ASSET MANAGEMENT STRATEGY Draft

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ASSET MANAGEMENT STRATEGY Draft

  1. 1. C O N S U L T A T I O N ASSET MANAGEMENT STRATEGY Draft Better homes, better lives
  2. 2. C O N S U L T A T I O N FOREWORD The Asset Management Strategy marks a further example of GHA’s commitment to openness and transparency. It represents a significant stage in how GHA moves from being the receiving landlord in the original stock transfer from the City Council towards the delivery of our commitment to the onward transfer of the stock to other, more locally based, and tenant controlled organisations. When GHA inherited the housing from the City Council, it is beyond dispute that the stock had suffered from many years of inadequate investment. With the support of the Scottish Executive and our funders, and working closely with the LHO network, GHA has set about the task of putting the housing stock on a firmer footing: • Recognising that the least sustainable properties need to be removed and working with LHOs, tenants and the Council to deliver that. • Stepping up investment in stock that can be retained and delivering on key tenant priorities more quickly than even we had anticipated. • Holding rent increases at inflation to bring GHA rents more closely into line with rents charged by other social landlords • Helping our tenants to enjoy their homes through programmes to tackle anti-social behaviour and a range of wider action initiatives • Reorganising estate management arrangements to provide more services to a wider range of tenants At the same time as we have been doing this, we have been exploring the legal, financial, and technical issues facing us in pursuing the onward transfer of the stock. This is presently focussed on the SST Pilot Programme; but with our recent invitation to all LHOs to confirm their interest in pursuing second stage transfer we need to extend our thinking to include all of the properties. 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 key challenges we inherited. As we dispose of the stock to other, much smaller organisations, we have a duty to tenants and others to ensure that these risks are recognised and that arrangements remain in place to deal with them. This Asset Management Strategy represents GHA’s first comprehensive statement of the various approaches we are using to move stock through to the second transfer process. We believe that this will make second stage transfer more deliverable, and by engaging LHO committee and staff in the process with us, will raise their awareness of the challenges ahead and the arrangements needed to ensure that these challenges are met positively and overcome in the interest of delivering the transformed and sustainable housing stock the city needs. Michael Lennon Chief Executive GHA DRAFT ASSET MANAGEMENT STRATEGY / 1
  3. 3. C O N S U L T A T I O N SUMMARY GHA owns a varied portfolio of over 74,000 houses plus related assets including land, shops, offices, and garages. GHA’s asset management strategy will provide a decision-making framework to ensure that these physical assets are utilised to best effect, and their value enhanced, to deliver GHA’s overall strategic aims and objectives. The strategy identifies the key challenges and GHA’s strategic objectives for asset management, together with related priority actions. It also describes the demand position and operating context for GHA, including the legislative, contractual and regulatory constraints that influence GHA’s approach to asset management, many of which will continue to apply following second stage transfer. Asset management aims GHA’s Business Plan identifies 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 10 years time, is part of a new sustainable housing system in Glasgow, within which GHA’s stock is: • Of a quality, type and located 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 deliver this, the asset management strategy must extend beyond property maintenance and investment, to encompass other areas of policy and practice that impact upon the future sustainability and value of the stock. The strategy complements GHA’s Business Plan, Sustainability Strategy and other corporate priorities, in particular GHA’s aim to achieve community ownership of a majority of the stock by 2008. Asset management challenges The extent of stock with an uncertain future presents a major asset management challenge in terms of achieving GHA’s aims to create sustainable homes and neighbourhoods, and to transfer the stock to community ownership. Around 25,000 units are identified as non-core stock at March 2006 (6,600 moving toward demolition, 10,100 for review in GHA’s Regeneration Areas and 8,300 for review in other areas). The total non-core stock exceeds by 10,000 GHA DRAFT ASSET MANAGEMENT STRATEGY / 2
  4. 4. C O N S U L T A T I O N units the capacity remaining within GHA’s current planned demolition programme. A key challenge therefore is how to identify which of the properties requiring review are to be demolished (and indeed, whether disposal is more appropriate). A related issue is how then to deal with or turn around the 10,000 non-core stock units that cannot be accommodated within the current demolition programme, to address demand risk, thereby supporting the second stage transfer process. The current stage of the investment programme presents a further complexity. GHA is 3 years into a 10 year investment programme to upgrade the 49,000 units designated as core stock to meet the Scottish Housing Quality Standard, with a 2,800 unit new-build programme planned. GHA requires to allocate remaining investment resources across the LHO network, to support planning of second stage transfer and delivery of LHO Local Investment Plans. Strategic Objectives GHA already has in place a number of processes geared to support asset management and decision-making about the future of the stock. However, there is a need to further develop and consolidate our approach so that it is geared more effectively to deliver the asset management aims and the transfer of the stock to community ownership. To this end, GHA has identified 5 strategic objectives for asset management: Objective 1: to develop a strategic approach to re-structuring GHA’s stock portfolio The target outcome is to achieve by 2016 a stock portfolio of a scale, quality and type of housing to meets the needs of a wide range of current and future customers. This will necessitate the stock to be re-structured to match need and demand. Priorities include: Objective 2: to gear GHA’s activities and investment to deliver “better homes” The target outcome is to achieve by 2016 a stock portfolio that is environmentally sustainable, energy efficient and economic to run. Objective 3: to use assets and resources to build stronger communities The target outcome is to deliver a stock portfolio that is integrated into successful neighbourhoods. This will require a focus on community regeneration, neighbourhood management and tenure balance. Objective 4: to deliver tenant and community control The target outcome is the fullest possible local control and influence over the ownership and management of the housing stock. Objective 5: to build asset value The target outcome is to deliver appreciation in value for GHA’s housing and non-housing property portfolio that reflects GHA’s capital investment programme and effective management arrangements. GHA DRAFT ASSET MANAGEMENT STRATEGY / 3
  5. 5. C O N S U L T A T I O N Delivering the strategy To support the delivery of the strategy a dedicated Asset Planning and Programme Development Team has been established within GHA’s Investment and Regeneration division. The team is taking forward the development of an asset management system to enable GHA to maintain and model information about the property portfolio, to support management and investment decisions. A range of policies, plans and work programmes will to support the delivery of the asset management strategy, to include a systematic approach to monitoring and evaluation. Communication GHA’s Asset Management Strategy has the following core communication objectives: • To develop informed awareness and support amongst stakeholders for the future of social housing in Glasgow as envisaged in GHA’s Business Plan; • To build trust and manage expectations of GHA among all stakeholder groups, developing and sustaining the credibility of the organisation. In furtherance of these objectives, GHA will publish an annual Asset Management Position Statement, providing an update on the asset base, a summary of stock utilisation, customer base, and housing market change. GHA will also publish an annual Investment Plan, the first covering proposals the 3- year period 2006/07 to 2008/09. Consultation In line with GHA’s commitment to consultation, a tailored programme of consultation on the strategy will commence in June 2006, with the aim of having a finalised Strategy in place by the autumn. Consultation responses are invited from LHOs, Registered Tenants’ Organisations and key stakeholders on all aspects and proposals within the draft asset management strategy. However, the key questions below highlight some particular asset management issues for consideration. The strategy generally: 1. Do you agree with the 5 strategic objectives for asset management identified by GHA? 2. Are the correct actions and priorities identified under each objective? GHA DRAFT ASSET MANAGEMENT STRATEGY / 4
  6. 6. C O N S U L T A T I O N Strategic Objective 1, developing a strategic approach to re-structuring the stock: 3. How successful is the Local Investment Planning Process? Are there ways in which it can be further improved? 4. Should GHA extend the range of options to be considered for vacant non-core stock to include stock disposal? In what circumstances should GHA consider this option? Strategic Objective 2, gearing GHA’s activities and investment to deliver better homes: 5. What are the key housing quality issues we need to address within the resources available to fund our investment programme? Strategic Objective 3, creating stronger communities: 6. Should GHA and its successors through SST, be a facilitator, direct provider, or joint venture partner in mixed tenure development? 7. How can GHA support LHOs to strengthen their capacity to become local regeneration vehicles? Strategic Objective 4, delivering tenant and community control: 8. In the run-up to SST, what is the best way of achieving tenant and resident participation in the asset management decision-making processes? 9. How should GHA support development of viable SST proposals to address demand risk attached to non-core stock? Strategic Objective 5, building asset value: 10. GHA has identified Net Present Value (NPV) as the financial indicator most relevant to assessing investment in GHA’s stock. Do you agree that this is the appropriate financial appraisal methodology? 11. The proposed non-financial criteria for evaluating investment proposals focus on Better Homes, Stronger Communities and Delivering Tenant and Community Control. What other factors should be considered? Which issues should be given most weight? GHA DRAFT ASSET MANAGEMENT STRATEGY / 5
