LHT S ASSET MANAGEMENT STRATEGY 2015-20 It s My Home 0
ASSET MANAGEMENT STRATEGY 2015-20 It s My Home Contents Page No 1. WHAT DOES OUR ASSET MANAGEMENT STRATEGY AIM TO DO? 2 2. WHY IS ASSET MANAGEMENT IMPORTANT TO LHT? 2 a) Making Better Use of Our Assets b) Investing in our homes c) Energy and Sustainability 3. CONTEXT FOR LHT s ASSET MANAGEMENT STRATEGY 5 a) The Landscape b) About LHT 4. HOW WILL WE DELIVER ASSET MANAGEMENT? 9 a) Making Better Use of Our Assets b) Investing in our homes c) Energy and Sustainability d) Policies e) How we will deliver our Asset Management Strategy 5. UNDERSTANDING ACHIEVEMENT 16 1
WHAT DOES OUR ASSET MANAGEMENT STRATEGY AIM TO DO? There is an increasingly important focus placed on the way assets are managed within the sector. Our Asset Management Strategy (AMS) provides a framework to drive our activities and influence our decision making to ensure we Make a Difference. Our strategy will drive our approach to move beyond traditional asset management to effectively manage our property portfolio maximising performance and optimising the return on our investment. At the same time, we will remain focused on delivering high quality services that provide the greatest value and meet the expectations of our customers. Our Asset Management Strategy is therefore: To optimise financial and social returns on our assets and remain the landlord of choice while minimising the impact on the environment '' WHY IS ASSET MANAGEMENT IMPORTANT TO LHT? We continue to experience significant change and uncertainty within the sector and Housing Associations continue to face a number of challenges which demand greater flexibility, commerciality and innovation in managing our homes. We will strive to provide high quality homes that meet our customer s expectations, maintain demand and make a positive contribution to the business. 2
There are increasing demands placed upon our limited resources and a different approach is required to fund our investment and the delivery of new homes which requires the introduction of new and emerging business models. Maximising property revenues and maximising the return on our investment is vital to release finance to support inward property investment which we will use to support our reinvestment programme. Our housing portfolio continues to age and a strategic approach is essential to maintain asset values. We understand the quality, condition, suitability and sustainability of our assets have a direct bearing on the quality, health and wellbeing of our customers. We recognise the importance of meeting increasing expectations from existing and new customers now and in the future to ensure we retain high demand and remain a landlord of choice. We have incorporated three main asset management themes which will ensure we meet our key objective as detailed below: Making Better Use of Our Assets Investment in our Homes Energy and Sustainability Making Better Use of Our Assets Assessing the performance of our assets in moving forward is vital to understand their long term value and performance to enable the right strategic decisions to be taken at the right time. This will require a more dynamic approach to rebalance our portfolio using the benefits of active asset management. 3
We will use information to understand financial return and performance with consideration to local housing markets. We take action to resolve our lowest performing assets and explore a range of strategic options to improve performance in terms of property retention/targeted investment, remodeling, conversion and disposal to supplement funding for the development of new homes which will provide the opportunity to use our resources more effectively to ensure we deliver greater benefits. We will ensure a full understanding of the long term financial value and overall performance of our assets and will use key information to support strategic decisions in terms of; New property acquisition Asset retention or disposal Housing type (meet housing needs and aspirations now and in the future) Our approach aims to maintain the long term viability of our portfolio and support greater long term resilience within our neighborhoods. Investing in our Homes Through investing in our existing homes in the right areas and replacing the right components at the right time, we will ensure we deliver high quality homes that provide a positive contribution to our business. Our investment will also provide a greater impact on the overall health and wellbeing of our customers. This will assist us in meeting our customers expectations and to maintain a high demand for our homes maximising the duration of tenancies providing high property yields and a good return on our investment. It is essential we comply with all landlord health and safety legislation and good practice to ensure our customers remain safe in their homes. In addition we will not only maintain our homes to the Decent 4
