How housing associations are being rewarded for commercial innovation
- Many registered providers (RPs) of social housing are becoming more commercial in their outlook
- This includes increasing their use of automated systems in order to make their processes more efficient
- While commercialisation can offer significant rewards for RPs, there are also risks to consider, as our Head of Housing, Allison Whittington, explains
The origins of much of the commercial activity we see across the social housing sector today can be traced back to the rent reforms announced by George Osborne in 2015.
The rental formula, which had allowed housing associations to increase their rents in line with the Consumer Price Index, plus 1%, was removed by the former Chancellor of the Exchequer. Instead, housing associations were told that from 2016-2020, they would have to reduce rents by 1% each year.
As they adjusted to this change, housing associations polarised into two camps. One group looked to stick to their traditional role providing social housing, and generate savings through efficiencies. The other decided to become more commercial, building more homes not just to provide social housing, but also for market sales.
More recently, a growing number of organisations have found a middle way – striving for efficiency savings, while also taking a more commercial view of what they need to do to deliver.
We’ve supported a couple of customers who have taken contrasting approaches. One has undergone massive transformation, reducing its staff numbers from 1,700 to 700. It’s been able to cope with this change by making innovative use of automation. It uses automated systems to send out letters to tenants who are behind on their rent, and to set up new tenancies. Processes that used to take days manually, now take a matter of hours.
Why it pays to think differently
Even small changes in mindset can bring about real benefits. Another customer ran a sheltered housing scheme that suffered serious flood damage. Having managed to rehome everybody living there, this customer took the opportunity to reconsider the best use of its property. After talks with a local hospital, it turned the building into much-needed key worker accommodation for nursing staff. This led to higher rents and reduced void periods. By taking a slightly more commercial view, the housing association generated more revenue, while answering a community need.
Commercialisation can carry risks, of course. There’s a real drive to build using Modern Methods of Construction (MMC), with the headline numbers suggesting there are significant cost savings to be made. Some housing associations are even setting up their own modular factories.
However, I do have concerns about whether this could lead to more money being poured in than can be saved during the lifecycle of a building. Big developments of lightweight, timber-frame properties, for example, worry me – it only takes somebody drilling a hole in a wall to completely undermine the compartmentation that’s meant to protect the building in the event of a fire.
Whatever kind of commercial activity you are considering, talk to us about it. We’ve got experts in risk across almost every sector, which enables us to see not just how risks have evolved up to this point – but to predict how things are going to look in five, ten or 20 years from now.
Get us involved as early as possible and we can support you in identifying the risks you might face, and help you come up with the best strategies to mitigate them.
How can Zurich help?
Commercialisation and the provision of public services are now inextricably linked. Within the current financial framework, the drive towards being more commercial brings challenges for public service leaders. What do our decision makers understand commercialism to mean? And what examples are there of innovation as well as risks around a commercial approach? This conference will examine the relationship and attempt to understand both the benefits and the risks of a commercial approach to delivering public services in the 21st century.
Join Zurich Municipal at CIPFA’s Commercialism Conference on 11th June in Westminster. Book here
Zurich has years of experience supporting public sector organisations in their commercial ventures. You can find a wealth of information about commercialisation in our new whitepaper – What are we here for? How commercialisation is reshaping the public and voluntary sectors