Value for Money Statement Year ended 31st March 2016

Author Job Title Approved by / Date Review Date Cross Reference with All Staff email sent

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C Bellamy Director of Resources BOM October 2016 Annually Financial Statements & Asset Management Strategy October 2016

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www.rfha.org.uk

Value for Money Statement For the year ending 31 March 2016 1.

Introduction

Rockingham Forest Housing (RFH) is a community based organisation with expertise in managing both urban and rural housing in Northamptonshire. We are a top performing and financially robust organisation that focuses on providing high quality housing and services to our customers. RFH's mission is: ‘To work with and enhance the lives of the people in our community, by providing homes and services that add value’ Our Vision is: ‘To provide homes that people want to live in, where customers are treated as individuals, by a team who are proud to work for us’ In order to achieve our strategic objectives we have 6 key strategic priorities: • • • • • •

Growth Asset management Income management Efficiency and value for money Tenant involvement & customer insight Being an excellent employer

This document sets out how RFH has achieved value for money through its activities. It covers the financial period April 2015 to March 2016, and looks ahead to some of the priorities for improving value for money over the coming year. During the year of assessment RFH reviewed its commitment to independence and in response to the challenging external environment made the decision to join a group. RFH identified a business partner in Grand Union Housing group that would enhance the resilience of the Association and also ensure growth aspirations are met. 2.

Value for Money

In terms of the delivery of value for money RFH is a high performing Association compared to its peers: • • • •

Operating margins are high Assets are maintained to a high standard Tenant satisfaction with RFH as a landlord is above the sector average We are using our financial strength to commence a period of growth including the development and acquisition of new homes.

There is however, scope to increase efficiency and this is ever more pressing in response to the financial and social challenges being faced by RFH and our tenants as a result of welfare reforms and the four year period of rent decreases from 2016. 1

RFH is committed to achieving Value for Money (VFM) across every aspect of the business. This will be achieved by seeking ways to reduce costs and achieve economies of scale through a clear understanding of cost drivers, combined with tight budgetary control, reviews of systems and procedures and partnership working. Improving the use of IT, including training for staff and board members, will support our drive for VFM. Good value, combined with excellent service delivery will be central to our approach. For RFH, delivering VFM must: • • • • •

3.

Support the mission, vision and values of RFH Provide the range and priority of services that our customers want Achieve standards of quality and cost which position us among the top performers in our sector Ensure the most productive and efficient use of the internal and external resources available Demonstrate sustained year-on-year improvement

Delivering High Quality Services

The last STAR tenant satisfaction survey was undertaken in 2016, results of which can be seen in the table below.

Question Overall Satisfaction Quality of home Neighbourhood as a place to live Rent VFM Repairs and maintenance Listens to views and acts upon them

RFHA STAR 2016 88% 80% 88% 83% 83% 70%

RFHA STAR 2013 85% 78% 88% 78% 81% 65%

Housemark Movement Median 3% 87% 2% 84% 0% 86% 5% 82% 2% 80% 5% 71%

Overall satisfaction with RFH as a Landlord was 88% which places RFH in the upper quartile. RFH has either increased or maintained satisfaction in each of the core areas, with the biggest improvements of 5% in rent representing value for money and listening and acting upon tenant views. RFH use an organisation called Housemark to benchmark tenant satisfaction performance. The above median scores are taken from a sample of Housing Associations of 5,000 units or less, the total sample size was 143 organisations. RFH scored above the median in 4 of the 6 core areas and made improvements in both of the areas that were scored below the median in the 2013 survey. The main area of concern continues to be the below average satisfaction with the quality of the home with a number of tenants citing mould/damp issues and costs associated with heating their homes. We will continue to invest significantly in our stock to increase its energy efficiency. This includes works such as external insulation, loft insulation top-ups and both window and boiler replacement programmes.

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4.

Annual Benchmarking

We undertake an annual benchmarking exercise with Intel4Housing to compare our performance, costs, satisfaction and financial vaibility to a peer group of similar sized Housing Associations in. The peer group for comparison included 14 Associations ranging in size between 800 and 2,100 units. VFM Score The VFM score is based on Total Cost Per Unit, Total Performance Score, Total Satisfaction Score and Total Finance Score. The scoring is based on quartiles and the system will match the score closest to the quartile position. The maximum score for any category is 30 and lowest 10 based on either an upper quartile, median or lower quartile score. The maximum total efficiency score is 120 as this would represent upper quartile performance for allcategories mentioned above and the lowest score being 30.