Homes Standard as a minimum but will detail how we will exceed this standard and deliver a new higher home standard. It is essential we deliver value for money across all asset management services which will allow our finite resources to do more for less. We also recognise the importance of maximising Social Value in delivering our services to provide a greater economic contribution to our neighbourhoods. Energy and Sustainability One of the greatest challenges we face today is that of energy affordability and the impact of climate change. Energy prices continue to rise which impact directly upon our customers and the Government face continued difficulties in managing national energy security. New technologies are emerging within a fluid market and we continue to face volatile funding initiatives. It is essential we remain vigilant and invest in the right technology while seeking to maximise future opportunities. We know that many LHT customers are affected by rising energy prices and understand the role we can play in minimising the impact of fuel poverty for our customers through improving the energy efficiency of our homes and providing a pro-active approach to resident engagement. This will help to reduce fuel bills and carbon emissions which will minimise the impact on the environment supporting Government targets. CONTEXT FOR LHT s ASSET MANAGEMENT STRATEGY The Landscape The current economic environment presents a range of new and emerging risks and we are committed to meeting the challenges following the government s modernisation agenda. 5
The sector continues to face substantial reductions in Government grant for new housing and we continue to adapt to the new Homes and Community Agency (HCA) regulatory regime requiring greater assurance to ensure appropriate mechanisms are in place to effectively protect housing assets. Following the introduction of the Localism Act and the introduction of new economic and consumer standards we have also seen the HCA increase the use of their enforcement powers with a number of serious detriment orders issued to Housing Associations where customers have been placed at risk. Maintaining landlord health and safety risk compliance must be consistently achieved to meet our statutory obligations and ensure our customers remain safe in their homes. Local Authorities continue to face challenges seeking additional support from partners and we have experienced a reduction in housing demand locally as the market reacts to the welfare reform changes while private sector housing continues to offer more choice to customers. It is commonly anticipated income streams will be further adversely affected following the introduction of Universal Credit. The Department of National Statistics project the UK population will rise by 4.9 million to 2020 and those aged over 85 will be 2.5 times higher in 2020 than in 2012. Those aged over 65 will account for 24% of the population by 2037. Housing organisations must therefore consider the future impact of our ageing population which will become increasingly important to ensure a provision of good quality housing is maintained, which remains flexible and continues to contribute to the health and wellbeing of our customers now and in the future. Housing accounts for nearly a third of total energy use in the UK and we face huge challenges in supporting the Government s Climate Change Act 2008 (CCA) targets to provide 15 per cent of energy from renewables by 2020 and to reduce CO 2 greenhouse gas emissions by 80% by 2050. The diversity of LHT s property assets presents a number of challenges in this new environment, but we remain optimistic that we are well placed to meet the challenges ahead. Over recent years we have supported our asset management objectives to strengthen and rebalance our housing portfolio introducing over 1,200 new build units during the last 10 years. 6
We have continued to work in partnership with local authorities to support their wider housing strategies and disposed/demolished more than 200 of our older or poorer performing homes. We have provided targeted investment within some of our largest neighborhoods, including the transformation of our Castlefields Estate. Our approach to investment continues to build on our strong focus on neighborhoods ensuring complementary solutions are tailored to areas Our homes continue to meet the Decent Homes Standard and we have introduced a higher Home Standard systematically seeking to improve the energy efficiency of our existing homes through investing in our poorer performing homes while achieving an average Standard Assessment Procedure (SAP) rating of 70. We continue to actively participate in VIRIDIS, which is a strategic alliance of local Housing Associations and key partnership agencies who are working collaboratively to collectively respond to the current energy challenges. We have further demonstrated our work in this area progressing from the Sustainable Homes Index for Tomorrow (SHIFT) Bronze rating to achieve the Silver rating. Ensuring our customers remain safe in their homes has been a key priority and we have continued to demonstrate progress in complying in all landlord risk areas while delivering our cyclical plus standard which has included the improvement of many of our communal areas. Repairs and maintenance activities have consistently delivered front line service improvements confirmed in a range of tenant satisfaction surveys. We have experienced recent market changes resulting in a continued increase in void turnover processing over 900 properties (9.9%) per annum (2014/15) while reducing void properties by 100 units over the period. During this difficult economic period we understand the importance of using our client role to influence contractors and supply chains to place employment opportunities high on their agenda. We have continued to focus on maximising social value related to our procurement activities through the introduction of a range of employment initiatives, receiving recognition within the sector for our approach. Our priority will be to continue to make a difference in this area. 7
