Review of the major repairs allowance

Transcription

1 Review of the major repairs allowance community, opportunity, prosperity

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3 Review of the major repairs allowance Building Research Establishment Ltd July 2009 Department for Communities and Local Government

4 The findings and recommendations in this report are those of the authors and do not necessarily represent the views of the Department for Communities and Local Government. Department for Communities and Local Government Eland House Bressenden Place London SW1E 5DU Telephone: Website: Queen s Printer and Controller of Her Majesty s Stationery Office, 2009 Copyright in the typographical arrangement rests with the Crown. This publication, excluding logos, may be reproduced free of charge in any format or medium for research, private study or for internal circulation within an organisation. This is subject to it being reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright and the title of the publication specified. Any other use of the contents of this publication would require a copyright licence. Please apply for a Click-Use Licence for core material at or by writing to the Office of Public Sector Information, Information Policy Team, Kew, Richmond, Surrey TW9 4DU [email protected] If you require this publication in an alternative format please [email protected] Communities and Local Government Publications Tel: Fax: [email protected] Online via the Communities and Local Government website: July 2009 Product Code: 09DHF06026/4 ISBN

5 Review of the major repairs allowance 3 Contents Executive summary 4 1 Introduction 6 2 Reviewing the archetypes 7 3 Review the detailed specifications of work 9 4 Examine the assumptions behind the original prices 10 5 Review current costs 11 6 Review additional components/costing of add-ons 13 Costs/work included 14 How the model deals with add-ons 16 7 Review element lifecycles used 18 8 Produce new models to estimate expenditure needed Simple whole stock model Final archetype model Key outputs from new archetype model New archetype weights Shared facilities and common areas Spend profile over the 30 years Changes in allocations to individual local authorities 30 Appendix A Lifetime scenarios and prices used in whole stock model 35 Appendix B Estimating the costs of statutory compliance 37 Appendix C Final unit prices by archetype 41 Appendix D Running the new archetype-based model 44

6 4 Review of the major repairs allowance Executive summary This work was undertaken for Communities and Local Government by Building Research Establishment (BRE) as part of the wider review of finance for council housing. It involved reviewing the existing model and producing both initial and final estimates of the resources required to maintain the stock in a decent condition beyond The main conclusions are: The coverage of the model needs to be expanded to include lifts and additional estate facilities. The prices for some elements are estimated to be significantly higher than those currently used; particularly for bathrooms and kitchens. Other prices are significantly lower than those used in the current model; especially rewiring and works to roof covering, windows and wall finish. The lifetimes for most elements are broadly in line with local authority expectations and experience. However lives for kitchens and bathrooms are unrealistic at 30 and 40 years respectively. Lifetimes for other elements in the current MRA are considered to be too short; especially roof covering and external wall structure spalling. The current average allocation is 668 per dwelling. If we re-run the existing major repairs allowance (MRA) model using data from EHCS and use building cost information service (BCIS) to inflate building prices, this gives an annual average of 793 per dwelling at 2008 prices (some 19 per cent higher than the current allocation). We first created a simplified model to estimate the number of replacement/ major works required and their costs and applied this to the stock as at 2010 using three different lifetime scenarios. This new model includes additional elements (e.g. lifts and many types of shared facilities on estates). The most conservative lifetime scenario estimates total costs of 955 per dwelling per year some 43 per cent higher than the current allocation of 668. The model was further refined to calculate costs separately for each archetype so that allowances could be calculated separately for each authority. This also took into account regional variation in building prices and separately identified the backlog and costs of statutory compliance. This generates an estimated total of 1,032 per dwelling per year 825 from newly arising need, 116 from backlog and 91 for statutory compliance. Note that we have not included any provision to subsidise costs to leaseholders which may be a consideration; especially in London. We have used the new model to generate allowances for individual authorities although we do not believe that the model, in its current form is an appropriate way to distribute resources. The 13 archetypes are not the most appropriate way of assessing need across all types of work we feel that there should be different mechanisms and/or archetypes used to calculate resources needed for each of the four main categories: inside the dwelling; external fabric of the building; common areas in blocks of flats; and shared facilities on estates.

7 Review of the major repairs allowance 5 This would require the collection of additional and more consistent data from authorities themselves and other sources. We are also not convinced that the methods and assumptions around annuitisation, copied from the current MRA model, are appropriate.

8 6 Review of the major repairs allowance 1 Introduction This work was undertaken for Communities and Local Government by Building Research Establishment (BRE) as part of the wider review of finance for council housing. It involved reviewing the existing model and producing both initial and final estimates of the resources required to maintain the stock in a decent condition beyond The work consisted of the following strands which are covered in detail in the following chapters: reviewing the 13 archetypes used in the current model reviewing the detailed specifications of work in the current model examining the assumptions behind the original prices reviewing the unit prices used by investigating other sources reviewing the treatment and costing of add-ons reviewing the life cycles for building components producing new models to estimate the expenditure required

9 Review of the major repairs allowance 7 2 Reviewing the archetypes We used English house condition survey (EHCS) data to examine the variation within and between dwellings in each archetype in terms of: age of key components, presence of shared facilities, dimensions/quantities and to establish how far some of the key parameters have changed from 1996 to The key findings were: There is considerable variation within archetypes in terms of dwelling size and other key parameters. On average there is very little variation between the average or stereotyped parameters for some of the different house types and this is reflected in the very similar prices used in the current model and derived as part of this exercise. House types could be rationalised from eight to three types (larger houses, smaller houses and bungalows). There are also too few low rise pre-1945 flats to maintain these as a separate category and we should consider distinguishing between small and large low rise blocks instead. We could also usefully split the medium rise into larger and smaller blocks. Dwelling archetypes are not a sensible proxy for estate and shared facilities present there is no real relationship. We need to look to devising new estate archetypes to better reflect the scale/quantity of shared facilities like hard landscaping, garaging, communal fences/walls etc. If we examine 2006 based data from the EHCS on useable floor area, although there is a difference in mean (arithmetic average) values between archetypes, there is considerable variation (Table 2.1). For example the average floor area for a traditional pre-1945 semi is over 10 per cent higher than a small terraced house from the same period (73.8m 2 compared with 61.8m 2 ). However, the top 20 per cent of small terraced houses are larger than the smallest 20 per cent of semis.

10 8 Review of the major repairs allowance Table 2.1: Floor area statistics for the MRA archetypes (source: EHCS 2006) Total useable floor area m 2 mean smallest 20% largest 20% Trad semi pre Trad semi or med lge terr Trad sm terrace pre Trad sm terrace Trad house other pre Trad house Trad house post Non trad house Bungalow Lo rise flat pre Lo rise flat post Medium rise flat Hi rise flat Similar trends are apparent for other key parameters used to arrive at the archetype specifications within the major repairs allowance (MRA) (total external wall area, total roof area etc.). For windows, one of the most expensive components, there is also considerable variation (Table 2.2). Table 2.2: Statistics on number of windows in the dwelling* for the MRA archetypes (source: EHCS 2006) Total number of windows mean smallest 20% largest 20% Trad semi pre Trad semi or med lge terr Trad sm terrace pre Trad sm terrace Trad house other pre Trad house Trad house post Non trad house Bungalow Lo rise flat pre Lo rise flat post Medium rise flat Hi rise flat * for flats this is the number belonging to the flat itself

11 Review of the major repairs allowance 9 3 Review the detailed specifications of work This work has been seriously hampered by the lack of documentation of the original specifications all we have are hard copies of the summary specifications (two sides of A4 per archetype) with very little information about quantities, materials, assumed quality etc. We have reviewed these bearing in mind what we know about current practice for capital repairs and improvements (from the implementing Decent Homes case studies we carried out). We contacted 12 social landlords (five retention authorities, three arms-length management organisations (ALMOs) and four housing associations) to ascertain the scale and quality of work being carried out within Decent Homes particularly with regard to kitchens, bathrooms, security and wider estate works. Because of the tight timescales, we only managed to obtain detailed information from four and partial information from another five. This has indicated that the specifications of work on all of these items appear to be well in excess of those used in the MRA. These additional items/quality have been built into the new prices used and are also reflected in the higher spend on these in both the business plan statistical appendix (BPSA) returns and building cost models (BCMs) analysed (see section 4). The key differences for the main costed components are summarised in Table 3.1. Estate works and other add-ons are dealt with in section 6. Table 3.1: Changes needed to specifications for main components Component Added aspects Revised assumptions Kitchens Bathrooms Rewiring Central heating Windows and doors Plumbing Extractor fan Additional wall tiling Redecoration Extractor fan Tiling to full height at side of bath Redecoration Fit 2 hard-wired smoke alarms per dwelling Fit new gas fire to lounge in all houses (not bungalows or flats) All boilers are condensing boilers Mains drainage Mid range quality units used rather than cheapest Mid range quality units used rather than cheapest Added in costs for additional separate WC for the 16.7% of dwellings that have this (work was detailed in the spec but not incorporated into the prices) Assume good quality, Secured by Design to achieve expected life (35 years for windows, 30 years for doors).