RFH’s VfM score is very positive and upper quartile performance has been achived in 3 of the 4 measures. Costs are low and performance in general is high resulting in a high performance score. RFH is also in a strong financial position recording upper quartile performance in operating margins and net leverage ratio’s. RFH’s VfM score of 110 was the highest in the peer group. 3

Performance Performance Indicator Rent Collected current and former tenants (including arrears b/f ) Current Tenant Arrears (Excluding Voids) Former Tenant Arrears (Excluding Voids) Rent Loss Due to Voids Average days to complete repairs Average Relet time (Days) Gas safety certificate % Tenancy Turnover Units Non -Decent year end SAP Rating ASB cases successfully resolved

2015/16 99.96% 1.42% 0.14% 0.14%

2014/15 98.77% 1.63% 0.20% 0.27%

Peer Median Quartile 99.70% 3.11% 0.67% 0.55%

6.20

5.67

5.90

10.79 100% 3.76% 0% 67.15 100%

10.19 100% 5.56% 0% 66.81 100%

17.40 100% 7.56% 0% 71.80 96.88%

RFH acheived top quartile performance in 9 of the 11 indicators and improved performance in 6 of the 11 indicators. Exceptional rent arrears performance has been maintained again this year with current tenant arrears at just 1.42% which is over 50% lower than the median of the peer group. Voids performance has been maintained and is again top of the peer group at 10.79 days, rent losses due to voids has dropped despite a small increase in average relet time due to a reduction in tenancy turnover. There was a small dip in repairs performance during the year due to some capacity issues with our main responsive repairs contractor, these have now been resolved and next years performance is expected to bounce back to upper quartile. The age profile of our stock means that SAP performance is still lower quartile but performance is improving albeit slowly. We have been targeting our investment in addressing issues with poor performing properties and now have only 1 property with a very low SAP rating (below 50). Cost Service Area Major Repairs Routine Repairs Void Repairs Cyclical and Compliance Repairs Housing Management Estate Services Overheads Total CPU

Cost Per Unit 2015/16 £966 £433 £127 £210 £274 £64 £586 £2,661

Cost Per Unit 2014/15 £1,014 £674 n/a* £159 £310 £50 £564 £2,771

Peer Median £974 £437 £174 £221 £602 £213 £672 £3,485

Quartile

We spent an average of £966 per unit on major works, a £48 decrease on previous year and £8 lower than the peer median. Major works costs have reduced due some fairly significant savings this year on bathroom and kitchen costs following a re-tender of the programme. The continued commitment to investment in our stock is starting to reduce routine repairs volumes and costs, during the year the average cost of routine repairs per property was £433 a £241 (36%) saving on the previous year and now lower than our peer median which is great performance given the age profile of our stock. Housing management costs came in less than half of the peer median at £274 per unit for the current year. This is a real achievement given the top quartile arrears, ASB and void performance. 4

5.

Return on Assets

The key measures of return on assets in order to achieve RFH’s objectives are detailed below:

2015/16

Debt per unit managed

£9,262

2014/15

£9,609

Housemark Peer Median

Comments

£18,151

No new borrowing during the year and no growth in property stock so small reduction in net debt per managed unit relating to amortising loan repayments during the year. This measure highlights the Associations potential borrowing capacity

Average cost of borrowing

3.5%

3.4%

4.1%

No new borrow during the year however small increase in average cost as those loans on lower interest rates are amortising and those on higher fixed rates are interest only so the proportion each year on the higher rates increases the overall average. Still well within the peer median of 4.1%

Operating Margin

50.4%

47.9%

29.7%

Expected higher margin than sector average as not currently undertaking development, this is likely to reduce over the coming years as we develop more homes and utilise our borrowing capacity

Adjusted Net leverage

8.3%

10.8%

31.4%

Reduction in net leverage as cash balances and reserves have grown compared to reducing loan balances

4.2%

Majority of Growth in turnover is due rent increases (lower in 2015/16) as the planned commencement of our own development programme has been deferred until the merger with Grand Union has completed and we have access to the groups development services. We have a number of S106 schemes in the pipeline for 2017 so should start to see signficiant growth from 2017/18

16.9%

Although staff turnover looks high at 26% this relates to 5 members of staff who left the organsiation for a variety of reasons including retirement, relocation and career change. We are also the smallest Association in the peer group and so it only takes a small number of leavers to have a significant impact on the percentage

6.6

The average days lost to sick in both 2015/16 and 2014/15 was inflated due to one long term sickness. Excluding long term sickness the average days lost to sick was only 1.2 days

Growth in turnover

Staff turnover

Average days lost to sick

2.4%

26.3%

6.7

6.5%

31.3%

11.5

Services to third parties RFH continues to promote the selling of services to third parties. This generated incomes as follows: Housing management services to Registered Providers Housing management service to Private Landlords ^

£138,498 £47,796

^ The PSL scheme reduced by 5 properties during the year, 3 of these 5 properties were purchased by RFH and now for part of our market rented portfolio. We are currently in the process of designing a new market rented PSL scheme under our RF Living brand and target 5 new properties in 2016/17.

