainable development principles outlined in ‘Choosing Our Future’, Scotland’s Sustainable Development Strategy, published by the Scottish Executive. Procurement of the new-build properties is being progressed to achieve GHA’s requirements for programme delivery, cost and quality. Early new-build properties have been procured through traditional procurement and the PPC 2000 Partnership model. Delivery of the new-build programme is one of the most significant financial challenges facing GHA. It is clear that GHA will need to find additional resources to deliver the complete new-build programme. This is being discussed with Communities Scotland. Asset management policy development GHA is developing a comprehensive suite of policies and procedures to support delivery of the asset management objectives and priorities. Policies are already in place covering access to GHA properties, repairs and maintenance, procurement and clearance of tenants for demolition and disposal. Existing policies are subject to review on a regular basis and additional policies, covering such issues as GHA’s role in developing alternative tenures, will be developed as the strategy is implemented. Objective 2: Gear our activities and investment programmes to deliver “better homes” Improving housing and neighbourhood quality GHA is addressing the poor quality of its stock to help transform the lives of tenants and ensure that the physical assets are adapted to meet current and future needs. The investment strategy will ensure that all properties with a long-term future meet or exceed the SHQS by the 2015 deadline. At a more detailed level, GHA has established technical standards setting out performance requirements and general specifications for materials and components. The Design Guide, which was produced following extensive consultation, sets out the strategic aims and aspirations for the investment programme, and provides a proper context for design work. It includes comprehensive procedures and standards for all projects – new-build, refurbishment, landscaping, regeneration and neighbourhood improvements. There is an increasing need for more sophisticated assessment, in collaboration with the LHOs, to develop tailored and imaginative solutions for improving the core stock within current resource parameters. This will include consideration of level of demand and suitability of property for adaptation to meet particular housing needs. Compared to the provision in place at the point of transfer, GHA is currently making additional resources available for this service. Given the unpredictability of demand for property adaptations, GHA has highlighted the need to address this issue to ensure that, post-SST, GHA’s successor bodies can continue to respond to the need for adaptations on a consistent basis. In relation to property maintenance, GHA is focusing on establishing full local cyclical maintenance programmes working with LHOs on programme development and delivery. These programmes are essential to protect the capital programme investment and maintain the quality of homes and the environment for tenants. GHA’s contract with City Building (Glasgow) LLP for the delivery of repairs and maintenance is due to end in 2008. Future arrangements are subject to competitive procurement and advertising through the Official Journal of the European Union. Initial meetings have already taken place with a variety of stakeholders to consider the type of services GHA will require and the shape of potential service arrangements. 19
  22. 22. Improving energy efficiency GHA recognises the impact fuel poverty has on the quality of life and health of individuals and communities, particularly those who are more vulnerable, and therefore aims to increase energy efficiency in its homes and reduce fuel poverty. GHA has a dedicated energy team. The “Wrap Around Warmth” initiative aims to produce warm dry homes that are affordable to heat. It focuses on the impact of physical improvement, energy efficiency and energy advice. The investment programme for existing properties includes over cladding, double-glazing and modern central heating systems to ensure that homes are warmer and more energy efficient. Delivering environmental sustainability GHA has identified environmentally sustainable, high quality design as an over-arching principle for its capital investment programme. GHA believes that consideration of environmental impact is intrinsic to every stage in the development of a project, whether new-build or refurbishment. To this end, GHA will manage its assets and the capital and revenue stock investment in accordance with the objectives and priorities set out in its Sustainability Strategy. Modernised Housing Service Implementation of GHA’s recent Housing Services Review is providing tenants with: • Safer and more secure homes • Improved customer service • An enhanced 24-hour concierge service for all multi-storey flats (MSFs) • Improved estates and neighbourhood management • Additional cleaning for all MSF properties • A hot spot Neighbour Relations team to identify and target hot spot areas of serious antisocial behaviour. Upgrading of our integrated housing management system has included the introduction of web-based iWorld housing management system to support front line services and provide a platform for modernised housing services. From April 2007, this will be complemented by the introduction of the Integrated Asset Management System (IAMS), providing GHA’s core Property Asset Register. Significant initiatives such as improvements to the standard at which properties are let, choice based letting and the introduction of mobile technology are all part of our drive to improve efficiency and tenancy sustainment. With the introduction