12 10 Review of the major repairs allowance 4 Examine the assumptions behind the original prices Again, this has been severely hampered by lack of documentation about the original assumptions. We have therefore built up our own specifications, based on the work in section 3 and priced these up. We have then compared these to data from the BPSA returns and a sample of recently completed building cost models (BCM) from recent ALMO applications as a rough check. We have largely followed the approach used in the MRA with the following exceptions: The original MRA prices for all work to roofs, chimneys and external walls appears to have an allowance added in for scaffolding (the same seems to apply to windows in some archetypes). Because we are not sure why or precisely how this was done, we have taken a different approach and priced these items without scaffolding and then added in a single cost to scaffold the building (divided by the number of flats to get a per dwelling price for blocks) during the 30 years. This assumes just one set of scaffolding needed over that period and we may wish to revisit this. The MRA prices also include fees. The unit prices we have derived do not include these and we have therefore added on 9 per cent for these. This 9 per cent is the Communities and Local Government suggested default used in the BCMs for ALMO application and the cost generation models (CGMs) used for (large scale voluntary transfer (LSVT) applications. It is unclear what assumptions about profit, overheads and prelims were built into the original MRA prices. The unit prices we have derived include profit (5 per cent), overheads (2.5 per cent) and prelims (8 per cent as scaffolding is separately priced).

13 Review of the major repairs allowance 11 5 Review current costs We have examined this in four ways: What do we think they should be spending (based on 2 above) using price books? What are they telling Communities and Local Government they are actually spending in their BPSA returns? What are they claiming they need to spend in the ALMO applications? What are the best performing local authorities spending at the moment? We have contacted the 12 social landlords referred to earlier for information on their current costs. We have also attempted to speak to them for the consortia work and Housemark with no success. We have also analysed both the 2007 BPSA returns and 12 recent ALMO applications to establish averages and ranges for expenditure on different types of capital works by different types of authorities during Results are summarised in Table 5.1 for each of the main components. Prices given are a weighted average across all archetypes. BRE prices are at south east region prices. Comparing data from the different sources is not straightforward as different headings/definitions are used in the BPSA and MRA for example, the BSPA return simply list work to roofs whereas the MRA separately identify works to roof covering, roof structure and rainwater goods (guttering and downpipes). The BPSA also has a catch all cateory of other which accounts for around 20 per cent of all expenditure. The building cost models from ALMO applications also use a variety of headings and combinations of work for example many combine all roofs and chimneys into just one heading or all structural works to roofs and walls whereas others disaggregate these into different components. Prices need changing for two main reasons: improved/different specifications (particularly kitchens and bathrooms) and differential movement in building prices. We carried out a separate exercise in 2007 to examine differential movements in building prices to inform whether we should still use a single uprating factor for all types of costs used in EHCS analysis. This indicated that real costs for most types of roofing, windows and re-pointing had risen significantly less than suggested by an overall index of all types of work.

14 12 Review of the major repairs allowance Table 5.1: Comparison of unit prices for main components Component MRA current price (uprated to q3 2008) BRE price from spec and price books Comments Bathrooms ,789 Both BCM and BPSA mean is around 2,500 so the original MRA price is far too low. CH boiler ,488 Insufficient data from other two sources but uprated MRA price looks about right Chimneys BCM average also 380. BPSA shows huge variation in this aspect 20 th percentile= 40 and 80 th percentile= MRA price looks too high. CH distribution 2,360 2,064 BRE price also includes gas fire to all houses. MRA price too high. Electrical wiring ,066 BCM average is 2370 and BPSA suggests MRA price too high. External doors ,259 BPSA and BCMs indicate lower (mean 954 and 1036) Kitchens 3,045 3,474 BCM prices similar to BRE (mean 3,692) and BPSA mean even higher ( 4283). MRA price too low. Storage heaters 2,750 Roof covering 6,083 3,018 BCM mean= 2,842 and BPSA mean= MRA price far too high (even if it includes full cost of scaffolding the building!). Roof structure 1, BPSA highly variable 20 th percentile 1099 and 80 th percentile 6,555. MRA price looks too high. Wall finish 2,535 1,599 for pointing and 2,023 for rendered MRA price includes scaffolding but unknown how much. No data from BPSA or BCMs. Windows 6,196 4,866 MRA price far too high, especially for flats. BCM mean= 3,225 and BPSA = 2,782. BRE include secured by design windows Wall structure lintels MRA price looks too high but unsure what has been assumed in terms of quantities. BRE for one lintel. No data from BPSA or BCMs. Wall structure spalling bricks Wall structure underpin/frame Wall all structure and finish components MRA and BRE prices close. No data from BPSA or BCMs MRA and BRE prices close. No data from BPSA or BCMs. 4,310 2,962 BCM average much closer to BRE ( 3,068). BPSA average much higher ( 6,389) due to high outliers but median of 3,340 close to BRE. Both BPSA and BCM show huge variability e.g. pre 45 small terrace ranges from 488 to 12,800 on BCMs.

15 Review of the major repairs allowance 13 6 Review additional components/costing of add-ons Items that are currently treated as add-ons are listed in Table 6.1. Table 6.1: Treatment of add-ons in the current MRA model Element Applied to Includes Assumed life Gutters All except high rise flats PVC gutters and downpipes Estate All with shared facilities Drying areas, paths and parking bays only. Basic provision Water mains All Mains water, mains drainage plus wet risers to flats Balconies All flats with private balconies Asphalt and balustrading 30 Common parts All flats with common staircases Internal fabric but not access doors and screens 20 Bay roofs All houses with bays Roof decking and covering (Flat rood assumed) 25 Door entry system Fire alarm All flats that currently have these All flats that currently have these Full replacement 10 Full replacement 20 Plot works All houses with private plots Walls, fences, steps, hardstanding plus roofs, doors and pointing to outbuilding 30 Communal areas All with shared facilities Unclear not detailed in specifications 30 A number of issues have emerged in analysing this in more detail relating to the costs/works included and how the model deals with them.

