Housing Properties at Valuation · The challenge of meeting the regulatory requirements of the HCA, most specifically the revised Viability Standard requiring a comprehensive Assets

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THIRTEEN GROUP – VALUE FOR MONEY SELF-ASSESSMENT 2015

Contents

1. Executive Summary .....................................................................3

2. Thirteen Housing Group ...............................................................5

3. Principal Activities and Geographical Focus ................................6

4. Business Environment, Risks and Priorities .................................8

5. Our Approach to Value for Money (VFM) .................................. 10

Priorities from the 2014 VFM Self-Assessments ......................... 13

6. VFM Outcomes and Achievements ........................................... 16

Return on assets ............................................................................. 16

Financial and operational performance ........................................ 26

Value for Money savings ................................................................ 36

Summary of savings in 2014/15 .................................................... 39

7. 2015/16 Business Plan and Targets ......................................... 40

8. Summary ................................................................................... 43

9. Further Information .................................................................... 44

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1. Executive Summary This document provides details of Thirteen Housing Group’s Value for Money (VFM) self-

assessment for the year ending 31 March 2015, highlighting the efficiencies realised across the

Group over the year, and detailing:

The achievements and performance of Erimus Housing, Housing Hartlepool, Tees Valley

Housing and Tristar Homes;

How we compare to our peers; and

The strategies developed to support a robust and effective decision-making framework within

the organisation.

The self-assessment also sets out how the Group plans to target, measure and report continuous

improvement in the future.

Last year the Group produced three separate VFM self-assessments: a Fabrick Group self-

assessment which incorporated Erimus Housing and Tees Valley Housing; and individual self-

assessments for Housing Hartlepool and Tristar Homes, due to the Vela Parent Company not

being registered with the Homes and Communities Agency (HCA).

A Group-wide self-assessment has been developed for 2015, recognising that strategies and

services are now implemented and delivered consistently across the Group, with a view to

improving performance and services whilst ensuring efficiency savings are maximised. Details of

each individual Landlord Company’s return on assets and financial and operational performance

are included.

A robust VFM strategic framework has been developed this year, to achieve increased financial,

social and environmental value and ensure that we meet regulatory and statutory requirements,

including the HCA’s Value for Money Standard:

Registered providers shall articulate and deliver a comprehensive and strategic approach

to achieving value for money in meeting their organisation’s objectives. Their boards must

maintain a robust assessment of the performance of all their assets and resources

(including for example financial, social and environmental returns). This will take into

account the interests of and commitments to stakeholders, and be available to them in a

way that is transparent and accessible. This means managing their resources

economically, efficiently and effectively to provide quality services and homes, and

planning for and delivering on-going improvements in value for money.

The document provides assurance that the Companies within the Thirteen Group understand this

requirement and the specific expectations detailed in the standard, and clearly sets out where,

and how, the standard is being met.

The decision making process that supports the Group’s strategic objectives is set out in the Our

Approach to Value for Money section, which specifically provides details on the Asset

Management Strategy and Business Planning and Governance frameworks, which culminate in

the Group’s Boards being presented with accurate and timely data to help inform appropriate and

effective decision making.

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The Group is committed to not only achieving VFM, but also ensuring that our assets generate a

return in terms of their financial, social and environmental impact. This includes generating a

surplus that can be reinvested to support future objectives. Further details are included in the

Return on Assets section.

The Group’s approach to performance management and scrutiny is detailed in the Financial and

Operational Performance section, which highlights our financial performance benchmarked with

the HCA Global Accounts and operational performance compared with Housemark’s National

Benchmarking Club. Our financial performance compares well nationally although operational

performance is, in some cases, median or lower quartile. Detailed analysis and associated

actions are included in this section.

A number of strategic and VFM targets were set in last year’s self-assessments and progress

against these is provided in the Priorities from the 2014 VFM Self-Assessments and Value for

Money Savings sections. A key objective from last year’s VFM self-assessments was to

establish and populate an effective organisational structure for Thirteen: following a

comprehensive and extensive recruitment programme, a streamlined Thirteen structure is now in

place, providing the opportunity to improve efficiency and performance.

VFM achievements for 2014/15 include:

A saving of £3.3m on the Group’s staffing costs as result of the merger.

Delivering a reduction in pay costs of £780k following a review of the Lettings, Estate and

Customer Involvement services. Innovative ways of working have been developed to help

realise the efficiency savings, including: Group sign ups; key safes and Mobysoft Rent

Sense and text messages.

Exploring alternative solutions to the provision of adaptations, providing savings of £241k.