of IAMS, the impact of the changes to GHA’s service delivery on the performance of GHA’s assets, and on both the asset values of specific properties and the total value of GHA’s assets, can be more effectively monitored. Objective 3: Use our assets and resources to build stronger communities Improving neighbourhood quality We will work with others to ensure tenants’ neighbourhoods are attractive, well-maintained and desirable places to live. GHA is supporting the Clean Glasgow campaign to tackle environmental blight and improve the attractiveness of the city. Through the Community Planning Partnership, we are working with others to improve neighbourhood management, improve co-ordination of services, minimise duplication and provide high quality environments that meet the aspirations of our tenants. GHA’s Neighbourhood Quality Improvement Fund (NQIF) is a positive response to feedback from tenants expressing dissatisfaction with the quality of open space within their neighbourhood. These resources target physical revitalisation of neighbourhoods to improve environmental and recreational standards. Four pilots started in 2006/07 and the lessons from these will inform the expansion of the programme in 2007/08. 20
  23. 23. Delivering comprehensive community regeneration, and developing GHA’s role in the city’s Community Planning framework GHA is working with LHOs, tenants, residents and other key stakeholders in taking forward the regeneration of some of the city’s most deprived neighbourhoods. The Community Planning Partnership led by GCC is critical in delivering this ambition by providing a mechanism for stakeholders to discuss and agree the vision for a regenerated city, respective roles, mutual priorities and co-ordinated programmes. GCC is also leading discussions on the implementation of public service reform to more effectively co-ordinate and align the activities of the public sector agencies. GHA strongly supports the development of a more co-ordinated approach and the targeting of extra funding towards the most deprived communities. Most GHA stock is located in such areas and GHA recognises that regeneration will only be achieved through the key partners working together. GHA’s commitment to community regeneration is underlined by funding a Neighbourhood Renewal Strategy to resource a diverse range of activities to complement improvements to the housing stock and service. These include financial inclusion, jobs and training, community learning and development, promoting energy efficiency, tackling fuel poverty and employing nine welfare benefit advisers. GHA strongly supports the rolling out of community planning structures at local level and the establishment of local housing forums. These offer LHOs the opportunity to progressively become local regeneration champions, not only focusing on their communities in the short-term but also building in long-term community control and capacity. Addressing tenure imbalance through mixed tenure development In many parts of the city, where the concentration of social rented housing is associated with high levels of deprivation, tenure diversification could contribute to the successful delivery of GHA’s Asset Management Strategy and sustainable area regeneration. There are many tenure diversification and low cost home ownership options that warrant examination; with GHA and its successor LHOs as facilitators, direct providers or joint venture partners as appropriate. There may be circumstances where low cost home ownership within the stock portfolio will help deliver GHA’s asset management aims and wider regeneration objectives. Tenure forms that provide choice to households wishing to remain in their local area, but to move into home ownership may play a valuable role in community retention and neighbourhood regeneration, while enabling available resources to go further. In other circumstances, participation in the Mortgage to Rent scheme may be appropriate, for example to consolidate GHA ownership in order to facilitate demolition processes. GHA will commission a review of home ownership options for GHA including the potential constraints, taking account of the relevant policy, funding, legal, regulatory and contractual issues, including the relationship with delivery of SST. A specific requirement of this Asset Management Strategy is that local plans for investment and management should examine and address tenure imbalance to improve the prospects for strong and sustainable communities. This will be carried out in the context of the Area Development Frameworks. An effective GHA contribution to community care and diversity GHA’s Housing and Community Care Strategy was developed jointly with GCC, NHS Greater Glasgow and Clyde and other stakeholders. It sets out the contribution GHA will make to meet community care needs in the city and complements the association’s Equality and Diversity Strategy. The strategy provides a framework for GHA to assess the needs of community care groups and to jointly commission research on identified gaps. The next step will be to assist LHOs to develop local housing and community care strategies in collaboration with Community Planning and Community Health and Social Care Partnerships. While GHA’s New-Build Strategy will assist in re-housing tenants from properties to be demolished, there is a recognised shortfall in many parts of the city in provision for a range of groups with particular housing needs. GHA will co-ordinate its activities with those of other providers to address these needs through the various new-build funding streams. 21