  7. 7. C O N S U L T A T I O N Responses to the consultation should be returned by 18th August 2006 to: Policy and Service Development Team Glasgow Housing Association 177, Trongate Glasgow G1 5HF GHA DRAFT ASSET MANAGEMENT STRATEGY / 6
  8. 8. C O N S U L T A T I O N ASSET MANAGEMENT CURRENT POSITION AND PRIORITIES Strategic Objective 1: Developing a strategic approach to restructuring GHA’s stock Overall aim / target outcomes: Making decisions about the future of the stock to achieve a stock 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. This will require a focus on housing demand, on customer base and needs, and on effective re-structuring of the stock to match need and demand Current Position: 1) Demand: • Joint work undertaken with GCC to assess demand for social rented housing, with the first 3-yearly demand Review completed in 2005. The emerging findings were reflected in GHA’s 2005/06 Business Plan. • GHA analysis of lettings and waiting list data undertaken to aid understanding of housing demand and customer preference at city-wide and local Housing Market Area level. 2) GHA customer base and needs assessment: • Analysis of GHA current customer base and related housing needs undertaken, through Lettings Review and Tenant Satisfaction Survey. • Review of GHA sheltered housing service ongoing • Joint working with GCC to develop a GHA Housing and Community Care Strategy • The furnished lets service being improved to better meet the needs of customers. 3) Planning the re-structuring GHA’s stock portfolio: • Stock classification exercise successfully undertaken by GHA and the LHOs, resulting in the designation of over 49,000 units as “core stock”, with a 3-year programme of stock approved for demolition, and a significant start made on planning GHA’s large scale regeneration projects. • The stock approved for demolition identified with LHOs via the Housing Futures Assessment process, with a 3 year demolition programme identified for the period 2005/06 to 2007/08 • New 3-year LHO investment planning process implemented successfully, achieving greater LHO input to investment and supporting medium term forward planning • GHA new-build strategy developed, with a 3-year site programme identified and a number of projects actively being worked up, with site acquisitions planned. GHA DRAFT ASSET MANAGEMENT STRATEGY / 7
  9. 9. C O N S U L T A T I O N Actions and priorities 1) Demand • GHA will work with the Council and other partners to develop understanding of the local housing market in the city, particularly focusing on local area sub- markets and on the impact of housing quality upon demand 2) Customer base • GHA will improve understanding of customer needs through a programme of local tenant satisfaction surveys /social surveys connected to the investment programme, and research targeted to particular housing needs and tenancy failure for homelessness referrals 3) Planning the re-structuring of GHA’s stock portfolio • GHA will develop the Housing Futures Assessment and investment appraisal processes to embrace stock disposal as an option for stock agreed as unsuitable for retention. • GHA will work with LHOs and other stakeholders to consider the implications for stock where new-build provision emerges as a better value alternative to full stock retention. • Assumptions to be agreed with LHOs about the future demolition programme to support the second stage transfer disaggregation process • Improved appraisal processes will be implemented, including full financial assessment and re-housing planning for stock proposed for inclusion within the clearance programme, to achieve early re-housing and to minimise costs to GHA’s business plan • Local investment planning process to be further developed, with a focus on development of neighbourhood housing strategies 4) Policy development • Develop a suite of policies and procedures to underpin GHA’s asset management strategy and system GHA DRAFT ASSET MANAGEMENT STRATEGY / 8
  10. 10. C O N S U L T A T I O N Asset Management Strategic Objective 2: Delivering better homes Overall aim / target outcomes: To achieve a high-quality housing portfolio that is environmentally sustainable, energy efficient and capable of being managed and maintained in the long-term at reasonable cost. This will require a focus upon improving housing and neighbourhood quality, improving energy efficiency and environmental sustainability of the stock, and improving the housing service. Current Position: 1) Housing and neighbourhood quality: • 10 year Investment programme to core stock well underway, with GHA on course for stock to meet Scottish Housing Quality Standard by 2015, and with accelerated provision of kitchens and bathrooms in response to tenant demand • New £30 million Housing Quality Improvement Fund established for specification enhancements • Stock Condition Survey update complete and work ongoing to disaggregate investment programme for SST purposes • Holding investment programme established for non-core stock with a lifespan of more than 3 years • Capital programme provision made to fund some stock re-modelling and adaptations • Responsive repairs being delivered via 5 year contract with Building Services • Cyclical maintenance programme established 2) Energy efficiency and environmental sustainability • Investment programme incorporating heating and over-cladding • GHA Design Guide developed and launched • GHA Energy Team and Wrap Around Warmth initiative established 3) Housing management service • Housing Services review established and implementation proceeding • Neighbour Relations and “hot-spot team to tackle serious anti-social behaviour • Review of Allocation System completed GHA DRAFT ASSET MANAGEMENT STRATEGY / 9
  11. 11. C O N S U L T A T I O N Actions and priorities 1) Housing and Neighbourhood Quality • In preparation for the 2008 expiry of the current maintenance contract with Building Services, GHA will work jointly with stakeholders to consider the shape of the repair service required post-2008 and the related service arrangements • On new-build the focus will be on delivery, design, procurement, and SST disaggregation • GHA will work with other stakeholders to assess and explore funding options for adaptations, to improve provision and mitigate risk to SST bodies 2) Energy efficiency and environmental sustainability study • GHA Sustainability Strategy to be implemented, with implications for procurement, site development, design, and materials 3) Housing management service • Full implementation of the Housing Services Review to be achieved by 2007 • Implementation of a Choice-Based Letting System for allocating property • Additional improvements to the Housing Service, including hand-held technology and an improved welcome package for new tenants GHA DRAFT ASSET MANAGEMENT STRATEGY / 10
  12. 12. C O N S U L T A T I O N Asset Management Strategic Objective 3: Creating stronger communities Overall aim / target outcomes: To deliver a stock portfolio that is integrated into successful neighbourhoods, promoting strong communities, enhancing community development, and creating places that generate civic pride. Improving neighbourhood management, delivering comprehensive community regeneration, and developing GHA’s role in the city’s Community Planning framework will help achieve this. Meeting this objective will also require tenure balance to be addressed through mixed tenure development and an effective GHA contribution to Community Care. Current Position: 1) Neighbourhood management • Neighbourhood Quality Improvement Fund introduced with £3million funding for 2005/06 and 4 pilot initiatives underway 2) Community Planning and community regeneration • GHA represented on Glasgow Community Planning Partnership Board • Community Planning Partnerships and Local Housing Forums to be established across the city. • GHA Neighbourhood Renewal Strategy (2005) with themes of financial inclusion, jobs and training, community learning and development and Wrap around Warmth • Welfare Benefit Support advisors employed • Neighbourhood Renewal Budget provision made 3) Tenure diversification • Through the operation of the Right to Buy, many GHA properties already sit in successful, mixed tenure estates. • GCC-led New Neighbourhood and regeneration projects will develop housing for sale in neighbourhoods in which GHA property is located. • In areas where it faces the most challenging regeneration projects, GHA has appointed consultants to prepare development plans, including considering options for mixed tenure solutions. 4) Community Care • GHA Housing and Community Care Strategy developed 5) Dealing with diversity • GHA Equality and Diversity Strategy developed GHA DRAFT ASSET MANAGEMENT STRATEGY / 11
  13. 13. C O N S U L T A T I O N Actions and priorities 1) Neighbourhood management • GHA to extend Neighbourhood Quality Improvement Fund programme to other areas • GHA to develop local neighbourhood services pilots in conjunction with GCC 2) Community Planning and community regeneration • GHA will work with community planning partners to target extra funding to help the most deprived communities, to achieve community regeneration • GHA will extend its involvement beyond the city-wide focus, to engage effectively in the new Local Housing Forums being established by the Council across the city • GHA will implement an integrated programme of training for managers and staff, and will align Community Planning targets with opportunities created through the Neighbourhood Renewal programme. • GHA will work with LHOs to build capacity so that LHOs can progressively become local regeneration vehicles 3) Tenure Diversification • Working with key partners, GHA will develop its approach to mixed tenure, to provide choice and balanced communities and to maximise long-term benefits in the most deprived neighbourhoods. • To this end, GHA will undertake a comprehensive assessment of the need and potential for tenure diversification, including identification of potential constraints • The new local investment planning process will help LHOs to identify proposals to address tenure imbalance 4) Community Care • GHA Housing and Community Care Strategy will be taken forward jointly with GCC and Greater Glasgow Health Board • Assistance provided to LHOs to develop Local Housing and Community Care Strategies with partners at the local level. • GHA will seek to incorporate some provision for particular needs within new- build 5) Dealing with diversity • GHA will work with bodies representing disadvantaged groups to respond positively to the equality of access objectives identified within the Council’s Local Housing Strategy GHA DRAFT ASSET MANAGEMENT STRATEGY / 12