16 14 Review of the major repairs allowance Costs/work included Works to common parts make standard assumptions about the size and configuration of these which are highly variable within archetypes (Table 6.2). For example, the average low rise post-1945 flat is in a block of 14 but 30 per cent of them are in blocks of 4 or less and 10 per cent are in blocks of 32 or more. Table 6.2: Statistics on number of flats in the block for the MRA archetypes (source: EHCS 2006) Lo rise flat pre-1945 Lo rise flat post-1945 Medium rise flat High rise flat Number of dwellings (2006) 38, , , ,992 Mean Lowest 10% th percentile th percentile th percentile th percentile th percentile th percentile th percentile Highest 10% For the purposes of this exercise, we have not changed the quantities in the original Valuation Office specifications but feel that these need to be reviewed more carefully; in particular to establish how we might establish another set of archetypes for work to common parts and exterior works to blocks. As with shared facilities on estates, additional data from local authorities, possibly supplemented by additional sample surveys are needed to obtain more detail here. These costs are important by 2010 half (49.5 per cent) of local authority dwellings will be flats. A serious omission in the current MRA model for common areas is any provision for major overhaul or replacement of lifts. We have included costs for this work for all blocks with lifts (97 per cent of high rise and 13 per cent each of medium rise and low rise post-1945). Within the existing MRA model, plot works are only included for houses. However, a number of flats have their own private plots and this is increasing as authorities try to provide more private/defensible space. EHCS 2006 based data indicates that 61 per cent of pre-1945 low rise, 33 per cent of post-1945 low rise and 33 per cent of medium rise flats have private plots. We have therefore included work for fencing to these plots. The estates work is based solely on EHCS surveyors assessment of whether any shared facilities are present and assumptions are made about what is present for different archetypes. However EHCS surveyors only count facilities that are within 100m of the dwelling concerned and that are useable by that dwelling so it will underestimate both the presence

17 Review of the major repairs allowance 15 and the extent of shared facilities on estates. Table 6.3 indicates the proportion of local authority homes with different shared estate facilities. Only those shaded are currently included in the MRA costs. Table 6.3: Percentage of all local authority dwellings with different shared facilities (source: EHCS 2006) only shaded items are included in the existing MRA Facility % dwellings with Tenant stores 12.7 Bin stores 13.1 Paladin stores 14.1 Laundry 5.0 Drying room 3.1 Community room 7.1 Warden office 8.1 Garages 8.4 CCTV 5.9 TV reception 19.5 Lightning conductors 10.1 Burglar alarm 1.1 Communal ext lighting 31.2 Drying areas 14.2 Play areas (surface) 7.3 Unadopted roads 9.1 Paths 40.7 Walls/fences 36.0 Hard landscaping 24.2 Grass/planting 38.5 In our re-run we have derived prices for all of these elements and made some general assumptions about quantities based on an assumed typical estate with 300 dwellings that are a mix of houses and flats. The estate price has been converted into a price per dwelling so we are only including costs for dwellings owned by the local authority leasehold and other owners on estates will be expected to contribute the rest. The problem is that there is no such thing as a typical estate and these costs are likely to vary widely. We need much more information than is currently available in the EHCS to derive accurate quantities for an average estate or for different types of estates. Given that these are significant costs, we think it is essential to obtain better information on materials, quantities and condition of these aspects. The first step would be to establish what data local authorities already have on these aspects, although it may be necessary to undertake additional survey work on a sample of estates (possibly as an add-on to the EHS).

18 16 Review of the major repairs allowance The costs for work to estates also appear to be incorrect in the original MRA model (for some reason they are identical to those for water mains ). We have been unable to establish whether this error has been present in all versions of the MRA (including the original 1996 based run on which the current allowances are based) and what the correct figures should be. How the model deals with add-ons These are called add-ons simply because the EHCS does not collect any data on the age of these items. It does not reflect their overall contribution or marginality to the MRA. For these items, the current MRA assumes that they have been replaced in line with their allotted life span since the date of construction. This requires complex modelling using the construction date profile of the local authority stock to estimate when different replacements are due for each item in each archetype. We do not feel that this degree of complexity is justified because it rests on two key assumptions, both of which are false: 1. The construction profile by archetype of each local authority will mirror that of the national profile 2. components have always been replaced after the allotted number of years so there is effectively no backlog in relation to these items The assumptions for internal fabric are similarly flawed. They are based on data from the EHCS postal survey of local authorities in 1996 that asked about work carried out to dwellings that had been sampled during Nominal prices were used to cost up the identified jobs and the proportion of the total relating to internal fabric was calculated. This currently adds 1.2 per cent onto the costs to cover for this sort of work. EHCS ceased to carry out a postal survey collecting this detailed information in 1996 so it cannot easily be updated. Because of the age of the data and the poor response rate to the survey and questions around the reliability of the information, we do not feel that it is sensible to continue with this approach and simply uprate by inflation. We can approach the issue from two angles: 1. What are they currently spending on capital works related to these items (that are not covered by other works to kitchens and bathrooms)? 2. What do they need to spend on this type of work? There is no data on the former collected in BPSA for capital works but it could be included as a separate category in the future. The EHCS repair costs are an indicator of disrepair and we could use the proportion of the total on internal fabric from the survey. However, EHCS covers all repairs (it is not possible to distinguish between responsive and major capital type works) and we know that it significantly underestimates work required to common areas and shared facilities. If we just look at work to individual

19 Review of the major repairs allowance 17 dwellings and the external building fabric, then internal fabric accounts for per cent of all costs in the social rented stock; much of which will be responsive work funded from revenue. A conservative assumption would be to add 2 per cent which is the sort of figure coming from the social landlords that have responded so far. Finally, the MRA makes no provision for disabled adaptations. In the local authority stock, these funds do not come from the separate disabled facilities grant budget so have to come out of the housing revenue account (HRA) (or other sources). In the first whole stock model that we developed (see section 8.1) we added on 3 per cent for these. This is the proportion of total capital spend on disabled adaptations from the 2007 BPSA returns which equates to around 22 per dwelling per year or 660 per dwelling over 30 years. This is rather lower than some of the estimates in recent BCMs of 1,000 1,500 per dwelling over 30 years. These assumptions were revised in the new archetype based model described in section 8.2.

20 18 Review of the major repairs allowance 7 Review element lifecycles used Information has come from two main sources. Firstly, a desk-based review of other systems/schemes in place and secondly discussion with individual local authorities/almos on how long they are expecting newly installed components to last and how soon they are having to replace items that are strictly decent but no longer adequate/serviceable. Based on this, we have produced proposals for how the lifecycles could and should be changed in Table 7.1. It is important to note that these do not all point to shorter lives some suggest that we should be using longer lives than the current MRA.

21 Review of the major repairs allowance 19 Table 7.1: Main elements: current and suggested lives Element Current MRA life Suggested life Justification Bathroom years is same as Decent Homes modernisation. 15 is a realistic average. CH boiler years is more in line with current experience especially for condensing combi-boilers which tend to be fitted in all but larger houses. Social landlords have already had to replace some that are < 10 years old. Chimney stacks 50 for all types except high rise as assumed none exist 60 CH distribution Electrics Consumer unit life is shorter than cabling External doors 40 for houses, 30 for flats 25 Most new doors will be PVC and this is how long they last in social housing Kitchen years is same as Decent Homes modernisation. BCIS Whole Life Costing Guide for Housing Corp works on 12 year life. 15 is a realistic average. Programmable heating Modern slimline storage heaters have shorter life than older ones. Roof covering 50 for houses, 30 for flats 60 for all types except felt and fibre cement slates (25yrs) Life should be based on the material- not the building type. Roof structure 50 for houses, 30 for flats 60 Will last 60 years provided the cover is properly maintained Wall finish 60 for all except high rise (30) 60 for pointing or non-masonry natural, 30 for other types (render, timber cladding etc.) Life should be based on the material- not the building type. Windows 40 for houses, 30 for flats 35 This is the most recent Green Guide estimate based on good quality windows Wall structure lintels Wall structure spalling bricks Wall structure underpin/frame 30 for all types except high rise where no work assumed 80 for all types except HR (30) although zero costs are entered here! Plumbing Gas Supply Electric mains

22 20 Review of the major repairs allowance 8 Produce new models to estimate expenditure needed Using the research and analysis carried out detailed in sections 1 7, we produced two different types of model: a simple whole stock model intended to provide an initial estimate of the total need to spend and examine how sensitive the estimates are to different assumptions about the lifecycle of components a more detailed archetype model to refine these estimates and allow calculation of revised weights for each local authority These are described in more detail below. 8.1 Simple whole stock model This was produced in November 2008 and includes a number of elements that were not included in the original MRA e.g. lifts and most types of shared facilities. For the shared facilities, it makes standard assumptions about quantities and materials present for facilities on a typical estate e.g. the length, height and material used in shared boundary fences, the size of a typical paladin store etc. Obviously, these aspects will vary widely and it would be prudent to carry out some sensitivity testing to examine the impact of varying these assumptions. It is very easy to change the lifetimes, prices and assumptions within the model and three variants were produced, each consisting of two Excel files (one for the add-ons and one for the main elements and total). Note that the only difference between these variants is the element lifetimes the unit prices and all other assumptions remain constant. 1. uses original MRA lives for most items apart from kitchens and bathrooms which are reduced to take them to 20 and 30 respectively and others that are increased 2. uses more realistic lives derived from BRE exercise but keeps kitchens and bathrooms at 20 and 30 years 3. this the most pessimistic scenario using the shorter estimates for lives for elements where relevant The lifetimes used are shown in Appendix 1 and the prices used in Appendix 2. The sequence of operations to calculate the final figures is detailed below:

23 Review of the major repairs allowance 21 First sheet dwelling numbers 1. Take stock as at 1/4/2010 (1,852,309 dwellings). 2. For each component, use EHCS data to estimate the proportion of stock that has this. For most, it is simply 100 per cent (all dwellings have kitchens, windows, doors, roofs etc) whereas for others it varies e.g per cent of the stock has a mains gas supply. 3. Multiply the proportion in two by the total number of dwellings in 1 to get the number of dwellings with that component. 4. Use BPSA data on the number of dwellings receiving different types of work to project the proportion of dwellings receiving that work up to (This is done in a separate spreadsheet). Apply this proportion to the number in 3 to say how many dwellings have this component that is currently 1 10 years old. In the remaining dwellings, that component will be at least 11 years old. 5. Calculate the number of replacements necessary separately for those aged 10 years or less and those aged over 10 years. For example, if the life is 20 years, then all of those that are 10 years old or less in 2010 will be over 20 years old by 2040 so will need one replacement. However, those that are 11 years old or more will need 2 replacements over this period. 6. Apply the number of replacements to the number of dwellings and sum these. Assume that there will always be a backlog of 5 per cent so take 95 per cent of this number. Second Sheet costs 1. Take the number of replacements from stage 6 in the first sheet. 2. Apply the unit price to give the total cost over 30 years for that element for the whole stock. These unit prices are based on the weighted average price for that element across all archetypes. 3. Divide that by 30 to get the annual amount. 4. Divide by the total dwellings to get the per dwelling amount over the full 30 years and per year. Note this is not annuitised as in the current MRA or in the later model. 5. Sum total to get total per dwelling for main elements per year (cell h30). 6. Add on 2 per cent of the main elements total for internal fabric. 7. Add on 67 per year for scaffolding (still waiting on prices for flats so this is likely to reduce a bit). This assumes that the building is scaffolded only once over the 30 years. 8. Take the add-ons total per year from separate sheet (add-ons are calculated in exactly the same way as main elements). 9. Add on 3 per cent of the main elements total for disabled adaptations.

24 22 Review of the major repairs allowance 10. Add on 9 per cent for fees. This is the Communities and Local Government default assumed in the applications for ALMOs and LSVTs. The annual average MRA for each of this and the base position (obtained from running the existing MRA model with data from EHCS ) is shown below. Note that this re-run gives a weighted stock average of 793 per dwelling at 2008 prices which is significantly higher than the current allocation of 668. This is because the current allocation is based on data from the 1996 EHCS and has been updated annually using GDP (rather than BCIS) and because the stock has changed significantly over the past 10 years in terms of the facilities present that will require periodic replacement; in particular the increase in the number of central heating and storage heating systems, controlled entry and private plots to flats. The prices under Scenarios 1, 2 and 3 are all at south east Region prices. They all include the same elements and same unit prices the only difference is the component lifetimes used. Table 8.1: Mean costs per dwelling per year at 2008 prices Current allocation Updated base Lifetime scenario 1 Lifetime scenario 2 Lifetime scenario 3 per dwelling per year ,070 1,266 % increase current allocation 19% 43% 60% 90% Following discussions within Communities and Local Government and with members of the HRA working group, it was decided to refine the model to deal with its key shortcomings and also to produce estimates for individual local authorities as detailed below. 8.2 Final archetype model This built on the above model using largely the same unit prices and the same lifetimes as used in scenario 1 with the following key differences: Instead of spreading all element replacements needed between 2010 and 2040 evenly between years, these were distributed based on the age profile of elements from EHCS data. This was to enable us to look at expenditure in five-year bands to establish whether there was any lumpiness in the spend profile going forward. It also meant keeping the backlog (replacements that should have been carried out by 2010 but had not been) as a separate entity. All amounts were annuitised using the same assumptions as in the original MRA model 6 per cent NPV and a factor (not documented or explained) of 7.26 per cent.

25 Review of the major repairs allowance 23 Calculations were carried out separately for each archetype so that individual archetype weights could be produced and new MRA weights produced for all authorities. Where authorities were in receipt of ALMO funding from 2010 onwards, their MRA weight was adjusted to remove the ALMO funding. Regional factors (from the BCIS) were used to calculate the overall total and to adjust individual local authority weights. Costs of statutory compliance with regard to Category 1 hazards under the housing health and safety rating system (HHSRS), asbestos and disabled adaptations were estimated and kept as separate sums. These are detailed in Appendix B. In creating the new model and checking prices by archetype, we also realised that there was no provision for works to mains drainage so a sum was added under plumbing to rectify this. The final unit prices used by archetype are in Appendix C and instructions for running the model are in Appendix D Key outputs from new archetype model The total MRA figure (including backlog and costs of statutory compliance) is higher than that produced by the whole stock model; largely because of the higher costs for disabled adaptations. It gives an annual average MRA across the stock of 1,032 compared with 955 and equates to a total spend of 57,359 million over 30 years (at 2008 prices) (Table 8.2). For the purposes of comparison, the costs of additional work to deal with the backlog and statutory compliance has been split evenly over the 30 years, although in practice much of this is likely to be done in the first five or 10 years. The backlog in this report is the backlog of time-expired elements which is different to the backlog of non-decent homes. The backlog will include work to some dwellings that are strictly decent because elements are time expired but either OK or not covered by decent homes. It also excludes work to homes that are non-decent because of thermal comfort or HHSRS excess cold as the MRA backlog does not include for installing central heating for the first time or installing/upgrading insulation. Separate analysis has estimated that the costs needed to deal with the non-decent backlog in 2010 will be between 1,400m to 2,900m based upon modelling from local authority predictions, English House Condition Survey data and business plan statistical appendix data. Some of these costs are in ALMOs which may already have funding. Costs to make decent are not simply a sub-set of the backlog of time expired elements because work to make decent may involve other types of work e.g. improving heating and insulation. It is likely that around per cent of the costs to make decent consist of these types of additional improvements. The final figure of 1,032 per dwelling is 54 per cent higher than the current average allocation of 668. Even just the newly arising need component in the new model at 825 per dwelling is still 24 per cent

26 24 Review of the major repairs allowance higher than the current amount; the rest being accounted for by the backlog and statutory compliance. Table 8.2: Summary outputs for new archetype based model Total cost all dwellings over 30 years Total cost all dwellings per year Cost per dwelling per year Newly arising need main elements 40,770M 1,359M 734 Newly arising need shared facilities 5,070M 169M 91 All newly arising need 45,840M 1,528M 825 Backlog main elements 5,816M 105* Backlog shared facilities 633M 11* All backlog 6,449M 116* Disabled adaptations 4,167 75* HHSRS 450M 8* Asbestos 453M 8* All statutory compliance 5,070M 91* All work (backlog + stst + NAN) 57, * * the amounts have been split evenly over the 30 years for the purposes of simple comparison Table 8.3: Current MRA allowances compared with new revised model Current 08/09 New archetype model Difference MRA NAN Backlog Statutory Total* current MRA-NAN current MRA-total Trad semi pre ,305 2,738 1, Trad semi or med lge ,965 2,738 1, terr Trad sm terrace ,891 2, pre-1945 Trad sm terrace ,449 2,738 1, Trad house other ,490 2,738 1, pre-1945 Trad house ,951 2,738 1, Trad house post ,935 2,738 1, Non trad house ,840 2,738 1, Bungalow ,643 2,738 1, Lo rise flat pre ,051 2, Lo rise flat post ,867 2, Medium rise flat ,893 2, Hi rise flat ,055 2,738 1, ratio smallest to largest * the backlog and statutory estimates have simply been divided by 30 to arrive at this total