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6.

Asset Management

The table below highlights some of the significant VFM savings achieved against targets for the repairs service in the year ended 31 March 2016. KEY PERFORMANCE INDICATOR

Performance 31/3/15 Right First Time 94% Reactive repairs completed within timescale 98.2% Ave end to end time to complete a repair 5.67 days Appointments kept as % of appts made 99.36% Average SAP rating 66.81 % of stock that meets DHS 100% % Properties with a valid gas certificate 100% Ave annual cost of reactive repairs per £395.96 property (inc VAT) Ave kitchen cost inc VAT £4,652 Ave bathroom cost inc VAT £3,393 Ave roof cost inc VAT £4,395 Ave boiler cost inc VAT £1,962

Target 2015/16 95% 99.5% 6 days 98% 69 100% 100% £450

Performance 31/3/16 94.2% 97.0% 6.19 days 98% 67.05 100% 100% £387.81

£4,390 £3,120 N/A £2,200*

£3,709 £2,453 N/A £2,072*

Ave standard relet cost inc VAT

£1,965

£1,858

£1,506

Explanation of performance: Responsive repairs: we have seen a continued fall in the average responsive repairs cost per property (see below table). Although the volume of repairs has remained fairly static from the previous year, a reduction in the average cost per job has resulted in overall savings. This is believed to be as a result of the significant annual major repairs investment we make in our stock.

The above table highlights that in the last 5 year period, the number of repairs per property has decreased by 28% and cost per property has reduced by nearly 34%. Kitchens & Bathrooms: During the year we retendered our kitchen and bathroom works programme through Efficiency East Midlands. We achieved significant savings without any compromise on quality, shaving off 20% from the average cost of a kitchen and 28% off the average bathroom cost. We achieved 100% customer satisfaction with quality against a 95% target (87.5% 14/15), and 95% on contractor liaison. Average SAP rating: Despite spending £50,814 on external insulation works, £65,831 on window/door replacements, £178,808 on boiler and central heating replacements during the year, and also reducing 6

the number of properties with a SAP rating of below 50 down to 1 (from 23 in 2012, 6 last year), the average rating has increased only marginally during the year to just over 67. The SAP Rating is based on the energy costs associated with space heating, water heating, ventilation and lighting, less cost savings from energy generation technologies. During the year there has was a change in how SAP ratings are calculated following the in introduction of SAP 2012 which has generally resulted in lower SAP ratings. The introduction of new criteria in the SAP 2012 makes it very unlikely that we achieve our target of 70 by March 2018. Average Standard Relet cost: The average relet costs of a standard void increased from £1,506 in 14/15 to £1,858 in 2015/16 but this was still well within target. Towards the end of 2014/15 we changed void contractors due to quality issues and accepted that although void costs would increase, the significant improvement in the quality of works would result in less follow up responsive repairs and also an increase in tenant satisfaction. RFH continue to operate a property inspection regime and commit to inspecting 50% of our stock on an annual basis, offering incentives to tenants who pass the inspection and addressing those issues of tenant neglect/damage through tenancy management we are starting to see an improvement the overall condition of our stock. As at the end of the financial year the pass rate on property inspections was 92% Stock Investment: We spent approximately £456K on stock investment programmes in 2015/16, which equated to 25% of our operating costs.

Kitchens & Bathrooms: the programme was delivered between October 2015 and March 2016 by Fosters Property Maintenance and comprised of works to 48 properties; 20 kitchens and 34 bathroom replacements. The final cost of this programme was £155,113 (inc VAT), against a budget of £164K and based on previous years cost achieved total programme savings in excess of £38k.