We have continued to work with our contractors to further embed our contractor commitments which details the front line service standards we expect from contractors. We therefore remain optimistic we are well placed to respond to the challenges ahead. HOW WILL WE DELIVER ASSET MANAGEMENT? We will deliver effective asset management by ensuring we maximise the use of our assets and invest in the right components in the areas at the right time while delivering a high performing repair and voids service. We will work to take appropriate decisions at the right time and measure outputs to understand the impact of the decisions we take. Making Better Use of Our Assets We will maintain a thorough and up to date register of all property related assets. Our active asset management approach will ensure we optimise the return on investment and provide a detailed understanding of the long term financial value/risks. We will introduce a new modelling techniques and indicators to measure the performance of our assets performance enabling us to make informed strategic decisions which will support our asset revolution providing the opportunity to commence a controlled churn of assets where we can achieve greater value. 8
Investing in our Homes LHT believe the key to successful asset management planning is good quality data. We operate the KEYSTONE asset management system to manage all associated stock condition data to drive investment and ensure we replace the right components in the right areas at the right time. We understand the importance of robust data to support investment decisions and we will continually strengthen our stock condition data by undertaking targeted stock condition surveys to ensure our samples are most representative of property archetypes. This will ensure our decisions are based on accurate data enhancing our long term investment planning. To ensure enhanced data accuracy and reduce our exposure to risk, we will externally validate our information every three years. Additionally, we will integrate customer feedback, responsive and void repair trends and our neighbourhood plans to further inform and support our investment decisions, ensuring the investment undertaken reflects local need. This will enable us to maintain the right balance between planned investment and reactive repairs to achieve the greatest value for money. It is vital we meet the expectations of our customers and we will deliver a high quality flexible service that offers tenant s choice, supported by robust performance management across all services. We will adopt innovative procurement solutions where we can deliver better outcomes to invest more in our neighbourhoods. We will work across SHG to achieve this. The impact of our investment will be monitored and measured through our neighbourhood plan data and benchmarking will be used to demonstrate we are delivering value for money and meeting our objectives. We will produce an overall five year investment plan which will detail our proposed investment activity identifying the projected cost and numbers of works components. This will be reviewed annually so it 9
reflects the most up to date information. This will be supported by a 30 year investment model to understand and inform our future active asset management decisions. Our asset management services are delivered by local teams and are focussed on the following main themes: Planned and Capital Works Cyclical Works and Facility Management Responsive Repairs and Void Management Planned and Capital Works Property investment will be delivered in accordance with our agreed annual investment plan and will ensure our homes meet and exceed the Decent Homes Standard achieving our Home Standard in targeted areas to keep our homes is a good condition. Our approach will seek to minimise reactive repairs by replacing components in the right areas at the right time. The delivery of our investment programmes will be flexible to meet the needs of our tenant s and we will offer choices keeping customers informed throughout the work. We are committed to addressing the needs of all of our customers and will work with Local Authorities and the health service to ensure our customers can remain in their homes for as long as possible. Our comprehensive adaptations service will seek to maximise available funding to improve quality of life where possible, at a cost that is affordable to the business. 10
Cyclical Works and Facility Management Cyclical works are items that have to be carried out at set intervals and during 2012 we introduced our Cyclical Plus standard which is delivered on a five year cycle. We have seen a positive impact with many improvements to many communal areas and this will help to ensure the external fabric of our homes remains in a good condition. We will continue with our programme to attain this standard across our portfolio which will be completed in 2017. We service all specialist equipment to ensure we meet manufacturer s recommendations and codes of practice maximising component lifecycles. It is vitally important that we meet our statutory obligations and demonstrate landlord health and safety risk compliance against 9 key risk areas to ensure our customers remain safe in their homes. Information is consistently reported which has demonstrated our overall progress particularly relating to fire safety and asbestos management and we will focus on