27 Review of the major repairs allowance New archetype weights The new archetype weights themselves are very different to the existing both in overall size and distribution. There are two key points to note: there is far less variation by dwelling type with the new weights the highest is about 1.5 higher than the lowest. With the current weights the highest is almost 2.4 times the lowest the biggest shortfall appears to be for houses especially larger houses The lack of variation by archetype in the revised model is something we were expecting following earlier analysis that suggested that there was far greater variation within archetypes in terms of key parameters like number of windows, total external wall area, number of flats in block etc. than between archetypes. It also arises for three other reasons: We have used statistical returns on capital work carried out to provide additional information about age of components. This just contains data on the whole stock rather than by archetype so we have had to assume the same proportions of homes in each archetype have had new components We have estimated the age of other components for the whole stock (split into pre-1945 and post-1945 for the exterior elements) rather than by individual archetype because this is more robust and transparent. Also, work programmes are likely to vary far more by authority than by archetype. The costs for statutory compliance are approximated for the whole stock so we have applied the same amount to each archetype. At least part of the discrepancy between the current allocation and the weights indicated by our revised method arises because the current weights are based on 1996 EHCS data and have been uprated by RPI (rather than building price inflation). If we compare the current allowances with what the MRA model output using 2004-based EHCS data it is clear that there are large discrepancies in both the overall size and pattern of allowances (Table 8.4). This highlights three real issues about the current method: it is inherently unstable due to fluctuations in EHCS data about age of components in different archetypes over time allowances need to be uprated to reflect building costs which normally run well ahead of general inflation the costs of different types of work increase at different rates so differential inflation factors are needed with a wholesale re-pricing exercise after 10 years

28 26 Review of the major repairs allowance Table 8.4: Current allocation compared with current MRA model on EHCS 2004 based uprated to prices current allocation model updated difference current allocation minus model Trad semi pre Trad semi or med lge terr Trad sm terrace pre Trad sm terrace Trad house other pre Trad house Trad house post Non trad house Bungalow Lo rise flat pre Lo rise flat post Medium rise flat Hi rise flat Shared facilities and common areas Going back to the revised archetype weights, we do have very serious reservations about the overall size particularly for flats. We have always been concerned that the MRA seriously underestimates the amount of money that needs to be spent on shared facilities and common areas. We think that the new method goes some way to addressing this shortfall but probably not far enough. The problem is that there is simply no data on the extent and type of shared facilities on estates owned by different authorities and the EHCS data that we have used only include facilities within 100m of the survey dwelling that are useable by that dwelling. For example, if our survey dwelling is a house with its own front drive on a large estate, the surveyor will not count any garaging, tenant stores, paladins etc. that are associated with flat blocks on the same estate. Analysis that we carried out previously has indicated that there is very little systematic relationship between the overall type of facilities present and archetype apart from very obvious things like high rise flats being much more likely to have lifts than other flats and flats generally being more likely to have shared facilities than houses. A low rise flat built after 1945 situated on a very small estate in a largely rural area is likely to have very different numbers and types of shared facilities than one located on a very large estate in a metropolitan area or London borough. Tables 8.5 and 8.6 indicate how both the revised weights for newly arising need and the current backlog are split between the main building elements and common areas and shared facilities. The proportion on both backlog and newly arising need for shared facilities is considerably higher for flats; especially high rise flats but is it enough?

29 Review of the major repairs allowance 27 Table 8.5: Breakdown of newly arising need main elements common and shared facilities total newly arising need % common and shared facilities Trad semi pre % Trad semi or med lge terr % Trad sm terrace pre % Trad sm terrace % Trad house other pre % Trad house % Trad house post % Non trad house % Bungalow % Lo rise flat pre % Lo rise flat post % Medium rise flat % Hi rise flat % Table 8.6: Breakdown of current backlog main elements common and shared facilities total backlog % common and shared facilities Trad semi pre , ,305 6% Trad semi or med lge terr , ,965 6% Trad sm terrace pre , ,891 6% Trad sm terrace , ,449 7% Trad house other pre , ,490 5% Trad house , ,951 6% Trad house post , ,935 6% Non trad house 3, ,840 6% Bungalow 3, ,643 6% Lo rise flat pre , ,051 7% Lo rise flat post , ,867 10% Medium rise flat 2, ,893 14% Hi rise flat 2, ,055 28% Spend profile over the 30 years We have examined the estimated total spend in five year bands and also investigated whether and how this varies by archetype and by type of component. The amounts used are not annuitised and are all at prices. The most striking feature is the sharp rise in estimated expenditure from year 21 onwards. This is not unexpected and is largely a reflection of huge amount of investment that has taken place which means that main key (and expensive) components will reach the end of their expected life between years 21 and 30 (Figure 8.1).

30 28 Review of the major repairs allowance Figure 8.1: Total estimated expenditure in five-year bands for the whole stock ,000m 14,000m 12,000m Shared facilities Common areas Main elements 10,000m 8,000m 6,000m 4,000m 2,000m 0m 2010 Backlog The trend is largely driven by the steep increase in the costs for the main elements. However, there are some fluctuations for shared facilities and common areas over the 30 year period as shown in Figure 8.2. Figure 8.2: Total estimated expenditure for each five-year band on common areas and shared facilities 1,200m 1,000m Shared facilities Common areas 800m 600m 400m 200m 0m 2010 Backlog For houses and bungalows, the large increase in total spend in years is seen in all archetypes. It is most pronounced for semi-detached houses built before 1945 and semis built and least pronounced for bungalows (Figure 8.3).

31 Review of the major repairs allowance 29 Figure 8.3: Total estimated spend in five-year bands houses and bungalows only 2,000m 1,800m 1,600m 1,400m 1,200m 1,000m 800m 600m 400m Trad semi pre 45 Trad semi Small terr pre 45 Small terr Other pre Houses Post 74 Houses Non trad houses Bungalows 200m 0m 2010 Backlog For all types of flats, the increase is less pronounced, reflecting at least in part, the higher proportion of expenditure on common areas and shared facilities (Figure 8.4). Figure 8.4: Total estimated spend in five-year bands flats only 2,500m 2,000m 1,500m Low rise pre 45 Low rise post 45 Medium rise High Rise 1,000m 500m 0m 2010 Backlog

32 30 Review of the major repairs allowance If we look at expenditure on key main elements, it is clear that most of the surge from year 21 onwards is being driven by two components: windows and heating (Figure 8.5). Figure 8.5: Total estimated spend in five-year bands on different types of component 3,500m 3,000m 2,500m 2,000m 1,500m 1,000m 500m Bathroom, wc, plumbing Kitchen Heating Electrics Windows External doors Chimeys, roofs and gutters External walls Mains services 0m 2010 Backlog This has arisen for two main reasons. Firstly, from the BPSA returns it is likely that 72 per cent of all local authority homes will have had new windows installed between and around half of these will exceed their life span of 35 years between years 25 and 30 and the unit costs are relatively high. Also, a very high proportion of homes have had new heating systems installed requiring replacement of boilers and/or radiators Changes in allocations to individual local authorities It is difficult to compare the weights calculated using the new archetype model with the existing weights because the former also include backlog and statutory compliance costs. We can, however, disaggregate these and do two sets of comparisons, one with the total and one with just the newly arising need component of the new archetype model weight. In the comparisons, we have also adjusted the weights for those authorities that will be receiving ALMO funding after April To do this, we have re-scaled their MRA to take out the years of ALMO funding for example, if they will be receiving ALMO funding for three years then their weights have been scaled down by 27/30 to reflect this. Before examining these in more detail, it is essential to point out that we do not see these as new weights to be simply plugged into the allocation process. Basing the whole of the MRA on the 13 standard archetypes is not the best approach to adopt in allocating all resources fairly. Whilst these 13 archetypes may reflect gross differences in dwelling size and other parameters, they conceal a huge amount of variation within archetypes. Also these archetypes are not related in a consistent and