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External Wall Insulation: the external wall insulation programme comprised works to 4 properties, all of which had previously been identified as those with a SAP rating below 50. The work was carried out by a new contractor Westville Insulation, a Nottinghamshire based firm. The quality of work has been excellent. Central Heating: Upgrading heating systems continues to be a major area of investment. We completed 70 boiler replacements, 6 whole property storage heater upgrades and 1 air source heat pump. Boilers are selected for replacement using stock condition data to draw up a long list which is then prioritised with the help of expert advice from the gas servicing contractor. Doors & Windows: Doors and/or windows were replaced at 55 properties in the last financial year. This programme was also retendered during the year through Efficiency East Midlands, the selected contractor was Nationwide Windows & Doors. Despite some problems delivering the programme as a result of contractor liaison issues, the quality of the product and works has been excellent and also achieved significant savings. The average window replacement cost per property was £2,276 (2015: £3,826). Market Rent Portfolio: our RFL market rent portfolio consists of a scheme of 16 one bed flats in Northampton (known as Kingsmead) and a mix of twenty one 2 and 3 bed houses/apartments spread across Northamptonshire. In the last financial year there was no major investment works required to this portfolio.

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7.

Procurement

The key contracts, services and consents that were procured or renewed during the year were: Method Managed IT services

Costs / savings

Negotiated price freeze on Freeze on total costs of over £25,000 for 2 contract providers

Treasury Management Services

Negotiated price freeze on contract

Property Insurance

Tender conducted by retained Broker

Office Gas & Electricity

My Home Energy Switch review of usage

Due Diligence Services Financial

Internal Tender

Due Diligence Services Legal

Internal Tender

Lender Consent Fees

Negotiated terms of lender consent

Freeze on annual retainer costs of £7,200

Service Improvements Existing contract terms retained Access to more markets for new borrowing and expertise aids negotiations for improved lending terms. Advice and support on merger implications and negotiating consent

5-year Long term price agreement upheld Existing insurance cover retained and in annual price increase restriced to RPI as per the case of some policies cover limits the LTA despite annual cost rises in the have been enhanced sector of more than double that Annual saving of £2,000 per year

Service maintained, costs reduced

The tender process resulted in a range of N/A - one off service in relation to Grand pricing from £23,000 to £50,000 so total Union merger saving £27,000 Despite the tender process returning similar project costs for each advisor consulted, the process enabled us to negotiate with our N/A - one off service in relation to Grand preferred advisor on the scope of works Union merger which resulted in a more concise brief and associated cost savings. By negotiating one off consent fees of £15,000 we avoided a margin increase of N/A - one off service in relation to Grand approximately 0.6% which would've cost the Union merger Association approximately £35k per annum .

Through our procurement partnerships: Method

Costs / savings

Service Improvements

Major Kitchen & Bathroom programme 20 Kitchens, 34 bathrooms

Tender through EEM

Average saving per: Kitchen £943 (20%), Bathroom £940 (28%)

Cost reductions as detailed in Asset Management section whilst improving tenant satisfaction

Major PVC Window & Door programme - 55 properties

Tender through EEM

The average window replacement cost per property reduced by over £1,500

Cost reductions as detailed in Asset Management section whilst improving tenant satisfaction

Responsive repairs

Partnering with Futures Housing

5-year Long term price agreement

Access to larger contractor base and better prices through economies of scale

Keystone Asset Management Software

Partnering with Futures Housing

Stationery

Procurement for Housing

Access to Keystone software is provided free as part of partnership agreement (as a small HA we couldn't afford to purchase Keystone software ourselves)

Approx £2,000 pa

The software ensures the money we spend on our planned major works programmes is done so in the most effective and efficent manner Centralised contact management

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8.

Other VFM initiatives

We encourage all levels of staff to take the initiative on value for money and where possible to review and improve services in their areas of operation. These are recorded on our VFM register and included: •

Use of on-line recruitment (notably Linkedin for Board recruitment)

•

Last year we brought the RF Living lettings process in house which helped to reduce letting fees. This year the service has been enhanced further and we now benefit from new income streams for sign up fees, holding fess, check out fees etc, our market rent void performance has improved significantly and we are now maximising rents at relet increasing our overall return on investment for this portfolio. The portfolio produced a surplus of £162,856 (78%). Net ROI including assumed interest, overheads and capital growth was 3.95%.

•

We have built on the successes of the RF Living team described above by offering our lettings services to private landlords. To date we have added two private sector leasing properties to the market rent portfolio we manage and see this as being a potential growth area in future years.

•

We have trained up members of our staff team to manage the Association’s two websites which has saved us significant consultancy costs for website development.

•

We retendered our asbestos survey programme during the year resulting in significant savings. The cost of an asbestos management survey was reduced from £252 to £150.