  24. 24. Investment in existing stock will significantly improve housing quality for many tenants with community care needs. However, incorporating provision for people with disabilities presents particular challenges given the high proportion of tenement flats and MSFs that cannot meet barrier free and wheelchair accessible standards. In relation to diversity, GCC’s Local Housing Strategy identifies four key objectives to improve equality of access to housing. These are targeted to ensure availability of housing based on assessed need, equal access, improved allocations procedures, and to address discrimination. The strategy highlights the lack of suitable housing and facilities for black and minority ethnic households, and the need for appropriate delivery of services and adequate monitoring. Through its Equality and Diversity Strategy, GHA is committed to working with GCC and representative bodies to respond positively to the priorities and objectives to ensure equality of access to housing. Objective 4: Deliver tenant and community control Developing the LHO network GHA’s stock is managed through the network of LHOs with the responsibilities of each party clearly specified within the Remodelled Management Agreement. The capacity of the LHOs and the devolution of central functions to a local level will be extended further in 2007 through the establishment of Local Shared Services. An LHO Chairs Forum has been established to improve communication between LHOs and GHA, providing one means for effective dialogue on a range of strategic issues and policy and service development. Developing and implementing arrangements for tenant empowerment, equality and diversity GHA’s Tenant Participation Strategy and Policy for 2005/07 sets out key action points, priorities and arrangements for communication and consultation with tenants. Intrinsically linked to this is GHA’s Equality and Diversity Strategy, which places an emphasis on consultation and community engagement with the aim of achieving continuous improvement in policies, services, employment practices and governance to promote equality and recognise diversity. GHA will work to empower and promote participation in decision-making about the future of its assets. In particular, it will support disadvantaged and difficult to reach groups, including disabled people and members of black and minority ethnic communities, to enable them to participate fully. Decisions on the future use of GHA’s assets should reflect the needs of members of these groups at the earliest possible stage in the planning processes. Delivery of community ownership GHA is committed to community ownership. The Asset Management Strategy and systems must support and facilitate SST to sustainable LHOs where this is possible. This will be achieved through: • Addressing the demand risk that attaches to the stock identified as requiring appraisal • Resolving the future life of existing GHA properties and effectively utilising the new build reprovisioning provided through GHA’s new-build programme or by other RSLs funded by GCC • The provision of full and accurate disaggregated stock, income and cost data to underpin stock valuation • Managing the changes that will occur in the volume and composition of its progressively diminishing stock portfolio. In addition, each SST will depend on a ballot of tenants, must represent a fair deal for all GHA tenants, have no impact on GHA’s investment and repair programme and be financially neutral to GHA. Given the financial challenges facing SST it is difficult to forecast accurately which stock is likely to transfer by when and at what stage of improvement. The Asset Management Strategy and systems must cope with this uncertainty. 22
  25. 25. Objective 5: Build asset value Re-structuring rents and service charges following the rent guarantee Rental income is a crucial factor in defining the value of GHA’s assets. Rents are currently set on factors such as amenity and stock condition that are out of date. The variation between individual rents often fails to reflect tenants’ perception of value and many tenants contribute to the cost of services they do not receive. A Rent Restructuring Project has been established to review the rents in consultation with tenants, LHOs and other stakeholders. This project is a critical component of GHA’s long-term approach to asset management. Whichever approach is used to restructure its rents, GHA recognises the need to charge rents and service charges that more closely match the costs of management and maintenance. This is intended to produce a rent structure that is fairer and more transparent. It should also help GHA build the asset value needed to support delivery for tenants in the longer-term and to pass to others through the SST process. It is likely that changes to the rent structure will be phased in gradually. The phasing of adjustments must recognise the rent guarantee to tenants at the point of transfer and balance the need to make GHA’s rents more affordable and comparable with the rents of other landlords against the requirement to maintain the income needed to deliver the business plan. Introducing new financial and non-financial appraisal techniques To make best use of resources, GHA and the LHOs need to fully assess the costs and benefits associated with alternative options in dealing with the stock. In order to improve understanding of the financial performance of properties and the impact of investment on the asset base, GHA has undertaken a strategic asset appraisal. This will underpin a fuller financial assessment and financial modelling of options for the non-core stock, including stock designated as major regeneration projects. By this means, financial appraisal will be extended to all stock groupings to enable appraisal, monitoring and modelling of the long-term value of all GHA stock on a consistent basis. Similarly, whilst non-financial factors