  14. 14. C O N S U L T A T I O N Asset Management Strategic Objective 4: Delivering tenant and community control Overall aim / target outcomes: To achieve the fullest possible local influence and control over the ownership and management of the housing stock. This will be achieved through development of the LHO network, developing and implementing arrangements for tenant empowerment and equality and diversity, and delivery of second stage transfer. Current Position: 1) Development of the LHO network • LHO network in place and split of responsibilities set out within the Revised Management Agreement • LHO Chairs Forum established. 2) Tenant empowerment and equality and diversity • Programme of tenant consultation implemented on key policy and service issues • Revised GHA Tenant Participation Strategy and Policy 2005-2007 approved and rolled out 3) Second Stage Transfer • Pilot programme identified and working group arrangements established to address the legal and financial framework • The majority of LHOs have submitted Community Ownership Intentions and the appraisal of these is under way GHA DRAFT ASSET MANAGEMENT STRATEGY / 13
  15. 15. C O N S U L T A T I O N Actions and priorities 1) Development of the LHO network • GHA will put in place arrangements to build the capacity of the LHO network and will work in partnership wit the network to introduce innovative service sharing arrangements • GHA will progressively devolve central functions to LHO level 2) Tenant empowerment and equality and diversity • GHA will further develop the Tenant Participation Strategy • GHA will work with LHOs to maximise tenant and resident participation in the asset management decision-making processes affecting the future of the stock • GHA will develop and implement the Equality and Diversity Strategy 3) Second Stage Transfer • GHA implement plans to transfer a majority of the stock to local tenant- controlled landlords by 2008 • GHA will assess all LHO Community Ownership Intention submissions during 2006 • GHA will support development of viable proposals to address demand risk that attaches to the significant amount of non-core stock • Full and accurate disaggregated stock cost and income data will be provided to underpin stock valuation • The asset management system will be designed to support the SST process and to cope with GHA’s changing asset base • GHA Board is considering a process for taking forward the SST pilots to conclusion in 2006 GHA DRAFT ASSET MANAGEMENT STRATEGY / 14
  16. 16. C O N S U L T A T I O N Asset Management Strategic Objective 5: Building asset value Overall aim / target outcomes: To deliver a property portfolio, embracing residential and non-housing assets that have appreciated in value reflective of GHA’s capital investment and effective management arrangements. This will be achieved by introducing new financial and non-financial appraisal techniques, the re-structuring of GHA’s rents and service charges following the rent guarantee period, and by developing our approach to managing our non-housing assets Current Position: 1) Rent structure • Rents currently set based on factors, such as local amenity and stock condition, that are out of date • The variation between individual rents do not reflect tenants' perception of value • Many tenants contribute to meeting the cost of services they do not receive 2) Appraisal techniques • Full financial appraisal of investment proposals is carried out for properties subject to development plans and option appraisals • Non-financial appraisal of proposals is not carried out using consistent criteria • Properties receiving standard core-stock investment are not subject to appraisal 3) Managing GHA’s non-housing assets • Sites emerging from GHA's demolition programme can be used by GHA for social rented purposes or are subject to a land protocol giving GCC the opportunity to direct disposals at nil value to other housing providers • GHA's shop portfolio is highly occupied, but in many cases leases are only for a short-term • The income gained from telecommunications equipment is significant, but the drivers influencing sustainability of that income are not well understood GHA DRAFT ASSET MANAGEMENT STRATEGY / 15
  17. 17. C O N S U L T A T I O N Actions and priorities 1) Rent structure • Consult on and implement the rent structure review following expiry of the current rent guarantee periods 2) Appraisal techniques • Develop strategic investment appraisal tool and implement programme of full financial appraisal and financial modelling for non-core stock not yet approved for demolition, including stock designated as major regeneration projects • Fully disaggregated 30 year cash flows for stock to be prepared and incorporated within the development briefs for major regeneration projects • Progressively extend financial appraisal to all of GHA stock groupings, to enable assessment of the long-term value of all GHA stock on a consistent basis • Develop GHA non-financial appraisal criteria and process for non-core stock not yet approved for demolition. 3) Managing our non-housing assets • Agree with GCC procedures for processing non- Regeneration Scheme Agreement sites emerging from GHA demolition programme, working with LHOs and other stakeholders to identify demolition sites required for provision of social rented housing, having regard to demand for re-housing of tenants affected by clearance, sustainability and potential for mixed tenure, and availability of resources • Implement review of GHA’s portfolios of shops, lock-ups/garages, and community facilities GHA DRAFT ASSET MANAGEMENT STRATEGY / 16
  18. 18. C O N S U L T A T I O N 1. INTRODUCTION GHA’s overall aim is to transform social housing, creating sustainable homes and successful neighbourhoods. Effective asset management - how the association uses, looks after and makes decisions about the future of its properties, and optimises their value - will be crucial to the successful delivery of this vision. Effective asset management requires a solid information base, robust planning and strategic direction and appropriate delivery mechanisms. The purpose of the asset management strategy is to provide a robust framework, covering these key areas, to guide GHA’s decision-making about its property assets in order to deliver GHA’s overall aim. Whilst a primary focus for the asset management strategy will be property related programmes of spend, both capital and revenue, many other areas of GHA’s business have a bearing on the sustainability and value of the stock, such as the quality, effectiveness, and cost of the housing service, rental levels, and the housing market in the city, and will be considered within the strategy. The strategy will reflect the need for an integrated approach across all of GHA’s activities, to ensure asset management consistent with and complementary to the business plan, GHA’s second stage transfer plans, sustainability, and community care strategies and other key corporate priorities. This document provides a framework for decision-making, describes GHA’s operating context, and sets out the strategic objectives, priority actions, and approaches through which GHA’s ballot commitments to tenants, our long-term target outcomes, and asset appreciation will be achieved. GHA will deliver on this strategy by working in close partnership with the Local Housing Organisations (LHOs) that manage GHA’s stock, and other partners, in particular GHA’s tenants and the Council as the strategic housing and planning authority. GHA DRAFT ASSET MANAGEMENT STRATEGY / 17
  19. 19. C O N S U L T A T I O N 2. THE KEY ASSET MANAGEMENT CHALLENGES GHA owns a hugely varied portfolio of over 74,000 houses plus other assets including land, shops, offices and lock-ups, and is now almost 3 years into a 10 year programme to upgrade the housing stock. At the same time as planning and implementing the investment programme, GHA is planning to transfer the stock to local community ownership, through the second stage transfer (SST) process. A stock classification exercise has been undertaken by GHA in partnership with the LHOs, based on historic performance of the stock and perception of demand prospects, and has resulted in over 49,000 units of the stock being identified as “core” stock, considered as safe for major investment, and sustainable over the long term. To date, working closely with LHOs, the investment programme has been targeted to this “core” stock, while planning for the future of the remaining stock is undertaken. Smaller units heavily dominate the stock portfolio, with 79% of the stock comprising 2 bedroom or less. It is also predominantly flatted; with tenement flats and deck access comprising 43% of the total stock and with multi-storey flats comprising 31%. Own door houses and cottage flats represent 21% of the stock portfolio, virtually all of which readily attract and retain tenants, and are designated as “core” stock. Older person’s housing comprises 5% of the total stock. GHA has identified 11 major Regeneration Areas and 7 smaller Regeneration Projects, where some form of master planning or option appraisal study will be required to allow long-term decisions. At March 2006, approximately 10,100 units were included in the Regeneration Areas and 8,300 units in smaller groups of stock requiring appraisal. A further 6,600 properties were included in GHA’s 3-year demolition programme GHA is currently planning on the basis of an overall demolition programme of approximately 19,000 with around 15,500 properties still to be demolished beyond 1 April 2006. Working with LHOs, The programme of demolition reduces GHA’s stock base in line with the current projection of long-term demand for the city's social rented housing. It is anticipated that many of the demolitions still to be identified will be of low demand tenement and multi-storey stock within the regeneration areas. GHA DRAFT ASSET MANAGEMENT STRATEGY / 18
