Finance: Driving Change in Social Housing: Helping UK Housing Associations to Perform a Delicate Balancing Act
Clarke, Paul, Penrhyn-Lowe, Alan, Financial Management (UK)
In the UK, housing associations are private, non-profit making organisations that provide low-cost social housing for people in need of a home. There is massive change under way in the sector as government spending cuts come into force.
This article is about how finance staff can step beyond their traditional accounting roles and become proactive drivers of change, an evolution that will be necessary if housing associations are to survive the changes intact. It is a personal reflection from the director of financial services at the Network Housing Group (NHG), based in north London, who is championing the sort of changes needed, and a management consultancy (Develin Consulting) that is helping to equip NHG's finance staff for the task ahead.
A double whammy
There is a significant shortage of good-quality social housing. Housing associations (HAs) do much of the building and have traditionally funded it through capital grants from the UK government, the financial markets and their own trading surpluses.
However, capital grants are being reduced. To compensate, HAs have been given permission by the government to lift the rent they charge on new properties - and those that have been recently occupied - to what is known as an "affordable rent" (80 per cent of the open market rent for the property).
Unfortunately, feedback suggests that fewer tenants are likely to be able to afford this increase than was first assumed. Also, a significant number of tenants receive benefits, which from April 2013 are being capped. A family might, for example, receive [pounds sterling]200 per week less. Those HAs affected may have little choice other than to reduce rent levels significantly, or risk having to evict tenants who can no longer afford these units. As a result, trading surpluses will be squeezed.
Strategy for survival
Survival for HAs depends on solving two problems: how to pare costs down while keeping essential services to the customer intact, and how to increase revenue without driving up costs.
These problems are not new. Commercial organisations have defined and refined techniques based around improving the efficiency and capacity of business processes under banners such as "value chain analysis", "kaizen" and "lean". Each method brings its own language, approach and set of priorities, and each requires an investment in the time required from staff.
But experience of championing change in commercial organisations tells us that, before reaching out for a toolkit, HAs must understand that long term, permanent change is more about influencing culture than it is about redesigning the mechanics of a process.
There are activities in the business that, in an ideal world, you would want to reduce. Staff know what these are because they are often a source of frustration and slow things down. It might be finding out why a contractor didn't turn up to fix a leaky tap for a tenant, not to mention handling the initial complaint from the tenant and the rescheduling of the visit. It might be searching for expenses that have been given the wrong budget code, or scheduling an emergency salary payment for a new member of staff who was omitted from the payroll.
For the want of a name we call these "diversionary" activities. They are always urgent and they always "divert' people away from doing other, probably better things.
The time spent on diversionary activities is typically about 30 per cent, and is often substantially more. In other words, 30 per cent of the pay budget is to pay for failure.
They drive up non-pay costs as well. Temporary staff, contractors, consultants and lawyers are often there to fix problems and act as an additional resource to help staff struggling to get everything done. And, of course, if these activities come first, then other activities involved in providing essential services to customers get delayed. …