are considered as part of the Housing Futures Assessment, there is a need to develop the process and criteria further. These must be applied consistently and incorporated into an appraisal that embraces both financial and non-financial factors and applies an appropriate weighting to each. GHA will consult LHOs and other stakeholders on the development of the financial and non-financial appraisal techniques, criteria and weighting. The proposed approach is outlined on page 26. Developing our approaches to managing GHA’s non-housing assets In relation to land holdings, GHA has begun working with GCC on the processing of sites emerging from the demolition programme that are not covered by the Regeneration Scheme Agreement. For sites within their area, LHOs will be engaged with other key stakeholders to review the potential future use of these sites for social housing or for implementation of the Land Protocol. Work will also continue with GCC and others to identify and obtain the land bank needed for GHA’s new-build programme. GHA will work with LHOs and other key stakeholders to review its shops, community facilities and lock-ups; to consider options for ownership and management of these properties, taking account of: • The costs and benefits associated with the assets • The potential demand for access to capital investment resources not currently provided for in GHA’s business plan • The views of key stakeholders • GHA’s governance, regulatory and contractual arrangements • The impact of the assets on delivery of community ownership through SST. Outcomes, priorities and timescales The target outcomes and priority actions for each of the five strategic objectives will be developed into an action plan for the implementation of this strategy. This will be finalised when the strategy is approved and updated annually thereafter. 23
  26. 26. FINANCIAL AND NON-FINANCIAL APPRAISAL Financial appraisal There are a number of financial evaluation techniques used regularly by housing associations. Given the nature, scale and duration of its programme GHA has identified the Net Present Value (NPV) method as the most relevant for assessing its investments, including re-investment in existing stock. The NPV technique profiles income and expenditure over the long-term, and then discounts the cashflows to arrive at a present day value. The NPV takes account of the time value of money, that is the costs and benefits in earlier years are given more weight than those in later years. When comparing options, the profile of costs and benefits for each project will vary over time. Discounting to present values allows the different options to be compared on a consistent basis. The “Green Book” published by the Treasury recommends a discount rate of 3.5% in real terms; that is excluding the projected rate of inflation. Separately the Green Book identifies that, for private individuals, the time value of money can be measured by the real cost of borrowed funds. This is the basis of the real discount rate commonly used in housing association investment appraisals. For GHA, this would equate to 3.305%, which is the difference between GHA’s average cost of borrowing of 6.305% and the inflation rate of 3% in the business plan. This is therefore the rate GHA would use in appraising most projects. Where the project is being valued over a time period longer than 30 years, or where the project is particularly complex, the discount rate may be varied. The reasoning behind any change needs to be explained fully in the option appraisal report. The advantage of the NPV over other techniques, notably the Internal Rate of Return, is that the NPV produces meaningful outcomes even when the investment has a negative value – that is when the long-term revenue which comes primarily from rent does not cover the capital, management and maintenance costs of the project. GHA will improve its financial understanding of its investments through a variety of means: • The briefs for Development Plans for GHA’s major regeneration projects already require the preparation of a 30-year discounted cashflow for all viable options identified. Project summaries will include details of capital costs so these can be compared to the cost of other social rented projects in the city. For new- build properties, this will provide important benchmarking for the cost of GHA investments • Where possible the NPV will produce costs per housing unit and bedspace to allow a more standardised comparison of projects producing different unit sizes • GHA approached the market looking for a partner to develop a strategic asset appraisal tool. This has now been developed with Savills Property Surveyors and produces concurrent NPV summaries of all GHA properties, divided into over 700 localised stock groupings, reflecting the current pattern of income and costs, with the capacity to model changes to these. Using the information from these appraisals, GHA will work with LHOs and other stakeholders to review the future life of its properties, with the long-term value of each group and options for their future prepared on a consistent basis. The financial appraisal will be significant in discussions with LHOs about the best use of the investment resources available and will play a part in decision making about the investment programme. 24