33 Review of the major repairs allowance 31 systematic way to the presence, scale and age of facilities on estates or in common areas of blocks of flats. We feel strongly that a different type of allocation model is need that separately identifies and allocates money for four main components: components inside the dwelling using archetypes based on overall dwelling size the external fabric of the dwelling using archetypes based on likely materials, built form (terraced, semi, bungalow etc.) and size of houses and blocks of flats common areas of blocks of flats number of flats in the block, storey height, accessway type and presence of facilities like controlled entry systems and lifts shared facilities on estates overall size of estate and facilities present The problem is that we are limited to using the data that we have (EHCS and the BPSA returns) for the moment and there is a need to consider how these vehicles could be modified or other data collected to produce more useful information to facilitate developing a better allocation system. Looking at the new model weights for each authority, the overall differences conceal a good deal of variation. Although, overall the new models newly arising need weight is 23 per cent higher than the current value, for some authorities it is actually lower (the lowest is only 77 per cent of the current value) and in some cases it is very substantially higher; up to 50 per cent higher (Table 8.7). The full details are in a separate excel spreadsheet. Table 8.7: Local authority weights for current allocations and new archetype model summary statistics Mean Min Max Current MRA per dwelling New model newly arising need New model All work 1, ,171 ratio of new to current newly arising need ratio of new to current all work With the new allowances, the big losers are recent ALMOs and London boroughs. The big winners are retention authorities in rural locations. However, there is considerable variation; for example some outer London boroughs and large metropolitan authorities have increased by significantly more than the average on the new model. Tables 8.8 and 8.9 highlight how allowances would change with the new archetype model. Note that there are six authorities where it was not possible to calculate the difference either because there was no data on stock profile (Arun, Nottingham, Rugby and Sedgemoor) or their current MRA allowance (Isles of Scilly and Mid Devon).

34 32 Review of the major repairs allowance Table 8.8: Difference between current allocation and newly arising need weight from the new model (average is 23% more) new is less new 0 19% more new 20 29% more new 30 39% more new 40%+ more Tower Hamlets Westminster Reading Lancaster Salisbury Lambeth Camden Adur Waveney North Warwick Southend-on-Sea Hammersmith Kingston u Thames Bristol Stoke-on-Trent Hackney Salford Medway Towns South Derby Cannock Chase Stevenage Charnwood Rotherham Winchester Carrick Blackpool Southwark NE Derbyshire Ipswich South Kesteven City of London Redbridge Kirklees Bolton Caradon Basildon Wandsworth Waverley Cheltenham Bridgnorth Lewisham Enfield Leeds Warrington North Cornwall Islington Barrow Runnymede Newark Mid Suffolk Kensington Ealing Brent Barnsley East Devon Havering Oadby & Wigston High Peak North Kesteven Stockport Northampton Ashfield Taunton Deane Eastbourne Kettering Hinckley South Holland Tendring Waltham Forest Chesterfield Harrogate Bassetlaw Oswestry Brentwood Rochdale Hillingdon Haringey Broxtowe Berwick South Lakeland Gravesham Harrow Solihull Barnet Blyth Valley South Tyneside Canterbury Exeter Colchester Poole Leicester St Albans Thanet Alnwick Dacorum Manchester Redditch Sheffield Uttlesford Oxford City Tandridge Gedling Wigan Luton Bournemouth NW Leicester Slough Lewes Milton Keynes continued

35 Review of the major repairs allowance 33 Table 8.8: Difference between current allocation and newly arising need weight from the new model (average is 23% more) new is less new 0 19% more new 20 29% more new 30 39% more new 40%+ more Castle Point Warwick Babergh Newcastle u Tyne Hounslow Plymouth Epping Forest Selby Mansfield Doncaster Corby Dudley Newham Dartford Liverpool Harlow Crawley New Forest Greenwich Gloucester Durham Easington West Lancashire Derby Portsmouth Shepway Barking Woking Birmingham Bolsover Thurrock Stockton Tamworth Brighton & Hove Dover Stroud Darlington Lincoln Swindon Welwyn Hatfield Blaby City of York Nuneaton Southampton Croydon Wolverhampton Melton Richmondshire Great Yarmouth Gateshead Wokingham Guildford Wycombe South Beds North Tyneside Wealden Gosport Fareham Bury Sandwell Norwich East Riding Kingston U Hull Sutton Ellesmere Port Cambridge Ashford Oldham

36 34 Review of the major repairs allowance Table 8.9: Difference between current allocation and the total weight calculated by the new model (average is 54% more) increased 20% or less increased 21 40% increased 41 50% increased 51 60% increased 61 70% increased over 70% Tower Hamlets Basildon Colchester East Riding Melton Liverpool Lambeth Islington Castle Point NE Derbyshire Ashford Mansfield Hackney Blackpool Epping Forest Runnymede Great Yarmouth Barking Southend-on- Kensington Sheffield Waltham Forest North Tyneside Durham Sea Stevenage Westminster Harlow Waverley Kingston u Hull Derby City of London Camden Portsmouth Barnet Ellesmere Port Swindon Lewisham Hammersmith Newcastle u Rotherham Waveney Tamworth Tyne Salford Doncaster Kirklees Norwich Bolsover Southwark Easington Leeds Bristol Salisbury Charnwood Woking Northampton Winchester Stroud Redbridge Brighton & Thanet Lancaster North Warwick Hove Wandsworth Thurrock Gravesham Bury Cannock Chase Enfield Southampton Oadby & Hillingdon Carrick Wigston Ealing Darlington Canterbury Harrow Stoke-on-Trent Havering Welwyn Poole South Derby South Kesteven Hatfield Barrow Wealden Bassetlaw Cheltenham Caradon Stockport Guildford Hounslow Ipswich North Cornwall Eastbourne Fareham Kettering High Peak Bridgnorth Haringey Wolverhampton Bournemouth Newark East Devon Brentwood City of York Lewes Bolton Mid Suffolk Tendring Richmondshire Rochdale Ashfield Taunton Deane Solihull Kingston u Crawley Oswestry North Kesteven Thames Harrogate Sutton Broxtowe Barnsley South Holland Newham South Beds Uttlesford Oxford City Dacorum Gateshead Warwick Warrington Tandridge Reading Manchester Hinckley Slough Adur Dartford Exeter Luton Sandwell Shepway Chesterfield South Tyneside Cambridge Gedling Redditch Greenwich Brent West Lancashire Blyth Valley St Albans Oldham Corby Milton Keynes South Lakeland Medway Towns Gloucester Berwick Croydon Leicester Selby Alnwick Stockton New Forest Birmingham Plymouth Dover Wigan Nuneaton Babergh Lincoln NW Leicester Wokingham Dudley Wycombe Blaby Gosport

37 Review of the major repairs allowance 35 Appendix A Lifetime scenarios and prices used in whole stock model Note: the lifetimes under scenario 1 were used in the new archetype model Table A1: Lifetimes for main elements under the three lifetime scenarios scenario 1 scenario 2 scenario 3 Unit price* Bathroom Additional WC CH boiler Chimney stacks CH distribution Electrics External Doors Kitchen Programmable heating Roof covering most RC felt and fibre cement Roof structure Wall finish point Wall finish other Windows Wall structure Plumbing Gas Supply Electric mains * this is the weighted average across the stock

38 36 Review of the major repairs allowance Table A2: Lifetimes for add-on elements under the three lifetime scenarios scenario 1 scenario 2 scenario 3 Unit price* Gutters Water mains Balconies Common staircases Bay roofs Door Entry System Fire Alarm Plot works Lift replace Lift overhaul Tenant stores structure Tenant stores door and roof Bin stores Paladin stores structure Chutes and doors Laundry Drying room Community room Warden office Garages structure Garages doors and roof CCTV TV reception Lightning conductors Burglar alarm External lighting to houses Communal ext lighting Play areas (surface) Unadopted roads Walls/fences Hard landscaping Grass/planting Retaining walls * this is the weighted average across the stock

