Home discomforts, by Andrew Jepp

23 Sep 10
Social housing providers have to take their share of the impending cuts but they will need to balance short-term savings against long-term dangers, advises Andrew Jepp

Social housing providers have to take their share of the impending cuts but they will need to balance short-term savings against long-term dangers, advises Andrew Jepp

With the austerity cuts beginning to take effect, social housing provider Connaught’s difficulties could be viewed as a worrying indication of the risks facing the public sector today.

Unison general secretary Dave Prentis argued that Connaught’s plight should be a wake-up call to the damage these cuts might cause. Indeed, it seems inevitable that they will lead to more uncertainty for both public sector providers and contractors.

While the government is still finalising many policy changes, it is already clear that the cuts will have a huge impact on the sector both in the short and longer term. At the same time, the UK’s housing needs are growing by the day. Together, these changes are not only forcing organisations to think creatively about funding, but are also presenting a host of new risks to providers and tenants alike.

So what could, and should, social housing providers do to adequately manage risks, while continuing to provide much-needed homes? Clearly, the exact risks will vary for each provider so, as a first step, senior management teams should be mapping risks from today.

From a financial perspective, the dangers are many. All cost-cutting needs to be considered carefully. Measures such as staff reductions can bring immediate savings but equally are liable to eventually compromise service provision and quality. This in turn could lead to higher costs and damaged reputations. Pursuing short-sighted cost-saving methods can even limit the potential to take advantage of new, positive opportunities in the future.

Equally, the choice of investment paths should continue to be taken against a board-agreed level of risk – decisions should not be rushed through that could later prove damaging.

The financial stability of tenants also needs to be taken into account. With pressure mounting on jobs and wages static, rent arrears might increase dramatically. Planning for this kind of risk requires active intervention – whether through community advice services or partnerships with other support organisations.

Supply chain issues have been cited as contributing to Connaught’s problems, although they are by no means unique to housing. Certainly, outsourcing and sharing services can pay dividends in driving costs down while maintaining quality. But for social housing providers to ensure they only reap positive results, they need to develop a consistent, well managed approach to procurement and supply chain management, which should be adopted across the whole organisation.

One example of this is already beginning to happen. Some public sector organisations are trying to renegotiate prices and services. But while their desire to make cuts is understandable, price reductions are likely to come at another cost.

Ultimately, there are only three ways a supplier can save money and pass on a reduction in costs – less margin, less expense or less service.

All these ‘options’ could have serious knock-on effects. Thus, a balance between immediate pressures and future needs is pivotal in avoiding these routes taking their toll on reputation, profitability and even the existence of both provider and supplier.

Providers also need to analyse their internal systems. A thorough approach will help every individual understand how the numerous supply chain elements interact and where the pressure points are. This will ultimately help the organisation become more resilient. Without a clear and comprehensive approach, one chink in the chain – internally or externally – could damage the entire process and, at the extreme, impede the supply of housing to people who badly need it.

These are difficult times for the entire public sector and social housing providers will need to adapt to survive.

But, despite the pressures to find new efficiencies, funding models and methods of procurement, providers should focus on the impact of every decision. They will need to ensure that all risks – existing, potential, likely and remote – are fully considered, in line with the organisation’s short and longer-term strategic aims.

Neglecting this could have far more human consequences than simply failing to meet housing targets.

Andrew Jepp is head of local government at Zurich Municipal

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