24 March 2006
Doubts cast over reality of RSL efficiency gains
A question mark has been raised over efficiency gains forecast by housing associations as part of the Gershon review.
According to the finance director of a major housing group, savings calculated last year by his and other registered social landlords were so large that they themselves did not believe the figures.
All RSLs were required to submit annual efficiency statements to the Housing Corporation last July.
The corporation later declared that RSLs had exceeded expectations and were on course to save £355m by 2008, as demanded by the Office of the Deputy Prime Minister.
Jon Rouse, the corporation's chief executive, praised associations in October for rising to the challenge set by ministers after forecasting gains worth £246m in 2005/06 alone.
But Kevin Rodgers, the finance director at Whitefriars Housing Group, questioned the validity of the exercise, claiming that the figures his RSL used were no more than 'a whole set of indexes thrown together'.
In particular, Whitefriars doubted whether the money it appeared to be saving on capital works necessarily represented greater efficiency.
'I'm not sure that the gains are real but we will have achieved it,' he told a seminar at the National Housing Federation's finance conference at Warwick University on March 16.
Whitefriars was set up six years ago to take over homes owned by Coventry City council. When Rodgers got in touch with other RSLs created from stock transfers, they also questioned the credibility of the figures.
'It was excellent in terms of meeting ODPM targets, but dangerous if you start believing them,' he said. 'There are definitely flaws in the methodology.'
Forty-one per cent of the total gains forecast by RSLs came from transfer landlords such as Whitefriars.
Revised indexes for this year's efficiency statements, due in four months, are expected shortly from the ODPM. 'We may have set ourselves up for a more challenging future,' said Rodgers. 'The Treasury will say “let's keep squeezing”.'
Deborah Ilott, regulation policy manager at the corporation, told the seminar it would be wrong to chastise RSLs for working with data supplied by the government. 'We had no engagement with the ODPM on how it drew up the indexes,' she added.
The Housing Corporation declined to comment further.
Keep social purpose or face more regulation, landlords told
Social landlords will face tighter regulation unless they continue to show their commitment to top-quality public services, according to the leader of England's housing associations.
Speaking at the conference, the National Housing Federation's chief executive David Orr said regulation was a means for the government to test services provided by registered social landlords because they do not operate in a proper market.
He warned that RSLs faced a battle to prove to ministers that they had not lost their sense of social purpose. He said: 'If we are to challenge that view, we have to be more open and transparent in demonstrating excellence.'
Speaking in the same week as it was revealed that RSLs made record pre-tax surpluses of £444m in 2004/05, Orr warned delegates at Warwick University that the reputation of housing associations was at stake. 'We are accused of being just another business in that what we are interested in is our development programmes,' he said.
'I don't think it's a useful characterisation, but we have to do something about it.'
It was essential to establish a new relationship with government that cut regulation. 'It traps potential and limits our capacity to meet the agenda that the government is developing for us,' said Orr.
Global accounts for registered social landlords in 2004/05, published last week, show pre-tax surpluses were up by £168m to £444m – an increase of 60%.
While £94m of the extra surplus resulted from the Home Group writing off internal debt among its constituent associations, the remainder is mainly due to the extra profit that RSLs are making on homes built for sale. RSLs now own more than 2 million properties worth a total of £67.9bn – 7.4% more than in 2003/04.
Clare Miller, director of regulation at the corporation, said the accounts demonstrated financial strength. 'Clearly the sector is in a robust position to respond to the new challenges and opportunities which the introduction of private developers look set to add,' she said.
PFmar2006