39 Review of the major repairs allowance 37 Appendix B Estimating the costs of statutory compliance We have carried out desk-based research to review and estimate the likely costs of statutory compliance with respect to the following three items: category 1 hazards under the housing health and safety rating system (HHSRS) additional costs associated with removal/containment and disposal of asbestos additional costs arising from the need to carry out adaptations for tenants with disabilities There are also likely to be substantial additional costs associated with improving energy efficiency and reducing carbon emissions to achieve key targets which we have not included in these estimates. This work will necessitate installing microgeneration and other renewables in at least some homes in addition to increasing the amount of wall and roof insulation over and above the current minima for Decent Homes. Communities and Local Government is carrying out additional work to estimate these additional costs. 1. Costs of dealing with category 1 HHSRS hazards Analysis of 2006 based EHCS data indicates that the average costs of remedying Category 1 hazards in local authority homes are 2,429 per dwelling where such hazards exist. As of 2006, 14 per cent of the stock had a category 1 hazard and we feel that it is reasonable to assume that this will have reduced to around 10 per cent by 2010 (at least half of this will relate to refusals by current occupants to carry out the work). This would give us an average cost per property across the whole stock in 2010 of 243. Essentially this is all backlog. Predicting need beyond is fairly straightforward because very few properties owned by local authorities will be improved to create hazards as happens with private sector homes (e.g. loft conversions with very steep stairs, large expanses of dangerously slipping decking etc.). Any hazards that arise from deterioration of the structure or services are already covered by replacement of these components in the current MRA and by day to day repairs and cyclical maintenance in maintenance and management. We therefore think that it is reasonable to assume that there will be no additional newly arising need related to HHSRS once the backlog is tackled unless there is a change in the standard itself.

40 38 Review of the major repairs allowance 2. Adaptations for people with disabilities The original model simply took 3 per cent of the total costs because BPSA returns indicated that 3 per cent of all capital expenditure related to disabled adaptations. This gave us about 30 per dwelling per year to add in for each of the 30 years. The main concerns about using this figure are that it is based on current spending, which is largely determined by the amount of money available, rather than actual need. To investigate this, we analysed the most recently available robust data on adaptations needed from EHCS. This analysis indicated that some 7 per cent of households renting from local authority need some adaptations and that the average cost of the works is 6,500 per dwelling. This equates to 455 per dwelling across the stock and is probably our best estimate of the current backlog. Unlike HHSRS, there will be additional newly arising need as tenants become older and/or ill and this proportion is likely to rise with increases in life expectancy. Also, technical innovations in delivering more care at home may actually mean more people staying in their existing home rather than moving into institutional care and works being more sophisticated and expensive. We examined a number of building cost models from recent ALMOs and LSVTs to see how much they were estimating they needed to spend on adaptations over the next 30 years. The way that the models were completed and the amounts involved varied considerably by a factor of ten! (Table B1) Table B1: Predicted spending on disabled adaptations from recent building cost models and cost generation models Per dwelling over 30 years per dwelling per year ALMOs Basildon 2, Blackpool 5, Charnwood Enfield 3, Haringey 2, Lewisham Liverpool Salford 1, South Northants 4, Stevenage 2, Tower Hamlets Lambeth not separately itemised LSVTs Merton 1, Rutland 2, Sedgefield 1, South Cambs 2, Plymouth not separately itemised

41 Review of the major repairs allowance 39 Our overall feeling was that many of these were not particularly robust or well-researched. For example, two of the building cost models completed by the same surveying firm included a blanket assumption of 1.5m per year for adaptations for the whole stock despite a large difference in stock numbers (Haringey=16,431 homes, Enfield=11,915 homes) and most others note that their estimate is based on current spending. The average across all of the ALMOs and LSVTs works out around 75 per dwelling per year or 2250 over 30 years and represents both dealing with the backlog and newly arising need. If we take the EHCS backlog figure of 455 per dwelling as the backlog, this leaves us with 1795 ( 2250 from the ALMOs/LSVTs minus 455 backlog) for years 1 30 which is an average of 60 per dwelling per year. This is a significantly higher than the 3 per cent contingency added on in the first whole stock model but we feel it is a more realistic indicator of need. 3. Asbestos This is extremely difficult to produce a robust estimate for this type of work as it is unclear how many dwellings may still contain asbestos after 2010 and what sorts of works will be needed. The assumptions used are outlined below so that alternative assumptions could be used to generate other costs. Numbers of dwellings Not all dwellings would have contained any asbestos and many that did would have already been dealt with by Dwellings built between and non-traditional houses are the most likely to contain asbestos. We have assumed that 10 per cent of all these dwelling types/ages still have some to deal with. This is because research on implementing Decent Homes suggested that most authorities were leaving dealing with the most expensive and problematic dwelling types and works until later to allow time for full structural evaluations and/or applications for additional ALMO funding. Although Communities and Local Government are expecting only around 5 per cent of homes to be non-decent by 2010, a disproportionate number of these are likely to be problematic in this and other respects. We have taken the total numbers from the assumed 2010 position (BPSA 2007 data remodelled to take account of known/expected transfers). We have used EHCS 2006 data to estimate the proportion of each archetype built where this is not already inherent in its description; apart from non-traditional houses where we have assumed all are likely to have contained at least some asbestos. Table B2 indicates the key numbers and percentages used to arrive at an estimate of us 69,761 dwellings predicted to have some remaining asbestos requiring removal after 2010.

42 40 Review of the major repairs allowance Table B2: Predicting number of dwellings likely to contain asbestos in 2010 dwellings in 2010 proportion Number Number untreated assume 10% still have some Trad semi pre , Trad semi or med lge terr , ,838 19,784 Trad sm terrace pre , Trad sm terrace , ,032 3,203 Trad house other pre , Trad house , Trad house post , Non trad house 109, ,022 10,902 Bungalow 170, ,913 7,191 Lo rise flat pre , Lo rise flat post , ,618 11,662 Medium rise flat 349, ,989 10,699 Hi rise flat 169, ,195 6,320 Total 1,852, ,607 69,761 Costs Not all dwellings with asbestos will need all likely work. To calculate costs, we have simply picked the most common types. All will however need the most expensive part; namely the negative pressure enclosure with airlock. We have used a single cost for all types (although this will vary). The costs break down (per standard dwelling) are shown in table B3 Table B3: Costs for dealing with asbestos Item Cost Negative pressure enclosure 3,500 Remove chimney panels 600 Remove bath panel 200 Removal artex ceilings throughout 1,800 Remove floor tiles kitchen and bathroom 150 Total 6,250 Applying this cost to the number of dwellings in table B2 gives us a total of 436,004,583. This equates to per dwelling across the whole stock for the 30 years.

43 Review of the major repairs allowance 41 Appendix C Final unit prices by archetype Main elements bathroom sep wc ch boiler chimneys ch dist electrics ext doors Trad semi pre ,774 1,350 1, ,500 2,350 1,650 Trad semi or med lge terr Trad sm terrace pre-1945 Trad sm terrace Trad house other pre ,849 1,350 1, ,500 2,350 1,650 2,774 1,350 1, ,800 1,950 1,650 2,774 1,350 1, ,800 1,950 1,650 2,849 1,350 1, ,500 2,350 1,650 Trad house ,849 1,350 1, ,500 2,350 1,650 Trad house post ,774 1,350 1, ,500 2,350 1,650 Non trad house 2,774 1,350 1, ,500 2,350 1,650 Bungalow 2,774 1,350 1, ,800 1,770 1,650 Lo rise flat pre ,774 1,350 1, ,800 1, Lo rise flat post ,774 1,350 1, ,800 1, Medium rise flat 2,774 1,350 1, ,800 1, Hi rise flat 2,774 1,350 1, ,800 1, Trad semi pre-1945 kitchen storage heat roof cover roof struc wall fin pointing wall fin other windows Trad semi or med lge 3,400 2,750 4, ,540 2,450 7,500 terr Trad sm terrace 3,865 2,750 4,710 1,025 1,716 2,730 5,250 pre-1945 Trad sm terrace 3,360 2,750 3, ,015 7, Trad house other 3,360 2,750 3, ,190 5,250 pre-1945 Trad house ,865 2,750 4,953 1,072 1,430 2,275 7,500 Trad house post ,865 2,750 4, ,672 2,660 5,250 Non trad house 3,865 2,750 4, ,672 2,660 5,250 Bungalow 3,400 2,750 4, ,672 2,660 6,375 Lo rise flat pre ,360 2,750 5,889 1, ,505 4,125 Lo rise flat post ,335 2,750 1, ,280 3,656 Medium rise flat 3,335 2,750 1, ,280 3,656 Hi rise flat 3,335 2,750 1, ,280 3,656 3,305 2, ,078