Implementing a number of initiatives to mitigate the impact of welfare reforms, including:

the re-designation of low demand high rise accommodation to meet the higher demand for smaller properties, resulting in a saving of £117k on void turnover and a 5% reduction in

the number of high rise tenants owing more than £50.

Economies of scale providing us with the opportunity to consolidate fuel card provision

across the Group, creating savings of at least £9k per year.

The Legal Services team now delivering a significant proportion of the Group’s day to day

and operational activity in-house, generating a saving of £1.3m.

The opportunity for all Partners to benefit from Group-wide procurement savings of £1.8m.

Generating £354k in social value through a number of initiatives helping customers into

training, work experience and employment.

Employability advisers achieving 384 outcomes for customers: 97 into employment; 244

into training and 43 into work experience.

The efficiency savings of £7.5m equate to 5.2% of the Group’s turnover.

The 2015 budget announcement to reduce social rent by 1% per year for 4 years has led us to review our Business Plans in order to accommodate the reduced income. Our recent performance in reviewing service delivery, enabling us to make savings and achieve value for money, means that we are well placed to respond to the challenge and demands of the reduction.

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2. Thirteen Housing Group Thirteen Housing Group Limited (‘Thirteen’) is a non-asset owning, non-charitable parent which is a company limited by guarantee and Registered Provider within the Homes and Communities Agency (HCA) regulatory context. The Thirteen Group (‘the Group’) is comprised of the parent and five subsidiaries:

Erimus Housing Ltd – a Company Limited by Guarantee, a charity registered with the Charity Commission and also a Registered Provider with the HCA

o Erimus Housing Limited has a subsidiary – Optimus Homes - which is registered at Companies House

Housing Hartlepool - a company limited by guarantee, charity registered with the Charity

Commission and Registered Provider with the HCA.

Tees Valley Housing Limited – a Registered Society under the Co-operative and Community

Benefit Societies Act 2014, operating under charitable rules and also a Registered Provider

with the HCA.

o Tees Valley Housing Limited has two subsidiaries – Portico Homes Limited and

Partnering Plus Limited - both of which are private limited companies.

Tristar Homes Limited - a company limited by guarantee, charity registered with the Charity

Commission and Registered Provider with the HCA.

Thirteen Care and Support Limited (previously Norcare) – a company limited by guarantee

and charity registered with the Charity Commission.

Thirteen’s Governance Structure Thirteen

Erimus

Housing

Housing

Hartlepool Thirteen Care

and Support Tees Valley

Housing Tristar Homes

Portico

Homes

Partnering

Plus

Audit and Risk

Committee

Remuneration

Committee

Treasury and Investment

Committee

Optimus

Homes

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3. Principal Activities and Geographical Focus Thirteen was formed in April 2014 from the coming together of two existing housing groups, Fabrick and Vela, both of which operated in a defined geographical location, primarily the Tees Valley area but extending across North Yorkshire and the North East of England.

As landlord and service provider, Thirteen directly reaches out to more than 70,000 people. It had a first year turnover of over £150 million and an asset base approaching £1 billion.

As well as owning and managing over 33,000 properties in total, Thirteen is a major developer of new affordable housing, with its subsidiary Tees Valley Housing Limited being the lead partner in the Spirit development consortia and operating under a framework delivery agreement with the HCA.

During the financial year, Thirteen’s primary activities included:

Management and development of: o general needs social and affordable housing for rent o supported housing and extra-care properties and related services o low-cost home ownership o leasehold and privately owned property

Provision of related services such as financial inclusion and social enterprise activities

Regeneration of neighbourhoods and communities

The profile of stock owned and managed at 31 March 2015 by Local Authority and Registered Provider was as follows:

31/03/2015

Local Authority Erimus

Housing Housing

Hartlepool Tees

Valley Housing

Tristar Homes

Babergh - - 1 -

Craven - - - -

Darlington - 7 339 36

County Durham - 158 190 17

Gateshead - 42 114 28

Hambleton - - 100 -

Hartlepool - 7,018 379 -

Middlesbrough 11,422 15 159 82

Newcastle - - 51 -

North Tyneside - - 12 -

Redcar & Cleveland - - 813 20

Richmondshire - - 52 -

Scarborough - - 65 -

Stockton on Tees - 145 1,444 9,922

Sunderland - 16 162 19

York - - 325 -

Total 11,422 7,401 4,208 10,124

Total Group Stock 33,155

Source: NROSH+ data this includes leased stock

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Thirteen’s collective values

The Thirteen Group has agreed clear values that reflect the ambitions and culture of the Thirteen Group and Partner Boards, as follows: • Passionate about our social purpose • Flexible and open minded • Professional and accountable • Supporting entrepreneurship and solutions that deliver • Showing respect and optimism • Credible and ethical These values help the Company demonstrate how it cares about the people and communities it serves and the partnerships it develops. They illustrate the kinds of partners it wants to work with: those which share its values, passion and commitment to help bring to life the business it is striving to create.