maintaining all areas of compliance. Responsive Repairs and Void Management Our responsive repairs and voids service covers the day to day maintenance of LHT s homes and we provide a 24 hour responsive repairs service 365 days a year. In order to make the responsive repairs service more accessible to customers and leaseholders we have extended our core operating hours from 8.00am to 8.00pm, incorporating Saturday morning appointments. Repairs are categorised into three areas - emergency, urgent and routine repairs and we regularly monitor the performance of our contractors against targets. We understand the importance of a value for money and efficient repairs and maintenance services that is flexible to meet the needs of customers and we will launch a new service following the introduction of new contract arrangements. 11
Letting void properties quickly will remain a high priority for LHT and we will continue to use void periods to appraise properties and take action where we feel we can maximise future revenues. Energy and Sustainability Effectively responding to this agenda will take coordinated long term actions. We will seek to target our investment focussing on a fabric first approach, integrating improvements within our investment plans. We will focus on our lowest performing homes first seeking to systematically improve the energy efficiency of our homes year on year, pursuing and maximising all forms of funding that is accessible. We will explore the use of new technology and mitigate our exposure to risk where we can deliver improved outputs. Where we cannot deliver satisfactory improvements, we will target properties undertaking a wider option appraisal. This will ensure we provide the greatest impact to LHT and our customers. Given the challenges we face, it is essential we continue to provide advice to customers to help reduce fuel bills supported by the introduction of targeted low cost energy saving measures. This will be delivered by LHTs Green Group through neighbourhood events and home support initiatives supported by a wider Symphony Sustainability Group. We will also continue to work within the Viridis partnership and work collaboratively where we can achieve greater collective outputs. Policies Our AMS will be underpinned by a number of supporting primary policies to ensure we deliver consistency and achieve our overall objectives as detailed below: 12
Responsive Repairs and major works policy Voids Management Policy Adaptations policy Gas Safety Policy Electrical Safety Policy Lifting Equipment Policy Fire Safety policy Legionella Management Policy Asbestos Management Policy Adaptations policy How we will deliver our Asset Management Strategy Area How What? Who By When? MAKE BETTER USE OF OUR ASSETS Project Introduce a new active asset management system Simon Brown February 2016 and optimise the future returns on assets through rigorous appraisal of all potential options to improve value for money. Task Produce an annual asset statement Wayne June 2015 Task Project Implement the findings of the SHG asset management business assurance audit relating to asset management - including the merging of the Keystone data base and integrated plans. Introduce a new approach for the management of our commercial property assets and un-adopted areas. McDonald Simon Brown February 2016 Simon Brown January 2016 13
Project Task Task Project Deliver new responsive repairs and servicing contract arrangements Revise our detailed 5 and 30 year investment delivery plan including specific arrangements for LHT s 4 priority neighbourhoods Introduce new asset management arrangements following the transfer of properties from Beechwood Community Housing Association Implement the targets agreed within the Symphony Sustainability Strategy and Delivery Plan Michael O Dwyer/Iain Hardman Wayne McDonald November 2015 December 2015 Simon Brown September 2015 Wayne McDonald March 2016 Task Minimise rent loss and reduce the level based on the 2014/15 return Simon Brown February 2016 INVESTMENT IN OUR HOMES Task Task Project Demonstrate Landlord Risk Compliance relating to all property risk areas Introduce a new phased delivery plan for the introduction of new standard policy documents relating to the following; Responsive Repairs Policy Void Management Policy Electrical Safety Policy Water Management Policy Gas Safety Policy Asbestos Management Policy Introduce new asbestos management software and deliver phase 2 of our enhanced approach to managing asbestos undertaking 1000 Asbestos Repair and Demolition surveys Iain Hardman March 2016 Michael O Dwyer/Iain Hardman March 2016 Iain Hardman March 2016 14
UNDERSTANDING ACHIEVEMENT It is important that we evaluate our success and understand if the right outcomes have been achieved. This will be achieved through a number of strategic achievement measures that we have set which will be used to measure the overall effectiveness and impact of our Asset Management Strategy, ensuring we deliver our objectives as detailed below: 1. Return on net assets by neighbourhood and street, against an overall measure of what performance needs to cover costs, surplus divided by net assets which indicates assets which are not necessarily performing financially 2. To achieve a minimum SAP of 60 by March 2017 with mitigation plans where properties are unable to achieve this minimum standard. 3. Minimise void rent loss based on the 2014-15 financial return 4. Demonstrate Landlord Health and Safety Compliance 15