44 42 Review of the major repairs allowance plumbing gas supply mains electrics scaffold one off* wall structure Plumbing gas supply mains electrics scaffold one off Trad semi pre ,680 1, ,277 Trad semi or med lge terr ,729 1, ,323 Trad sm terrace pre ,346 1, ,242 Trad sm terrace ,346 1, ,242 Trad house other pre ,738 1, ,392 Trad house ,688 1, ,300 Trad house post ,688 1, ,300 Non trad house 1,122 1, ,277 Bungalow 1,642 1, Lo rise flat pre ,365 1, Lo rise flat post ,365 1, Medium rise flat 1,112 1, Hi rise flat 1, , ,277 Unit prices for add-ons ,323 price per dwelling where present Gutters , ,242 Water mains 1,164 Balconies 1,000 Common parts 1,436 Bay roofs 260 Door entry system 250 Fire alarm 400

45 Review of the major repairs allowance 43 Plot works 1,536 LIFT replace 2,272 LIFT overhaul 1,136 Tenant stores structure 260 Tenant stores door and roof 390 Bin stores 378 Paladin stores structure 35 Chutes and doors 116 Laundry 53 Drying room 17 Community room 18 Warden office 63 Garages structure 86 Garages doors and roof 246 CCTV 400 TV reception 325 Lightning conductors 250 Burglar alarm 500 External lighting 170 Communal ext lighting 33 Play areas (surface) 17 Unadopted roads 12 Walls/fences 23 Hard landscaping 12 Grass/planting 9 Retaining walls 10

46 44 Review of the major repairs allowance Appendix D Running the new archetype-based model This section outlines the key stages giving the names of the associated excel spreadsheets. 1. Calculate the percentage of dwellings in the backlog and requiring replacement of each element in five year bands backlog and age profile calcs.xls First sheet backlog calcs(2) 1. For each component, EHCS 2006 based data is used to estimate the current proportion of stock with a backlog of repair, using the scenario 1 lifetimes detailed in Appendix A. This percentage is in column B. 2. Where available, for each component, BPSA data is used to project the proportion of dwellings in the current backlog receiving works due to be completed by the end of 2010 (column C). The model assumes that 90 per cent of this work would have been directed at components that were already in the backlog. Deducting the 90 per cent of predicted BPSA works from the current backlog, gives the resultant backlog figure for each component at the end of 2010 in column D. Where this deduction results in a negative backlog of component repairs it has been assumed that this is due to different assumptions about component definition or lifetimes in the BPSA data. For example, the BPSA data does not distinguish between wall structure and wall finish and just has a single category for external walls. In such cases 5 per cent residual backlog figure is used in the model. For some components there is insufficient EHCS and/or BPSA data to determine the resultant backlog at Where this occurs, the resultant backlog for the component is taken as the same as another component with the same life cycle and/or where we would expect a similar pattern of replacement repairs to be undertaken, for example, bay roof replacement backlog to be similar to those roof coverings with the same life cycles. This approach has been used especially in relation to estimating current backlog figures for the shared and common components.

47 Review of the major repairs allowance 45 To obtain more in depth analysis of replacement programmes elements with longer lives have been broken into pre-1945 and post-1945 stock, such as chimneys and roof structure. As it cannot be assumed that the distribution of the backlog for post-1945 dwellings would simply mirror those of pre-1945 dwellings the model has used what are considered to be realistic current backlog figures and figures for the distribution of dwellings where the component is under or over 10 years (see 3 below). At this stage we therefore have the estimated percentage of each element that is: in the backlog (column D) ten years old or less (column E) more than 10 years old, but not backlog (column F) 3. The proportion of dwellings where the component is under 10 years of age is assumed to be divided equally into the two five-year age bands; 1 5 years, 6 10 years (columns H and I). The 2010 resultant backlog is deducted from the proportion of dwellings with the component over 10 years of age, to establish the proportion of stock over 10 years where the component is not in the current backlog (column K). The exceptions to this relate to those components which have been split into pre-1945 and post-1945 stock. For post-1945 dwellings the proportion of stock over 10 years where the component is not in the current backlog is assumed to be equal to the proportion of components over 10 years of age. 4. For each component with a lifetime over 10 years, EHCS data is used to estimate the proportion of dwellings/components in five-year age bands from 11 years up to the age of that component s life cycle, for example, bathrooms are split in five year bands from 11 years of age to 30 years. These percentages were derived from SPSS analysis and are given in columns N-W. 5. The above proportion in each of the five year bands is then calculated as a percentage the total stock over 10 years not in the current backlog. This gives the proportion of dwellings requiring replacements for that component s given five-year age band (columns X-AG). 6. Where a component has a lifetime of less than 30 years, the proportion of replacements in each five-year period up to 30 years, mirrors either the current 2010 backlog, backlog in the following 1 5 years, or backlog in the following 5 10 years depending on the component s age at each time period.

48 46 Review of the major repairs allowance Second sheet backlog percentages summary This sheet shows, for each component, the proportion of stock requiring replacement works in 2010 and in each five-year age band thereafter over the following 30 years. 1. The proportion of dwellings in the current backlog in 2010 is as given on the first sheet. 2. The proportion of dwellings that will be in the backlog within the following 1 5 years, 5 10 years etc is taken from the relevant five-year age band of dwellings which fall into the backlog during each time period. For example, for wall structures, we need to take the proportion of dwellings aged in 2010 as those falling into the backlog in the following 1 5 years, those aged years in 2010 will fall into the backlog within 5 10 years. 2. Apply these percentages to the number of dwellings in each archetype and unit prices to obtain the cost per element in five-year bands for each archetype archetype model no links.xls The first sheet backlog summary sheet is copied from the backlog and age profile calcs workbook and can be automatically updated from it if the two sheets are linked (we have unlinked them here. The worksheet for each archetype gives both five-year band, and total cost estimates, for component replacements over the 30 year period. 1. Each proportion of dwellings in the current backlog, and the proportions of dwellings in the backlog for each of the age bands, is multiplied by the stock total for each archetype. The stock total for each archetype is calculated as current local authority stock minus planned LSVT transfers. This figure is then multiplied by the proportion of the archetype with the given component, estimated through EHCS data, and the unit price of component replacement for that particular archetype. 2. For the main elements 2 per cent has been added on for internal fabric and 9 per cent for fees 3. The model assumes that scaffolding occurs only once over the 30 year period and, as with other unit prices, the cost per dwelling varies according to the type and age of dwelling type. 4. The last three sheets carry out the annuitisation calculations and use exactly the same assumptions as the original MRA and the final weights for each archetype are in the last sheet ( all work ). The newly arising need figure is in row 38 and the total backlog amount (not split over

49 Review of the major repairs allowance 47 the 30 years) in row 40. Note that these are all at SE England prices at this stage. 3. Apply the archetype weights to the regional stock profile to get total spend figures at regional prices archetype per region.xls The key figures are in the first sheet Regional costs : total annual MRA (newly arising need only) all regions cell E26 annual MRA per dwelling cell E27 total backlog all regions cell E50 4. Apply the archetype weights to the individual local authorities to get their new MRA allowance costs by local authority new model. xls This outputs the new allowances for each authority note that these do not take account of ALMO funding. The final spreadsheet with allowances for each local authority adjusted for ALMO funding is: LA weights comparison.xls

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