  27. 27. Non-financial, or quality, appraisal The Asset Management Strategy and investment are designed to achieve key benefits for tenants and the wider community. In considering the allocation of resources between projects it is therefore necessary to take account of the extent to which the proposed expenditure helps deliver these wider objectives, that is, what is the quality of the asset produced by the investment, as well as the financial costs and benefits. GHA is developing its approach to non-financial appraisal of investment projects, based on the GHA Design Guide, approved in March 2006. The Design Guide is the essential reference for all those involved in the design, specification and delivery of GHA’s investment programme and provides a firm foundation for the assessment of project quality. The guide applies to all projects, new build, refurbishment, landscape, regeneration and neighbourhood improvements. It sets out the association’s aspirations for investing in its housing stock as being: • The creation of successful places, where people want to stay to create sustainable communities for the foreseeable future • Seamless integrated tenures, in which social renting co-exists with other tenures, with houses of the quality, type and location that meet the needs of a wide range of current and future customers • Sustainable, good quality design, a forward-thinking approach to design that encapsulates the principles of environmental sustainability and efficiency • Effective, Affordable Tenant Choice, capturing the best from the private sector to create affordable housing and effective tenure choice. These aspirations are translated into a series of Design Quality Indicators, covering topics including: • the urban context • community and connectivity • roads and open space hierarchies • buildings and landscape. At each stage, the project will be assessed against these indicators, and other indicators included on a project-specific basis. Relative weightings need to be agreed for the non-financial measures used in the appraisal and between the financial and non-financial measures. These will be subject to consultation with key stakeholders including tenants. 25
  28. 28. ORGANISING TO DELIVER THE STRATEGY In order to deliver the strategic objectives for asset management, the following four priorities have been identified. Governance and corporate responsibilities The role of GHA’s Board is to ensure that, in meeting its strategic plans and commitments, the association remains financially viable with continuing demand for the stock generating sufficient rental income to meet financial commitments. In discharging this role, the Board will evaluate strategic aspects of asset management and asset management practice, ensure there is proper consultation with tenants, LHOs, GCC and other stakeholders, and then take decisions to ensure that property assets are managed effectively. Some of this work is delegated to the various committees of the Board and arrangements are in place to ensure the work of committees is co-ordinated. Recognising the importance of pro-active asset planning and management, a dedicated Asset Strategy team has been established within the Investment and Regeneration division. The responsibilities of this team will include the development of policies, procedures and systems to deliver the Asset Management Strategy. During 2007, the plans for “Transforming the Network – Creating Shared Services” will be fully implemented. Local Shared Services are central to GHA’s strategy to extend tenant participation and control by devolving support services to the front line. The seven Shared Service centres being established across the city and the GHA service development team will each work with groups of LHOs to deliver services in a more locally, responsive way. The Local Shared Services will have key responsibilities in relation to asset management, including delivery of the investment programme and supporting LHOs in developing neighbourhood strategies. GHA Corporate will support them in meeting these responsibilities. Developing GHA’s strategic planning framework As already indicated, the Asset Management Strategy gives GHA a single strategic framework within which to take investment and related decisions. However the extent to which the strategy is governed and influenced by external factors cannot be over-emphasised. The key components of the stock transfer proposal put to tenants at ballot and the related funding and contractual arrangements have been key drivers for GHA’s business plan. The asset management and other GHA strategic plans must in turn reflect the business plan and the parameters that have guided its development. At operational level, GHA’s various policies, plans and programmes will be developed and implemented to deliver the asset management and other GHA strategies. Establishing an asset management system GHA is introducing IAMS, which will be brought into operation from April 2007 onwards. This will provide the means to maintain, access, validate, and model full information about the property portfolio to inform management and investment decisions. Implementation of the system will make detailed and accurate information more accessible to LHOs, and to Local Shared Services. It will assist them in investment planning and in developing proposals for SST. Development of IAMS follows on from the implementation of the new iWorld Integrated Housing Management System. Following a review of the relationship between the systems, it has been agreed that IAMS will contain GHA’s core asset register. Monitoring and evaluation A systematic and consistent approach to evaluation is required to ensure the best outcomes are achieved from the allocation of resources This will focus on the delivery of business plan targets and objectives, statement of intent targets, key performance indicators and tenant satisfaction. As part of this process, an Asset Management Position Statement is now produced annually. 26