  20. 20. C O N S U L T A T I O N GHA is planning to provide 3,000 new-build homes for rent, that together with a further 3,000 to be provided by other RSLs are to be used as reprovisioning for GHA tenants affected by demolition. Therefore, GHA will face many critical decisions in the years ahead, particularly in relation to under-performing “non-core” stock to determine which stock can be retained and how it can be made sustainable over the long term, which stock will not be retained and whether it should be demolished or disposed of for alternative use, and where replacement new-build should occur. The organisation is fortunate to have in place a private and public funding package and firm plans to deliver the improvement of the housing, to undertake the demolition programme and provide new-build homes. However, these programmes are being delivered over a 10-year period, and against a complex and changing external environment, not least the planned delivery of second stage transfer. It is because of this context that GHA needs to have a robust and widely accepted strategy to guide decision-making and to support regular review, notwithstanding the firm commitments and decisions that are already in place and the very real improvements that have been delivered to date. In summary, the priority asset management issues facing GHA are: • The significant level of reduction in the stock base stock planned over the 10-year period, how and when the relevant stock should be identified and how the reduction can be achieved to best effect. • How to deal with or turn around poorly performing and uneconomic stock, the amount of which outstrips the currently planned level of stock reduction. • Tailoring the portfolio and stock investment to meet the Scottish Housing Quality Standard, the changing demand picture, and a changing customer base and customer expectations over this 10- year period. • The planned programme of new-build housing and how this opportunity is best used to deliver GHA’s overall long-term aim. • How to then maintain and manage the stock to ensure long-term sustainability. • Scope for facilitating mixed tenure development where appropriate to enhance long-term sustainability. In addressing these issues, the asset management strategy objectives, priorities, and action plan will take account of the following complexities and challenges unique to the GHA initiative: • The sheer scale and complexity of the GHA stock portfolio and the 10-year time horizon for the post-transfer investment. GHA DRAFT ASSET MANAGEMENT STRATEGY / 19
  21. 21. C O N S U L T A T I O N • GHA’s commitment to community ownership, with ambitious plans to deliver second stage transfer of a majority of the stock to local ownership by 2008, and the consequent need to ensure that the asset management strategy is appropriate not just to the needs of GHA but also tailored and sufficiently flexible to meet the needs of the future local community landlord organisations. • The need to allocate available resources, with the plans being brought forward by LHOs increasingly demonstrating their preparedness to develop radical and ambitious plans for their local communities and housing, with a push to drive improvement standards upwards. • How therefore to strike a balance and maximise commonality between the aims and objectives set out in this strategy and the aspirations of the Local Housing Organisations and tenants, to deliver the best asset management outcomes for the benefit of all • The external legislative, contractual, and regulatory constraints within which GHA requires to operate • The need to manage and mitigate risk directly relevant to asset management GHA’s asset management approach must take account of its contractual commitments and statutory and regulatory requirements, with the constraints imposed by the Transfer Agreement and Loan Facilities Agreement of particular significance. In addition, the Councils' strategic housing investment priorities will be a key influence on GHA asset management. GHA’S current approach to managing its assets The organisation already has in place a number of processes and programmes geared to support asset management, on which this strategy builds and develops. These include: Identifying what stock GHA needs: • Assessing demand for GHA’s stock. • Working with LHOs to regularly classify the stock, identifying core stock, stock for demolition and stock for appraisal. • Assessing the stock identified for appraisal through the Housing Futures Assessment process. • Working with LHOs, strategic partners and other RSLs to plan the new-build re-provisioning programme. Managing the stock: • Developing with LHOs the arrangements for managing the stock, and implementing the housing services review GHA DRAFT ASSET MANAGEMENT STRATEGY / 20
  22. 22. C O N S U L T A T I O N • Arrangements for 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 Scottish Housing Quality Standard by 2015 • Working with LHOs to develop and implement proposals to upgrade the core stock and provide “holding” investment to non- core stock with a lifespan of more than 3 years • Developing and implementing proposals for cyclical maintenance and responsive repairs • Assessing requirement for conversion of 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 a neighbourhood renewal strategy • Participating in the city’s Community Planning arrangements • Working with LHOs and strategic partners to develop and implement plans for GHA stock and activities at the local level Procurement • Developing and delivering GHA’s procurement for capital works • Conducting a procurement exercise for revenue maintenance from March 2008 onwards Effective management of non-housing assets • Developing and reviewing GHA’s portfolios of shops and offices, garages and lock-ups, community facilities and other non- residential property assets. • Updating the valuation of the properties and considering GHA’s strategic options in the context of SST. GHA DRAFT ASSET MANAGEMENT STRATEGY / 21
  23. 23. C O N S U L T A T I O N 3. OPERATING CONTEXT Strategic context for the Glasgow stock transfer The stock transfer was progressed in the context of the stock transfer Framework Agreement as agreed between the Council and the Scottish Executive. The Statutory Consultation Notices 1 and 2 issued to tenants before the ballot provided guarantees and commitments to tenants covering in particular rent levels, investment levels and timescales, repairs and maintenance, delivery of the local housing service through a network of designated Local Housing Organisations, tenant participation and control, and second stage transfer. Statutory and regulatory framework As a registered social landlord (RSL), GHA requires to comply with the Housing Scotland Act 2001 and other legislation governing the activities of RSLs, including statutory provisions relating to disposal of assets1 and the requirement to assist the local authority in addressing homelessness2. The 2001 Act obliges every social rented landlord to prepare a tenant participation strategy setting out arrangements for obtaining views and for notification and provision of information to tenants3. Specifically, Section 54 of the Act requires landlords to notify and consult with tenants and Registered Tenants Organisations about: • Any proposals for policies in relation to housing management, repairs or maintenance, where the proposal is likely significantly to affect the tenant, • The standard of service in relation to housing management, repairs, and maintenance. After the Glasgow transfer, the Scottish Executive introduced the Scottish Housing Quality Standard, a national target for warm, dry, decent homes for all RSLs and public sector landlords to be met by 20154. The 2006 Housing Act contains provisions that will affect GHA’s management of property assets, including powers granted to local authorities to designate Housing Renewal Areas5 and new powers for the 1 Sections 65 to 68 2 Section 5 3 Section 23 4 The standard was announced in the Scottish Parliament on 4 February 2004 and guidance on the standard issued to local Authorities and RSLs the same day. 5 Section 1 GHA DRAFT ASSET MANAGEMENT STRATEGY / 22
  24. 24. C O N S U L T A T I O N Scottish Executive to direct RSLs, including GHA, to delegate functions to Local Housing Organisations6. As a registered charity, GHA’s activities are also governed by legislation for charitable organisations. The most significant impact of GHA’s charitable status on its Asset Management Strategy is the association’s ability to reclaim VAT on much of the investment programme expenditure via a Development Agreement between GHA and the Council, with the arrangement agreed by HM Revenue and Customs. In addition, as a registered social landlord, GHA is subject to regulation and inspection by Communities Scotland, against a number of general and activity-specific Performance Standards7. The Performance Standards of particular relevance to GHA’s asset management include Resource Management (GS1), Risk Management (GS4.4) and Stock Management (AS2.2). A more detailed description of these and other relevant Performance Standards is provided in Appendix 1. Contractual framework A Transfer Agreement, between GHA and the Council, governs the terms on which the stock transferred to GHA. This Agreement places considerable constraints on how GHA can utilise its assets. These include: • The Disposals Clawback Agreement - restricting GHA’s ability to benefit from the disposal of land or properties, subject to Scottish Ministers’ discretion. • The Land Protocol - setting out provisions for GHA and GCC to resolve the treatment of GHA-owned land surplus to GHA’s own re-provisioning needs. • The Regeneration Scheme Agreement - requiring GHA to pass back to Council ownership vacant sites created from specific demolitions approved by GCC pre-transfer and regulating the handback process and apportionment of costs. The Agreement also 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 arrangements for maintenance of GHA properties and adjacent land, including Unadopted8 Roads and Footpaths used to access GHA stock. 6 Section 177 of the Act introduced a new section 68A of the Housing (Scotland) Act 2001 7 Performance Standards for Registered Social Landlords’, Scottish Homes and the Scottish Federation of Housing Associations, April 1999 8 An unadopted road has not been adopted for maintenance by the local authority. Such roads are not normally available for use by the public, but in many GHA estates many of them are part of the public road and footpath network. GHA DRAFT ASSET MANAGEMENT STRATEGY / 23