•

Working in partnership with Vibrant Energy we have undertaken EPC surveys on all of our stock. This data can be used to ensure that in accordance with the Affordable Warmth Strategy, we focus our investment on energy efficiency works to those properties that really need it.

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9.

VFM Priorities

2015/16 Review The following table explains our performance against our VFM objectives set last year. Out of 8 objectives (1 was N/A) we’ve achieved 6, failed 1 and 1 is in progress and will be completed once the integration into the Grand Union group is completed. Area

Improve energy efficiency of RFH’s homes to achieve an average SAP rating increase of 1 point per year

Operational services

Secure new borrowing to fund development requirements over at least the next 3 year period

Operational services

STAR survey to be completed in February 2016. Target to exceed peer group median in at least 4 of 5 key measures (Overall Satisfaction, Quality of Home, Neighbourhood as a place to live, Rent represents VFM, Repairs & Maintenance service) Achieve savings of at least 15% on average bathroom and Kitchen prices for the 2015/16 programme as tendered by EEM As part of our commitment to being an excellent employer, ensure staff retention of at least 80% for 2015/16

Outcome

Comments

We failed to achieve a SAP rating increase of 1 point during the year, however the main reason for this Failed was due to the new rating criteria following the introduction of SAP 2012 A group wide treasury review is currently in progress and this will determine the most efficient way RFH In progress can fund its own development programme over the next 5 year period

Operational services

We exceed the Housemark peer median score in 4 of Achieved the 5 key areas and improved or maintained satisfcation scores in every measure

Operational services

Achieved

Savings in average bathroom and kitchen prices were over 20% for both component types

Operational services

Achieved

Staff retention for the year 2015/16 was 83%. During the year 3 permanent members of staff left RFH

Achieve an annual net surplus of at least 35% and reduce overhead costs per unit by 1% per annum (5 year business plan target is to reduce overheads costs per unit by at least 5% over the period of the plan)

Operational services

We achieved a net surplus of 43% from an operating Achieved surplus of 50.4% and successfully achieved a 1% reduction in overhead costs per unit

Continue to develop the long term Treasury Management Strategy to achieve fixed long-term debt through aggregate bond issuance or private placement

Corporate services

Proceed with office site as a development site, identify alternative premises and prepare office move project plan

Review continued commitment to independence and identify impacts on VFM

N/A

N/A as RFH will now adopt Grand Unions group Treasury Management Strategy

Corporate services

During the year all possible redevelopment options were evaluated on the office site. The board have resolved that the site will be sold on the open Achieved market or alternatively converted into 6 apartments. A new office premises has been identified and the lease is due to be signed in October 2016 with a planned move date during December 2016

Corporate services

A review was undertaken in October 2015 and the Board of Management resolved that given the challenging operating envirnoment, it was the time Achieved to investigate group opportunites. Grand Union housing group was selected as our preferred partner and RFH will join the group in October 2016

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2016/17 Priorities Many of the key VFM objectives for 2016/17 will be driven by the benefits resulting from RFH joining the Grand Union group, details as follows: •

RFH to have joined the Grand Union Housing group by October 2016. The interests of the Association should be reflected throughout the negotiations, to ensure that business drivers are met.

•

Ensure that the efficiency savings as detailed in the business case for RFH joining the Grand Union group are met.

•

To dispose of the current office site by open market sale and move to new office premises and by early 2017 at the latest. There are a number of drivers relating to moving offices these include, freeing up capital to invest in news homes, cheaper running costs and a more efficient working environment for our staff to operate within.

•

Secure new borrowing to fund development requirements over at least the next 5 year period.

•

Growth – expand the RF Living portfolio (owned) by at least 5 properties (13.5%). Introduce an RF Living PSL service and aim to have 5 properties signed up by March 2017

•

Growth – in consultation with the Grand Union development team establish a development programme of approximately 30 units per annum for a period of 5 years. Target by March 2017 is to have acquired at least 10 new units either owned or managed.

•

In consultation with Grand Union review key repairs contracts for service improvements, and efficiency /cost savings. Two key contracts that will be coming up for review during the year are the responsive repairs contract and gas servicing contract.

•

Implementation of new IT and telephony systems that will enhance the way the Association operates and communicates with both internal and external stakeholders.

•

As part of our commitment to being an excellent employer, ensure staff retention of at least 80% for 2016/17 (excluding any restructures).

•

Achieve an annual net surplus of at least 35% and reduce overhead costs per property by a further 1% in line with the 5 year business plan.

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