  29. 29. RISK MANAGEMENT GHA risk strategy GHA applies a comprehensive risk management framework. This includes consideration of specific risks associated with strategies. The main risks identified that are relevant to the Asset Management Strategy are: • Investment programme delivery, priorities and customer service • The uncertainty associated with the second stage transfer programme • Achieving assumed Right to Buy receipts • Achieving cost savings and business performance targets • Ensuring long-term sustainability of GHA’s assets • Investment programme costs over the longer-term • Procuring quality neighbourhood management • Availability of information to support development of the strategy. The corporate risk report will be submitted to the GHA Board in March 2007. This will be supported by divisional operational risk registers, to be maintained and updated on a regular basis by Executive Management. The Audit Committee monitors the corporate risk register on a six-monthly basis. The asset management risks listed above will be incorporated in the relevant operational risk registers. Legislative and political change Significant pieces of legislation impacting on the management of GHA’s assets have been identified and allocated to an officer who has responsibility for ensuring compliance. The Board and Chief Executive maintain close relationships and meet regularly with GCC, the Scottish Executive, and local elected members from each level of government. Stock Condition GHA has agreed with its funders to implement a programme of regular stock condition surveys. A refreshment exercise of the survey carried out in 1999 was completed in 2005. A further update of the survey is due by March 2008. Specialist components, e.g. lifts and other mechanical and electrical installations, mainly in MSF and desk access properties are included in fixed term contracts covering inspection and maintenance. Declining or changing demand GHA works closely with GCC, Communities Scotland and other RSLs to monitor and project the level and nature of demand for social rented housing in the city. It has been agreed that city wide Demand Reviews, commissioned by GCC and Communities Scotland, will be conducted every three years. The next review is to be commissioned in 2007 and published in 2008. GHA also carries out its own assessment of the operational performance and demand for its stock. Many of the properties being used for the asylum seekers contract are in GHA’s regeneration areas or in stock for future review. GHA is aware of the need to ensure that long-term investment is not made based on short-term demand and must balance the needs of the asylum seekers and the settled community. 27
  30. 30. Declining stock performance Much of the responsibility for management of GHA’s stock rests with the LHO network. The contracts between GHA and the LHOs specify Key Performance Indicators (KPIs) affecting the financial and operational performance of GHA’s stock. Regular reports on the performance of the LHO network against KPIs are submitted to GHA’s Operations Committee, including exception reports on poor performance. Community ownership As a major landlord with a widely dispersed and varied stock base, GHA has been able to absorb and manage the risks associated with some of the challenges it inherited. For LHOs to prepare viable transfer proposals and sustainable business plans, it is essential that risk and uncertainty be reduced, particularly in relation to: • Removing as much as possible of the stock with an uncertain future • Addressing issues of potential future low demand • Investing in stock with a sustainable future and likely long-term demand • Appropriate allocation of resources to meet investment risks. The Asset Management Strategy provides a single strategic and comprehensive framework for taking decisions that minimise and mitigate these risks, thereby promoting sustainable successor organisations. 28
  31. 31. COMMUNICATION Successful management of GHA’s assets requires effective communication with a wide range of stakeholders: tenants, LHOs, GCC, Communities Scotland, lenders and many others. GHA’s Asset Management Strategy is supported by the following core communication objectives: • Developing informed awareness and support among stakeholders for the future of social housing in Glasgow as envisaged in GHA’s business plan • Building trust and managing expectations of GHA among all stakeholder groups and thereby develop and sustain the credibility of the organisation and its people. GHA now publishes an annual Asset Management Position Statement giving key updates on its asset base and how it has changed over the previous year, summary information on stock utilisation and charges, changes in the customer base and in the housing market, and developments in GHA’s approach to managing and maintaining its assets. The first Position Statement, which gives the position at 1 April 2006, was published in October that year. Following the successful implementation of a three-year investment planning process with LHOs, GHA also publishes an annual Investment Plan. This provides significantly more detail on GHA’s plans for investing in its stock in the next financial year and outlines plans for investment in each of the two following financial years. CONSULTATION The draft AMS was issued for consultation in June 2006 and Glasgow University organised workshop discussions with representatives from key stakeholders. Responses were received from a number of LHOs, registered tenants organisations, GCC and other stakeholders. Details are provided in Appendix 4. All respondents welcomed the development of the AMS. Points highlighted included: • The strategy was seen as critically dependent on GHA having good quality information about its assets and the demand for those assets • That an extension of the options used by GHA in dealing with vacant properties raised significant issues and need to accord with the Transfer Agreement • That further work needed to be done to address the question of which “products” GHA needs to meet the aspirations in the future, and which might go beyond bringing properties up to the SHQS • That demand risk was the key issue • The inter-relationship between asset management and SST needed to be clear. GCC welcomed the broad definition of asset management, agreed with the objectives identified and highlighted the need for more detail on how these would be developed. In December 2006, GHA organised an asset management seminar, at which Savills Property Consultants presented an overview of the approach adopted in preparing the Strategic Asset Appraisal. The strategy has been amended to reflect the feedback and updated to take account of developments in the period since the draft was issued. 29