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4. Business environment, risks and priorities

In common with all housing providers, Thirteen faces immense challenges within the current and immediate social and economic climate. The economy remains located within a period of protracted slow growth and public expenditure is likely to remain highly restricted.

The Thirteen and Partner Boards remain very much aware of the many key challenges, including:

The change in Government and proposed new policy development, specifically relating to Right to Buy/Acquire.

The impact of the recent budget announcement to reduce social housing rents by 1% per year for four years.

Continuing uncertainty within the economic and housing market despite some modest improvement in the availability of mortgage finance.

Continuing pressure on the financial position and status of many of our customers and local communities, with greatly reduced prospects, particularly for those aged 16 to 24.

More directly, pressures resulting from the impact of welfare reforms - most notably the ‘bedroom tax’, reduced benefit cap and universal credit - hardening the operating environment for social housing providers, and creating greater uncertainty for individuals, communities and social housing businesses.

Signs of increased confidence in the housing market with sales increasing.

Social and demographic changes that continue to present specific needs’ gaps for those who are very elderly, in poor health or disabled and for others who, collectively, remain the most vulnerable members of our communities.

The challenge of meeting the regulatory requirements of the HCA, most specifically the revised Viability Standard requiring a comprehensive Assets and Liabilities Register.

This context also provides the challenge within which the Thirteen Group will flourish, drawing

upon the capacity and capability the new Group has created.

Strategic Risks

The Thirteen Board and Partner Boards have reviewed and agreed the key strategic risks linked to

the Group’s strategic objectives as being:

Significant service delivery quality or failure Failure to identify, understand and react to changes in market and impact of diversifying into non-core business activity

The volatility of our operating environment, and uncertainty of the political landscape, impacts on activity

Failure of, or too many, complex projects and/or opportunities, including partnership working issues

Failure to maximise use of assets to achieve Group objectives

Regulatory failure due to poor governance / assurance

Failure to deliver efficiencies specified in business case for merger

Failure to merge and integrate Group effectively / demonstrate effective leadership

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Failure to secure funding and revenue - to deliver core business plus other opportunities

FRS102 and the impact that will have on decision making

Strategic Priorities

In the face of such challenges the Thirteen and Partner Boards continue to focus on the following strategic priorities which inform and frame the focus of the Group’s work and activities:

Building a Great Organisation

- Delivering profit for social purpose;

- Delivering great services;

- Generating social capital;

- Doing business in an ethical way;

- Investing, learning and innovating;

- Being well led and accountable.

Promoting Resilience and Sustainability

In our:

- Business;

- Assets;

- Customers and clients;

- Neighbourhoods and communities.

Committed to Growth and Adding Value

- Developing aspirational homes and community facilities;

- Ensuring existing partnerships deliver;

- Forging new partnerships and making connections.

During our first year of operation, the focus was very much on the integration of staff and services. In our second year of operation as Thirteen, the Group Board and Partner Boards, together with the Executive and wider management team, have collectively aligned themselves behind the immediate aim for 2015/16 of "Laying Firm Foundations". This strategic statement of intent re-emphasises the short to medium term objectives of prioritising those activities that are core to our business and central to underpinning our future growth, and enabling Thirteen to become the organisation it aspires to be.

More specifically, the key priorities are:

Letting, managing and maintaining good quality homes;

Maximising rental and other income;

Completing a rationalisation of office locations;

Preparing for and implementing an integrated property and customer services system;

Keeping us legal and safe; and

Continuing our work developing people and teams.

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5. Our Approach to Value for Money (VFM)

Value for money (VFM) is fundamental to all partners within the Thirteen Group. The creation of the Group epitomised our commitment to achieving VFM, optimising future returns on assets, delivering quality services and having a positive impact on our customers and communities.

The Group is committed to ensuring VFM in the delivery and procurement of excellent goods and services, whilst also providing social value to support our customers and neighbourhoods.

In developing a VFM strategic framework, we have reviewed and built on established good practice to achieve increased financial, social and environmental value and achieve organisational objectives and legislative requirements for VFM.

The VFM framework, which is equally applicable to all Companies within the Group, aims to consolidate our approach to VFM, ensuring it is embedded throughout the Group and an integral part of all policy development, project initiation and evaluation and recommendations to Board.