  25. 25. C O N S U L T A T I O N • Provision of accommodation to homeless applicants and of Temporary Furnished Flats • Requirement to deliver the investment commitments • Requirement to effect second stage transfer subject to fulfilment of certain conditions • Right-to-Buy Sharing Agreement - which governs the distribution of receipts generated from RTB sales between GHA and GCC. Finally, the terms of Scottish Executive Grant Determinations for the various funding streams to GHA will have a bearing on GHA asset management, including: • £20.6m towards the cost of GHA installing central heating systems to deliver the Scottish Executive’s ‘Warm Deal’ programme for tenants in social rented properties. • £114m towards the cost of demolitions, including repurchase of properties bought under right to buy and payment of Home Loss and Disturbance. • £113m towards the cost of GHA’s new build programme. The availability of these grants, together with the terms of the Disposals Clawback and other agreements, will influence GHA’s management of its property assets and the financial implications for the association of pursuing alternative strategies. Funding conditions In managing its assets, GHA must have regard to the conditions attached to the borrowing facility made available by its funding consortium. The Loan Facilities Agreement governing GHA’s access to these funds contains several conditions affecting GHA’s management of its property assets, including the requirement for the funding consortium to have a fixed charge over all of GHA’s properties, and for a 3-yearly stock re- valuation and stock condition survey update. The conditions are set out in more detail in Appendix 2. GCC Local Housing Strategy and Housing Investment Strategy The City Council is the Strategic Housing Authority for the city. The Council’s 2003-2008 Local Housing Strategy (LHS) sets out its strategic aims and objectives. After the transfer, the Council also took over from Communities Scotland responsibility for disbursing the city’s Housing Development budget. The Council’s Housing Investment Strategy identifies four key issues that will guide how and where the Council will invest in housing: GHA DRAFT ASSET MANAGEMENT STRATEGY / 24
  26. 26. C O N S U L T A T I O N • Neighbourhood Renewal: the need to address neighbourhood decline and build attractive places for people to live • Balancing Supply and Demand: the need to improve the supply of affordable public and private housing in the city • Raising Housing Quality: the need to tackle the problems of poor quality housing • Responding to Changing Housing Needs: the need to provide appropriate housing to match people’s changing needs and the needs of homeless households The Housing Investment Strategy also identifies a range of priorities for each issue. Many of the Council’s housing investment priorities will impact upon the way in which GHA manages its property assets, with those priorities of particular significance set out within Appendix 3. Housing Demand GHA has undertaken to develop its investment plans and demolition assumptions in the context of regular demand reviews to be commissioned by Glasgow City Council and Communities Scotland. The first 3 year Review of Demand for Social Rented Housing, undertaken by Tribal HCH, reported in January 2005, using as a baseline the Scottish Executive projection of households to 2013. The objectives of the 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; and • to examine the impact of affordability and quality on movement between the sectors. The Review produced a range of projections for demand for social rented housing to 2012 and 2016, covering both GHA and other registered social landlords. The specific projections for GHA stock indicate a mid- point demand projection of 51,000 units by 2016; 5,000 units lower than GHA’s current business plan stock assumption of 56,000 units by that date. This would suggest a requirement for GHA’s demolition programme to increase by 5,000 units. However, the broad range of the projections, as set out within the table below also illustrates the degree of uncertainty in the longer-term, with GHA’s current stock projection ranging from an under-provision of 5,000 units by 2016 to over-provision of 22,000 units. GHA DRAFT ASSET MANAGEMENT STRATEGY / 25
  27. 27. C O N S U L T A T I O N 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 GHA stock 59,000 51,000 GHA 05/06 Business Plan - estimate for GHA stock 64,000 56,000 Variation between GHA business plan estimate and +5,000 +5,000 Demand Review mid-point Rent Levels The average rent for GHA properties, at £54 per week, GHA 2005/06 Business Plan, is amongst the highest for any RSL or local authority in Scotland. At the point of transfer, GHA provided guarantees to tenants designed to reduce the differential between GHA rent levels and rents charged by other RSLs. The rent 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 2010. GHA will implement the rent guarantees in full. The structure of rents inherited from the Council has built up over a number of years, and has not been subject to comprehensive review for over 20 years. GHA has embarked on a full review of its policy for setting rent and service charges. GHA DRAFT ASSET MANAGEMENT STRATEGY / 26
  28. 28. C O N S U L T A T I O N 4. GHA’S STRATEGIC OBJECTIVES AND PRIORITIES FOR ASSET MANAGEMENT GHA Business Plan GHA’s Business Plan provides the long-term strategic framework for the organisation. It covers a full 30-year period and demonstrates how GHA is approaching the transformation of its stock and 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 the vast majority of stock over an initial 10 years to allow maintenance of the stock for a 20- year period thereafter. • The faster planned disaggregation of GHA, through second stage transfer with the organisation ceasing in its current form by 2007. • An increase of 5,000 units to GHA’s demolition programme over 10 years. • An emphasis on neighbourhood standards and management, with a new 3-year Neighbourhood Quality Improvement Fund, additional resources for GHA’s Neighbour Relations Team and implementation of GHA’s new build programme. • A new “Housing Quality Improvement Fund” to improve investment standards. • Key service priorities to include welfare benefit support, the furnished let service, neighbourhood renewal, and housing support services for vulnerable tenants. • Supporting staff through continuous change. • Supporting the emerging independent RSLs in the Local Housing Organisation network to deliver quality management, and community empowerment and control. These high level aims and objectives will drive GHA’s Asset Management Strategy. GHA’s annual Statement of Intent translates them into annual and 3-year objectives and target outcomes. Asset Management Aims and Target Outcomes The 2005/06 Business Plan also sets the aim of GHA’s Asset Management Strategy as: GHA DRAFT ASSET MANAGEMENT STRATEGY / 27
  29. 29. C O N S U L T A T I O N “to deliver a housing investment and new build development programme that will turn GHA’s housing portfolio into one that, in 10 years’ time, is part of a new sustainable housing system in Glasgow, within which GHA’s stock is: • of the 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 in the long-term, at reasonable cost; • integrated into successful neighbourhoods, which promote strong communities and enhance community development; and • 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; and • keeping the strategy sufficiently flexible to accommodate GHA’s community ownership plans. Asset Management Strategic Objectives The further development of the Asset Management Strategy contained within this document sets out how GHA will undertake asset management, geared to support the achievement of these aims. As such, the Strategy: • reflects the operating context outlined above • represents a consolidation of the GHA approach, not a fundamental shift in strategy • builds upon GHA’s experience of the stock gained over the 3 year period since transfer • is designed to feed into the development of GHA’s approach to delivering community ownership GHA’s developing approach to asset management focuses on five strategic objectives: OBJECTIVE 1 Develop a strategic approach to restructuring GHA’s stock - This will be achieved through a focus upon: GHA DRAFT ASSET MANAGEMENT STRATEGY / 28
  30. 30. C O N S U L T A T I O N • working with strategic partners to identify and respond to changing demand • consideration of disposals and alternative uses for surplus stock • assessment and planning of future demolition programme • provision for particular needs • planning GHA’s activities at a local level, including the development of neighbourhood housing strategies • planning and delivery of GHA’s new-build programme • asset management policy development Responding to changing demand GHA will continue to work with the Council, Communities Scotland, LHOs, and other RSLs to better understand the housing market in the city. The critical issues of demand at local level and the link between demand and housing quality will be the subjects of further research. Work is also taking place to examine the cause or causes of the high level of short- term tenancies occurring in certain areas, and particularly the high failure rate of tenancies taken up by persons referred to GHA as homeless. GHA is committed to increasing its understanding of the needs of current and future tenants. This will be done through tenant satisfaction surveys at a local level, social surveys connected to the investment programme, and research targeting particular groups, such as disabled people and those with particular needs. This will inform both policy and service development and the investment programme. At the point of transfer, GHA contracted with GCC to provide 2,300 properties to support the rehousing of Asylum Seekers in the city. This contract is due for renewal from July 2006, for a reduced number of units. The contract is likely to run for a further 5 years; the longer-term requirement for such temporary accommodation is unclear and is subject to decision by the Home Office and future legislative changes. Stock disposal and alternative uses To date, decisions around the future of GHA stock have tended to result in one of two outcomes - either the retention for improvement or the demolition of the stock. There is a need to now develop this aspect of our asset management, to include consideration of other options for surplus stock, not least since GHA’s draft Sustainability Policy commits GHA to demolish properties only when an appraisal confirms that it is not practical or economical to retain the property. In certain circumstances, disposal or transfer to an alternative use could be more beneficial for the local community and could further GHA’s and the city’s regeneration objectives. This option could yield could cost GHA DRAFT ASSET MANAGEMENT STRATEGY / 29