  32. 32. 30
  33. 33. ACTION PLAN Developing a strategic approach to restructuring GHA’s stock Aim: to make decisions about the future of the stock to achieve a portfolio of the volume, quality and type of housing to meet the needs of a wide range of current and future customers including those with particular needs. Objective Measure of success Target date To assess demand GHA contribution to the 2008 Review of Demand for social rented housing commissioned by GCC and Dec 07 for social rented Communities Scotland delivered housing Review of Waiting and Transfer lists completed and the implications for GHA’s stock profile identified Jun 07 Work on demand/supply balance to underpin GHA decision-making completed following the 2008 Mar 08 Demand Review Identification and classification of the full stock portfolio to receive investment to meet GHA’s transfer Sep 08 31 commitments To develop Implications for GHA from local housing market studies in Easterhouse and Glasgow North identified Jun 07 understanding of the local housing GHA Housing Market Area analysis revised and relationship between identified patterns of demand and Jun 07 market in the city Community Planning framework identified Methodology for monitoring the long-term impact of choice based letting on demand for GHA properties Dec 07 identified Review arrangements for provision for temporary accommodation for asylum seekers in light of GHA Mar 08 demolition programme With GCC and other key stakeholders, assess the impact on short and long-term housing demand of Dec 07 recent in-migration from accession countries to the European Union
  34. 34. To improve Programme of surveys of local tenant satisfaction and housing needs assessment connected to the Mar 08 understanding of investment programme completed customer needs The impact of the demolition programme on the housing opportunities of large families identified and Sep 07 reflected in re-housing strategies Research on the need for larger family housing and assessment of implications for GHA stock profile Dec 07 and new build strategy completed Assessment of the rehousing needs of residents, including community care groups, in GHA stock Dec 07 identified for demolition completed The pattern of tenancy failure examined and implications for GHA and joint work with GCC Mar 08 Homelessness team identified To plan the re- Training for LHOs to engage effectively with Local Housing Forums and the review of Area Development Mar 08 structuring of Frameworks GHA’s stock LHOs supported to prepare comprehensive investment plans and GHA-wide investment programmes Sep 08 32 agreed to underpin procurement of constructor capacity to deliver the tenant commitments Proposals from major regeneration area studies progressed in consultation with key stakeholders and Dec 07 GHA input to implementation plans agreed Guidance produced for LHOs on the preparation of neighbourhood housing strategies to ensure Sep 07 GHA/LHO activities meet the needs of the local community Integrated Asset Management System (IAMS) fully operational and in use across GHA and the LHO Sep 07 network Assessment of development studies for the Wingets, St Andrews Drive, Temple, West End MSF, Moss Mar 08 Heights, Bishoploch, and Tollcross completed and GHA response agreed
  35. 35. GHA analysis of property investment risk produced for all stock based on updated stock performance Sep 07 and demand data and the outcome of the strategic asset appraisal Timetable agreed for determining the future life of all GHA stock following publication of 2008 Demand Dec 07 Review Following consultation, guidance issued on decision-making and management for stock with an Sep 07 uncertain future or to be removed from GHA stock Options for strategic disposal of stock as an alternative to demolition and for GHA’s input to developing Sep 07 mixed tenure communities assessed in consultation with key stakeholders GHA’s city-wide stock profile broken down into localised targets for stock retention and demolition in Mar 08 consultation with LHOs, GCC and other stakeholders Plans to increase the supply of housing to address identified shortfalls in housing for people with Mar 08 particular needs and for wheelchair accessible homes agreed Asset Management Position Statement published Annual 33 Rolling three-year Investment Plan published Annual To develop policies Existing policies which impact on asset management reviewed in light of changes since initial approval, Sep 07 and procedures including the introduction of IAMS and implementation of Local Shared Services Comprehensive portfolio of asset management policies developed and additional policies and Sep 08 procedures approved as required