  31. 31. C O N S U L T A T I O N savings, minimise resource waste, facilitate low cost home ownership, and minimise disruption to tenants and the wider community. In general, disposals (other than SSTs) would be of vacant property. For any tenanted stock, the provisions of the 2001 Act9 regarding tenant consultation would apply. In addition, for all disposals, the relevant conditions of the GCC/GHA Transfer Agreement, and other constraints, including the granting of statutory consent for disposal, would require to be addressed. Demolition For future consideration of clearance and demolitions, GHA has introduced new processes, including full financial appraisal, improved re- housing planning and resident consultation processes, and effective linkage to new-build re-provisioning. Provision for particular needs Through its investment planning processes, GHA will work with LHOs and other stakeholders to identify opportunities to meet the needs for both temporary and permanent accommodation, including the potential for adjustment of mainstream accommodation to meet particular needs. GHA will ensure that new dwellings meet barrier-free standards, are accessible to all, including people with disabilities, and capable of future adaptation. Planning GHA activities at a local level The recently introduced 3-year Investment Plans for LHOs will provide a focus for GHA and the LHO to plan the programme of activities and to roll it forward each year. GHA is attempting to ensure that in future the GHA/LHO planning process is increasingly linked to the planning processes of other stakeholders Decisions on which GHA stock to retain, demolish or build and for which customer groups should be taken in the context of robust neighbourhood strategies and analysis of demand at local Housing Market Area level. In many neighbourhoods, 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 for GHA to have full regard to this wider context in the development of strategies for its stock. This will involve consideration of the following: 9 Section 68 and Schedule 9 GHA DRAFT ASSET MANAGEMENT STRATEGY / 30
  32. 32. C O N S U L T A T I O N • whether and on what basis GHA should retain and invest in this stock; • for what end use is the stock 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. A number of neighbourhood strategies are already under development, with more to emerge via the Development Plan exercises commissioned over GHA’s major Regeneration Projects, and through the Council’s proposed Local Housing Forums. For GHA, an important target outcome that should guide the development of any neighbourhood strategy will be the requirement to deliver sustainability and growth in value of GHA-owned housing assets. Achieving such sustainability and asset growth at a local level is a key to developing a housing system across the city that has the flexibility to cope with changing needs. As the neighbourhood strategies emerge, GHA will work with LHOs, the Council, other RSLs, and other stakeholders to develop detailed implementation plans, feeding in through LHO level plans to GHA’s investment and service delivery and informing the development of plans for Second Stage Transfer. New-Build GHA will be providing 3,000 units of new build housing as re-provisioning to facilitate the clearance programme, 200 of these to be provided by GCC as a contribution to GHA’s Business Plan. GHA will develop the remaining 2,800 in line with its new build strategy. The strategy sets out planning assumptions for each GHA Housing Market Area for a 5 year new build programme covering 2,000 units, based on an assessment of the potential scale, timing and location of demolitions and the supply and demand characteristics of each HMA. The remaining 800 units not included in the planning assumptions will be allocated as the programme develops. GHA’s Housing Futures Assessment and financial appraisal processes will be used to assess and identify those properties where, instead of retention and refurbishment, GHA and tenants can obtain better long- term value by demolishing and where long-term demand justifies it partially replacing the existing stock. Land availability is critically important to delivery of GHA’s new build programme. Accordingly, the Business Plan includes provision for a Land Acquisition Fund of £9 million over three years from 2005/06. GHA DRAFT ASSET MANAGEMENT STRATEGY / 31
  33. 33. C O N S U L T A T I O N Negotiations are progressing over a number of Council-owned sites identified as meeting GHA’s requirements. All GHA new-build housing will reflect the Design Standards contained in GHA’s Design Guide and will comply with Building Regulations and current good practice guidance, including Housing People with Varying Needs and Sustainable Development principles. GHA is currently assessing options for the procurement of the new-build programme, in order to achieve GHA’s requirements relating to programme delivery, cost and quality. Options under consideration include traditional procurement methods, design and construct, and management contracting. Asset management policy development GHA will develop a comprehensive suite of policies and procedures to support delivery of the organisation’s asset management objectives and priorities. OBJECTIVE 2 Gear our activities and investment programmes to deliver “better homes”. This will be achieved through a focus upon: • improving housing and neighbourhood quality • improving energy efficiency • delivering environmental sustainability • improving the Housing Service Housing and neighbourhood quality GHA aims to address the poor quality of the stock at transfer and in doing so, help transform the lives of tenants, ensuring that the physical assets are adapted to the current and future needs. GHA’s investment strategy will ensure that by 2012 all of its properties with a long-term future will meet the Scottish Housing Quality Standard. At a more detailed level, GHA has established a suite of technical standards setting out performance requirements and general specifications for materials and components. This has now been further developed through the production of a GHA Design Guide which has been the subject of extensive consultation, which sets out the strategic aims and aspirations for GHA’s investment programme and provides a proper context for design work. The guide includes comprehensive procedures and Technical Standards applicable to all GHA projects - GHA DRAFT ASSET MANAGEMENT STRATEGY / 32
  34. 34. C O N S U L T A T I O N new-build, refurbishment works, landscape projects, regeneration, and neighbourhood improvements. Increasingly, there is a need for more sophisticated assessment and development of tailored and imaginative solutions for improving the core stock, within current resource parameters and working in collaboration with LHOs. This will include consideration of level of demand and suitability of property for adaptation to meet particular housing needs. Given the unpredictability of demand for property adaptations, GHA will raise with other stakeholders the need to address this issue in the context of SST. In relation to property maintenance, GHA will focus on the establishment of full local cyclical maintenance programmes, working with LHOs on programme development and delivery. These programmes are essential to protect the investment being made through the capital programme and to maintain the quality of home and environment for tenants. GHA’s contract with Building Services for the delivery of repairs and maintenance is due to end in 2008. Building Services is aware of the requirement that these arrangements post-2008 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 requires post-2008, and the shape of potential service arrangements. Energy efficiency GHA aims to increase energy efficiency in its homes and reduce fuel poverty, recognising that fuel poverty has a negative impact on the quality of life and health of individuals and communities. High fuel costs mean that households have less to spend and this can lead to poor diet and reduced participation in social activities. There are particular impacts on elderly people, disabled people, and families with young children. GHA has established an Energy Team as part of the Neighbourhood Renewal section. The 'Wrap Around Warmth' initiative aims to provide warm dry homes that are affordable to heat and help reduce fuel poverty. 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. GHA DRAFT ASSET MANAGEMENT STRATEGY / 33
  35. 35. C O N S U L T A T I O N Environmental sustainability GHA has identified the creation of environmentally sustainable good design as an over-arching principle to be embodied in 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 environmental sustainability objectives and priorities set out in GHA’s Sustainability Strategy. The Housing Service Implementation of the Housing Services Review will take place by 2007. The changes will focus on providing tenants with: • Safer and more secure homes • Improved customer service • An enhanced 24-hour concierge service for all MSF properties • Improved estates and neighbourhood management • Additional cleaning for all multi-storey flats Further improvements to the housing service are planned, subject to consultation, including a review of GHA allocations system, with choice - based letting under consideration; improvements to the package for potential new tenants, with a higher quality lettings standard and welcome pack under consideration; a “hot spot” team to target areas of serious anti-social behaviour; and technology improvements, with the introduction of iWorld, a web-based integrated housing management system, which will also provide the core Property Asset Register for GHA’s Asset Management System. Implementation of this programme will have a significant impact on the performance of GHA’s assets. It will require the allocation of capital and revenue expenditure to support implementation. It should also impact on the total income received by GHA and the relative contribution of particular stock groupings. These changes will be reflected in the asset values attributed to specific properties and the total value of GHA’s assets. OBJECTIVE 3 Use our assets and resources to build stronger communities. This will be achieved through a focus upon: • improving neighbourhood management GHA DRAFT ASSET MANAGEMENT STRATEGY / 34