  36. 36. Gear our activities and investment programmes to deliver better homes Aim: To deliver a high quality portfolio that is environmentally sustainable, energy efficient and capable of being managed and maintained in the longer-term at reasonable cost. Objective Measure of success Target date To improve housing Stock condition survey updated, impact on outstanding investment need identified, and revised business Dec 07 and neighbourhood plan investment profile prepared quality Standard delivery plan for GHA stock to meet the Scottish Housing Quality Standard (SHQS) reviewed Sep 07 Delivery of GHA investment programmes to meet tenant promises and to meet or better the SHQS Annual Satisfaction with quality of work carried out through GHA investment programme increased to 75% of Mar 08 tenants in properties receiving investment GHA demolition programme revised in light of the outcome of the 2008 Demand Review and Dec 08 completion of the HFA process 34 Procurement strategy for repairs and maintenance services for the period post 2008 developed and Jun 07 agreed Cyclical maintenance programmes prepared for all properties Dec 07 Post-investment resident satisfaction surveys completed and recommendations made on any changes Mar 08 to policy, practice and communications
  37. 37. To improve energy Sustainability strategy action plan implemented As per efficiency and plan environmental sustainability Sustainability principles and actions incorporated in LHO investment plans and new-build programme Ongoing Continued delivery of Warm Deal investment for those properties not completed by 31 March 2007 Ongoing Identified implications for GHA of Communities Scotland Sustainability policy Mar 08 To improve the Agreed recommendations from baseline evaluation of Modernised Housing Services delivered Aug 07 delivery of housing services Standards at which properties are let improved Dec 07 Choice based letting system implemented Oct 07 Monitoring arrangements in place to track the impact of changes in service delivery on the performance Mar 08 of GHA assets Review the operation of GHA’s Adaptations Policy Sep 07 35
  38. 38. Use our assets and resources to build stronger communties Aim: to deliver a stock portfolio that is integrated into successful neighbourhoods, promoting strong communities, enhancing community development and creating places that generate civic pride Objective Measure of success Target date To improve Neighbourhood Quality Improvement Fund (NQIF) projects appraised and programme to improve Dec 07 neighbourhood environmental and recreational standards extended taking account of lessons from the pilots management Deliver locally responsive services through neighbourhood management partnerships Sep 07 with GCC and other stakeholders Environmental strategy developed and approved following consultation Sep 07 To deliver GHA Action plan for GHA Wider Action Strategy implemented As per input to plan comprehensive community In conjunction with Local Shared Services, build LHO capacity to deliver wider action. Coach 22 LHOs to Mar 08 36 regeneration develop their own wider action strategy and delivery plan Delivery mechanism and partnerships for ‘transformational’ regeneration programme/projects Mar 08 developed and agreed To address tenure Potential for diversification through mixed tenure development, home ownership initiatives and Sep 07 imbalance Mortgage to Rent assessed in consultation with key stakeholders
  39. 39. To make an Action plans for GHA’s Housing and Community Care and Equality and Diversity strategies implemented As per effective plan contribution to community care Assistance provided to LHO’s to prepare local Housing and Community Care strategies in collaboration Mar 08 and diversity with Community Planning and Community Health and Social Care Partnerships Provision for particular needs incorporated into revised GHA New-Build Strategy Oct 07 GHA’s new-build activities co-ordinated with those of other providers to effectively address the shortfall Oct 07 of provision for a range of groups with particular needs Forward new-build programme planned, coordinated and profiled and New-Build Strategy updated Oct 07 37
  40. 40. Deliver tenant and community control Aim: to achieve the fullest possible local influence and control over the ownership and management of the housing stock. Objective Measure of success Target date To develop the LHO Asset management functions to be devolved to Local Shared Service centres agreed and implemented Sep 07 network Support provided to LHOs to engage effectively with Local Housing Forums and in the review of Area Mar 08 Development Frameworks To develop tenant Arrangements in place to maximise resident participation, including from community care groups, in the Sep 07 empowerment, asset management decision-making processes affecting the future of the stock equality and diversity Effective communication with and engagement of tenants, LHOs and other key stakeholders in process Mar 08 for determining the future of GHA properties Implement key findings of 2006 Tenant Satisfaction Survey and approved action plan As per plan 38 LHOs supported to develop an information base on the needs of people from equalities groups in their Sep 07 area To promote Action plan for GHA’s Equality and Diversity Strategy implemented As per diversity and plan equality The needs of equality and diversity groups recognised in the preparation of GHA/LHO led Dec 07 neighbourhood strategies, emerging from development studies and other planning processes
  41. 41. To deliver Second LHO community ownership business cases assessed against GHA business plan Aug 07 Stage Transfer LHOs provided with full and accurately disaggregated stock, cost, and income data in accordance with Annual the current business plan Future life of existing GHA properties resolved in consultation with LHOs and other key stakeholders to Sep 08 inform preparation of SST proposals 39

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