  36. 36. C O N S U L T A T I O N • delivering comprehensive community regeneration, and developing GHA’s role in the city’s Community Planning framework • addressing tenure imbalance through mixed tenure development • an effective GHA contribution to community care and diversity Neighbourhood management GHA is responding positively to feedback from tenants reflecting dissatisfaction with open space maintenance, with the establishment of a 3-year, £11 million Neighbourhood Quality Improvement Fund. These resources will be targeted to physical revitalisation of neighbourhoods, to improve environmental and recreational standards. Four pilots are already underway and the programme will be expanded significantly in 2006/07. Through its involvement in the Glasgow Community Planning Partnership, GHA is piloting 3 initiatives working jointly with Glasgow City Council as a major provider of local neighbourhood services, aimed at improving the social and physical environment, and achieving the effective and efficient use of services that are responsive to local needs and circumstances. Community regeneration GHA is committed to working closely with LHOs, local communities and other key stakeholders in taking forward the regeneration of some of the city’s most deprived neighbourhoods. GHA recognises that the success of the city’s Community Planning Partnership, led by GCC, will be a critical factor in the delivery of this ambition. The partnership provides a mechanism for stakeholders to discuss and agree the vision for a regenerated city, respective roles, mutual priorities, and co-ordinated programmes GHA strongly supports the targeting of extra funding towards helping the most deprived communities. Most GHA stock is located in these most deprived communities and GHA recognises that it will only be through GHA, and its succession through SST and key partners working together in a targeted and co-operative manner that the regeneration of these communities will be achieved. GHA has underlined its commitment to community regeneration through the development and funding of a GHA Neighbourhood Renewal Strategy. Resources have been made available for a diverse range of regeneration activity to complement and go beyond improvement to the housing stock and service. Current activities include: financial inclusion, jobs and training, community learning and development, promoting energy GHA DRAFT ASSET MANAGEMENT STRATEGY / 35
  37. 37. C O N S U L T A T I O N efficiency and tackling fuel poverty. In addition, GHA has employed nine welfare benefit advisers. GHA welcomes and will strongly support the rolling out of community planning structures at local level and the establishment of Local Housing Forums. Working through these structures, and with support, LHOs have the opportunity to progressively become local regeneration vehicles10, not only focussing attention on their communities in the short-term, but also building long-term community control and capacity. Mixed tenure In many parts of the city, tenure diversification will be central 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 or its successors through SST as facilitator, direct provider, or joint venture partner: There may be circumstances where low cost home ownership within GHA’s stock portfolio will be appropriate to help deliver GHA’s aims. In particular, tenure forms targeted at providing choice to lower income households may play a valuable role in neighbourhood regeneration, and enable available resources to go further. To assist the development of the Asset Management Strategy, GHA will commission a review of its home ownership options and potential constraints, taking account of relevant Scottish Executive policy and funding regimes, RSL and charitable organisation legal and regulatory regimes, and GHA contractual, funding and constitutional position. A specific requirement of this Asset Management Strategy is that local plans for both investment and management should examine and address tenure imbalance, to improve the prospects for strong and sustainable communities. Community care Complementing its Equality and Diversity Strategy, GHA is developing a Housing and Community Care Strategy jointly with Glasgow City Council, Greater Glasgow Health Board and wider stakeholders. This will set out how GHA will help meet Community Care needs in the city. 10 The potential for RSLs to take on a wider role is recognised in section 178 of the 2006 Act which extends the permissible purposes of RSLs to include promoting or improving the economic, social or environmental well-being of its residents or area. GHA DRAFT ASSET MANAGEMENT STRATEGY / 36
  38. 38. C O N S U L T A T I O N One of the aims of the Strategy will be to assess the needs of community care groups and to jointly commission research on identified gaps in 2006/07. Having completed a citywide strategy, GHA’s next step will be to assist LHOs to develop Local Housing and Community Care Strategies, in collaboration with local Community Planning Partnerships and Community Health and Social Care Partnerships. GHA new-build will primarily assist in re-housing tenants from GHA properties for demolition. However, the new-build strategy recognises the identified shortfalls in housing provision across a range of groups with particular housing needs. GHA will co-ordinate its activities with other providers to address these needs through the various new-build funding streams. GHA’s investment programme to existing stock will significantly improve housing quality for many existing GHA tenants with Community Care needs. However, GHA faces the challenge of incorporating provision for people with disabilities in much of the existing stock, with its high proportion of tenement flats and MSFs unable to meet barrier free and wheelchair accessible standards. Dealing with diversity The Council’s Local Housing Strategy identifies 4 key objectives to improve equality of access to housing, 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 availability of suitable houses and facilities for black and minority ethnic households, together with the needs for appropriate delivery of services and the need for adequate monitoring. GHA is committed to working with the Council and with representative bodies to ensure that GHA can respond positively to the Council’s priorities and objectives to ensure equality of access to housing. OBJECTIVE 4 Deliver tenant and community control. This will be achieved through a focus upon: • developing the LHO network • developing and implementing arrangements for tenant empowerment, equality and diversity • delivery of second stage transfer GHA DRAFT ASSET MANAGEMENT STRATEGY / 37
  39. 39. C O N S U L T A T I O N The LHO network The network has now been successfully established. The responsibilities of GHA and each LHO are clearly specified within the management agreement entered into between the two bodies. Increasingly, the focus will shift to building the capacity of the LHO network and the progressive devolution of central functions to LHO level, with GHA working in partnership with the network to introduce innovative service sharing arrangements. A LHO Chairs Forum has been established to improve communication between LHO Chairs and GHA, providing one means for effective dialogue on a range of strategic issues and policy and service development. Tenant empowerment, equality and diversity In October 2005 GHA introduced a revised, comprehensive Tenant Participation Strategy and Policy for 2005-2007, setting out key action points, priorities, and arrangements for communication and consultation with tenants. In line with the Strategy, a programme of tenant consultation has been implemented on key policy and service issues. GHA is also introducing an Equality and Diversity Strategy, with the aim of continuously improving policies, services, employment practices, and governance to achieve greater equality and recognise diversity. This Strategy is intrinsically linked to the Tenant Participation Strategy and places an emphasis on consultation and community engagement. In taking decisions about the future use of its assets, GHA will work to empower and promote tenant and resident participation consistent with these strategies. In particular, GHA will support disadvantaged and difficult to reach groups (including disabled people and members of the city’s 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 process. Second Stage Transfer GHA is fully committed to the onward transfer of the stock to local tenant-controlled landlords; indeed this is the organisation’s core aim. The association's target is to transfer a majority of stock into community ownership by 2007/08. The Asset Management Strategy and systems must be designed to support and facilitate SST. This presents a number of specific challenges. GHA DRAFT ASSET MANAGEMENT STRATEGY / 38
  40. 40. C O N S U L T A T I O N First, and most critically, to support the development of viable proposals to address the demand risk that attaches to a significant proportion of the stock - the 25% of GHA’s total stock currently identified as requiring appraisal. Many proposals will involve demolition and some may require replacement new build properties, either from GHA’s new-build programme or through projects carried out by other RSLs funded by GCC. Second, to ensure provision of full and accurate disaggregated stock, income, and cost data to underpin stock valuation. Third, GHA needs to manage and respond appropriately to the changes that will occur in the volume and composition of its progressively diminishing stock portfolio. Second stage transfer will be dependent upon successful ballots of tenants and achievement of other criteria, and it is therefore 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. OBJECTIVE 5 Build asset value. This will be achieved through a focus upon: • re-structuring rents and service charges following the rent guarantee • introducing new financial and non-financial appraisal techniques • developing our approaches to managing the non-housing assets Rents For GHA, rental income is a crucial factor in defining the value of its property assets. The Rent Re-structuring Project is a critical component of GHA’s long-term approach to asset management. GHA’s rents are currently set on factors such as amenity and stock condition that are out of date, with the variation between individual rents often failing to reflect tenants’ perception of value, and with many tenants contributing to the cost of services they do not receive. There is a need therefore to review the rents, in consultation with tenants, LHOs, and other stakeholders. Whichever approach to structuring rents GHA uses, the association needs to charge rents and service charges that cover the cost of management and maintenance. Only in this way will GHA build the asset value needed to support delivery for tenants in the longer term, or 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 upwards and downwards adjustments in rent levels must GHA DRAFT ASSET MANAGEMENT STRATEGY / 39
  41. 41. C O N S U L T A T I O N balance the aspiration of making GHA’s rents more affordable against the requirement to maintain the income needed to deliver the Business Plan. Financial and non-financial appraisal At present, GHA does undertake financial appraisal of investment proposals for properties subject to development plans and option appraisals, but the process is basic and is under-developed. To make best use of the resources available to it, GHA and the LHOs need to assess fully the costs and benefits associated with alternative investment options in dealing with the stock. GHA is committed to the development of a better understanding of the financial performance of its properties and the impact on the asset base of undertaking investment. To this end, GHA will undertake a strategic asset valuation to enable fuller financial assessment and financial modelling of options for stock, particularly the non-core stock not yet approved for demolition, 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 through the housing futures assessment process GHA has sought to consider and address non-financial factors influencing the future of particular properties, there is a need to further develop the process and criteria. These need to be consistently applied and incorporated within an appraisal process which embraces financial appraisal and applies an appropriate weighting to financial and non- financial factors. GHA will consult with LHOs and other stakeholders on the development the financial and non-financial appraisal techniques and criteria and their relative weighting. Meantime, a suggested approach for financial appraisal of investment proposals and outline criteria for non-financial appraisal are described in Section 6 below. GHA’s non-housing assets In relation to its land holdings, GHA needs to agree with GCC procedures for processing the sites emerging from the demolition programme that are not covered by the Regeneration Scheme Agreement. GHA will work with LHOs and other key stakeholders to review these in respect of potential future use for social housing or for implementation of the Land Protocol. Work will also continue with the Council and others to identify and obtain the land bank needed to deliver GHA’s New Build programme. GHA DRAFT ASSET MANAGEMENT STRATEGY / 40
  42. 42. C O N S U L T A T I O N For shops, community facilities, lock-ups and garages, GHA will be reviewing its portfolios, working with LHOs and others to consider the most effective strategy for ownership and management of these properties, taking into account: • the potential demand for access to capital investment resources not currently provided for in GHA’s Business Plan; • GHA’s governance, regulatory and contractual arrangements; • the objective of delivering community ownership of the housing stock through second stage transfer. The aims and target outcomes, current progress, and priority actions proposed for each of the 5 strategic objectives are summarised below: GHA recognises that the timescale for delivery of these objectives extends into a period when it is expected that much of the stock will have transferred to others through SST. This strategy is intended to assist the SST process not to inhibit it. As this strategy will inform GHA’s approach to the valuation of stock for SST purposes, it is important that it is widely considered and shared by key stakeholders. GHA DRAFT ASSET MANAGEMENT STRATEGY / 41
  43. 43. C O N S U L T A T I O N 5. FINANCIAL AND NON-FINANCIAL APPRAISAL Financial Appraisal There are a number of financial evaluation techniques regularly in use by housing associations. Having considered the nature, scale, and duration of its investment programme11, GHA has identified the Net Present Value (NPV) of investment projects as the financial indicator most relevant to assessing investment in GHA’s social rented housing, including re- investment in existing stock. 12 When comparing options, the profile of costs and benefits for each project will vary over time. The technique of discounting the cash flows that is central to calculation of NPVs is used to convert these differing profiles of costs and benefits to present values, so they can be compared. The ‘Green Book’ published by the Treasury13 recommends the use of a discount rate of 3.5% in real terms; that is, excluding the anticipated rate of inflation. Separately, the Green Book identifies that, for private individuals, the time value of money, or time preference, can be measured by the real cost of borrowed funds14. This is also the form of discount rate commonly used in Housing Association investment appraisals. 15 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 in the Business Plan, of 3% and is the rate GHA would use in appraising most projects. Where the project is being evaluated over a time period longer than 30 years, or where the project is acknowledged to be particularly complex, the discount rate may be varied. The reasoning behind any change in the discount rate will need to be fully explained in the option appraisal report. GHA will improve its financial understanding of its investments through a variety of means. Those already under way include: 11 An assessment of the most frequently used techniques will be contained in GHA’s Asset Management Position Statement for 31 March 2006 12 Unlike the Internal Rate of Return, NPV produces meaningful outcomes even when the investment has a negative value – that is when the long-term project revenues, primarily from rent, do not cover its capital, management, and maintenance costs. 13 The Green Book, Appraisal and Evaluation in Central Government, HM Treasury, 2003 14 This is commonly referred to as the Weighted Average Cost of Capital (WACC) 15 Housing Investment Appraisal, National Housing Federation, July 2004 GHA DRAFT ASSET MANAGEMENT STRATEGY / 42
  44. 44. C O N S U L T A T I O N • The briefs for the Development Plans being prepared for GHA’s major regeneration projects require the preparation of a 30-year discounted cash flow for all viable options identified. These will underpin the calculation of the NPV of each project as outlined above. The project summaries will include details of all capital expenditure and demonstrate how capital costs compare against the cost of providing other social rented units in the city. This is likely to be of most interest in relation to new build properties and will provide important benchmarking for the cost of GHA investments. Where possible, for each project, the NPV will be produced at bedspace and at housing unit levels, to allow a more standardised comparison of projects producing different unit sizes. • GHA has approached the market looking for a partner to develop a strategic asset valuation tool. This will produce concurrent NPV summaries of all GHA properties. This will allow GHA to work with LHOs and other stakeholders to review localised groupings of all of its properties, with the long- term value of each group of properties prepared on a consistent basis. • The output of the financial appraisal will provide a significant input to GHA’s discussions with LHOs about the best use of the investment resources available and will play a part in GHA’s decision making about the investment programme. Non-financial appraisal As indicated above, GHA will also be reviewing, developing and consulting on the process and criteria for non-financial appraisal of stock. Our asset management strategy and investment are designed to achieve key benefits for tenants and the wider community. It is appropriate, when considering the allocation of our resources between projects that we consider not only the financial costs and benefits, but also the extent to which the proposed expenditure helps GHA deliver its objectives. Our preliminary view is that the criteria for non-financial appraisal should reflect the objectives outlined above: GHA DRAFT ASSET MANAGEMENT STRATEGY / 43
  45. 45. C O N S U L T A T I O N Better Homes Measures could include: • Layout and space standards • Accessibility for those with limited mobility • Energy efficiency • Estate environment (quality/ amenity/ sustainability) • Security • Access to external private space, particularly for family properties Stronger Communities • Evidence of demand for area and house type and size • Accessibility to employment and services • Mix of housing options available locally • Local regeneration plan in place • Adaptability of the properties to meet changing needs Delivering tenant and community control • Builds on existing community links • Tenant and resident support 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 the subjects of consultation with key stakeholders, including tenants. GHA DRAFT ASSET MANAGEMENT STRATEGY / 44
  46. 46. C O N S U L T A T I O N 6. ORGANISING TO DELIVER THE STRATEGY In order to move effectively towards this more strategic approach to asset management and to support delivery of the strategic objectives, priority will be given to the following: • putting in place appropriate governance arrangements and assigning corporate responsibilities; • developing the organisation’s strategic planning framework; • introducing an asset management system to support the strategy; • introducing monitoring and review arrangements. Governance arrangements and corporate responsibilities GHA has put in place a dedicated Asset Planning and Programme Development team within the Investment and Regeneration division, in recognition of the importance of pro-active asset planning and management. The structure of the team is currently being finalised and the allocation of responsibilities throughout GHA at corporate level and within the team, together with updated governance and officer level delegation arrangements, will be developed and introduced as the structure is implemented. The role of GHA’s Board is to ensure that the association, in meeting its strategic plans and commitments, remains financially viable, with continuing demand for the stock generating a solid rental income stream to meet the association’s financial commitments. To discharge this role, the Board will evaluate all aspects and implications of GHA’s asset management practice, ensure that proper consultation is undertaken with tenants, LHOs, the Council and other stakeholders, and then take decisions to ensure the property assets are managed effectively. Some of the work relating to these responsibilities is delegated to various committees of the Board, notably the Investment and Regeneration Committee and the LHO Development Committee. The Board has put in place appropriate mechanisms to ensure collaboration and co-ordination between these Committees. GHA’s Strategic Planning Framework The degree to which GHA’s asset management strategy and approach must be governed and influenced by prior agreements and external factors cannot be over-emphasised. The key components of the stock GHA DRAFT ASSET MANAGEMENT STRATEGY / 45

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