It supports and consolidates a number of corporate strategies, including:

Financial Strategy

Governance Framework

Business Planning Framework

Performance Management Framework

Customer Involvement Strategy

Asset Management Strategy

Procurement Strategy

Transformational Framework (incorporating ICT, People and Accommodation Strategies)

Corporate Social Responsibility Strategy (pending approval)

Decision Making One of the early priorities for the Thirteen Group was to establish an effective governance framework that ensured the accountability of the Group and Partner organisations and facilitated an environment that encouraged scrutiny and challenge prior to the approval of key business decisions. During our first year of operation the governance framework has been further enhanced to meet the high standards expected of the Group as well as the requirements of the revised HCA regulatory framework and our adopted Code of Governance (NHF 2015 Edition), to enable us to be vigilant and resilient in the face of increasing economic and policy challenges. Thirteen’s Boards The Thirteen Board, which oversees the business and strategic direction of the Group, has the legal responsibility to lead and direct the affairs of the Group within a framework of sound governance, continuous improvement, VFM and effective control, enabling risks to be properly assessed and managed. The Partner Boards are responsible for ensuring their business is carried out in accordance with their constitution, the intragroup agreement and agreed business plans. They are able to influence strategies and policies to reflect their priorities, and ensure accountability with regard to landlord services and local communities. They scrutinise and challenge financial plans and

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operational performance, ensuring that services provided to customers are effective, appropriate and deliver VFM. The work of the Boards is supported by three Group Committees – Remuneration, Audit & Risk and Treasury & Investment - which act on behalf of all Boards within the Group and consider and influence relevant aspects of VFM. Customer Involvement

The Thirteen Customer Council, which holds the Group to account on delivering VFM services, is involved in the development and review of VFM processes and the Group’s annual self-assessment.

The new Thirteen Customer Scrutiny Panel, made up of customers from all four Landlords, carried out its first piece of scrutiny work – ‘Promoting a positive product to our customers’ - over a five month period between January and May 2015. The report, which was presented to all Partner Boards in September 2015, made recommendations for how Thirteen Group could improve its marketability and, thereby, attract more customers as a provider of choice, given changing market conditions and increased competition from the private rented sector (PRS) over recent years.

An action plan has been developed to address the recommendations made by the Panel. This will be monitored by the Panel and reported to the Group’s Audit and Risk Committee by exception.

Business Planning The business planning process evolves through a series of Board development days, reflecting on current business priorities, changes in the external and internal environment, exploring new business needs and priorities and identifying key delivery projects. These are brought together to provide a draft business plan, which is then further scrutinised by the Board and subjected to detailed stress testing and scenario planning to consider how the organisation can react to unforeseen events, exploring financial and physical resource responses. Within the Group structure the proposed business plan is further subjected to scrutiny by the Treasury and Investment Committee, considering here the overall impact of Partner business plans and financial capacity in preparation for review and adoption by the Group Board. During 2014 the Group Board (including Partner Chairs) and Leadership Team collectively undertook further scenario testing via a HQN led ‘Iron Grip’ risk modelling event. The developing Financial Strategy, linking to the Treasury Strategy, sets out our approach to getting the most out of our financial resources and achieving sustainability: assessing the Group’s financial needs and the sources of funding required in order to meet the objectives of the business plan, whilst also planning for continued growth to enable stability in the face of both national and regional socio-economic factors impacting on the organisation. We are currently developing our Funding Plan to unlock the capacity of our property assets in providing security for future funding at competitive rates of interest. We have commenced the securitisation project, whereby the properties are prepared to be placed in security with our potential funders, which is largely a legal and administrative process. Asset Management The Group’s Asset Management Strategy (2015 to 2019) covers the homes owned by the stock holding companies of Erimus Housing, Housing Hartlepool, Tees Valley Housing and Tristar Homes. It responds to a number of unprecedented threats to our core business and the overall sustainability of our homes and neighbourhoods. The Group structure also includes a Care and Support arm which provides specialist services for older people and clients with extreme needs.

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This continues to be a significant growth area and one which presents a number of challenges which must be taken into account when managing existing and future stock assets. Through the Health and Housing initiative, Thirteen Care and Support was awarded £180k last year from Public Health England to develop three community health hubs, five shared houses and a peer mentor and volunteer hub, for people in drug and alcohol recovery in Middlesbrough. By upgrading three of our under-utilised housing community facilities, in Hemlington, Thorntree and Belle Vue, we have created space for community groups and health and voluntary organisations to run activities, sessions and events. The shared houses are to be occupied by people who are in active recovery: these houses are located close to the community health hubs which are open to all. In total there are 10 peer mentors and about 40 volunteers who have access to the peer mentor hub, which provides office space and a training facility. The Asset Management Strategy has been purposely developed to take into account the individualities of each Landlord Company and the different stages of stock investment. Historically, asset management strategies concentrated on covering a plethora of ‘bricks and mortar’ issues to account for where resources were to be spent, however effective asset management recognises many social and economic factors, interacting with all service delivery teams and key stakeholders to consider all aspects of successful property management during these times of change. Using the asset management modelling criteria, areas with long term high turnover of properties and high void costs have been reviewed. A number of option appraisals have been considered over the last 12 months, with the following outcomes:

On three schemes we will sell the properties on the open market as and when they

become vacant;

A fourth scheme is to be considered for alternative use in partnership with a regional

mental health trust, with a view to helping those leaving care and support homes to have

good quality, well managed homes outside of the hospital environment;

Elm House, Stockton and Windlestone House, Billingham (medium rise flats) have been

recommended for disposal through demolition; and

A number of other schemes have been identified for appraisal with options currently being

explored.

These options are being considered in conjunction with the review of the business plans in light of the recent budget announcement.

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Priorities from the 2014 VFM Self-Assessments

Thirteen Group and its Partner Landlords maintain high level 30 year business plans and detailed rolling 5 year budgets, which have been updated for 2015/16. Reflecting on 2014/15, the Boards made significant progress with their strategic priorities, as follows: 1. Building a great organisation

Office accommodation was reviewed, and the building of the new Northshore HQ completed, resulting in savings from rationalising or closing a number of locations.

Thirteen Care and Support was established, bringing together Norcare and supported housing services from Tees Valley Housing, to streamline and improve supported housing service provision, working together to stimulate market growth.

Sound ICT support for services was established from Day 1; procurement was completed for an integrated ICT management system and the project plan implemented, with a go-live date of November 2015.

A review of Group wide operational strategies was undertaken and a schedule of new strategies developed and reported to the Partner and Group Boards. Priority was given to customer interfaces and intelligence, including the Customer Service Strategy, Customer Involvement Framework and Communications Strategy.

In addition essential corporate strategies were developed, such as the Transformational Framework, incorporating People, ICT and Accommodation strategies, Assurance Strategy and Asset Management Strategy.

One of the key objectives for the Thirteen Group was to achieve value for money and efficiencies on service delivery. The 2013/14 VFM self-assessments for all Group Partners were completed, published by the deadline of 30 September 2014 and approved by the HCA. A customer friendly version was also published on the Group’s websites. This will remain a key objective each year.

Another key priority was to regain G1 regulatory status for governance and retain V1 status for financial viability. Both of these outcomes were achieved and processes put in place to ensure standards are maintained.

The Group’s Project Management framework was reviewed in May 2015 and a business

case review pro-forma implemented. The framework will be used to support the business

planning process through understanding both human and physical resource allocations.

Progress against projects will be reported, by exception, to the relevant Boards and

Committees.

The performance of Partner Landlords in relation to their key performance indicators was

within projections, with the exception of the number of voids. A project group was

established to manage and improve void performance and end quarter performance at

June 2015 was indicating a significant improvement in this area. Performance outturns,

actions and revised measures were reported to Boards throughout the year.

The Thirteen Customer Involvement framework was developed and implemented,

including the Thirteen Complaints Panel which the Partner Boards have approved as the

Companies’ designated complaints panel.

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Housing Hartlepool supported Hartlepool’s Housing Strategy, which was informed by the Strategic Housing Market Assessment undertaken by Hartlepool Borough Council and an in-house customer perception study, and is pending approval.

Grove Hill redevelopment in Middlesbrough is ongoing, with plans to extend the joint

venture to North Ormesby agreed by the Erimus Housing Board. Joint investment and

continuing collaborative working has provided greater opportunities for the scheme.

The Allocations and Empty Homes Strategy has been reviewed to promote tenancy

sustainability and incorporate the provision of quality home fixtures and fittings, including

carpets, white goods and decoration. Performance outturns indicate that there has been a

positive impact on void rent loss with a reduction of £43k on the projected amount and the

number of empty properties has reduced by an average of 10% across the Group.

A strategic review of care services was undertaken by Peter Fletcher Associates; this has informed the development of the Older Persons Strategy, with a view to aligning services with operational delivery.

Tees Valley Housing’s supported housing provision was transferred to Thirteen Care and

Support, which has enabled the creation of a single business unit with a dedicated Board

and a new management structure. This structure clearly separates the service delivery and

service development functions, which are consistently applied throughout our area of

operation. Efficiencies have been noticeable in the local authorities where historically both

Norcare and Tees Valley operated, for instance in County Durham and Sunderland.

An environmental improvement programme has been delivered in partnership with Groundworks.

2. Promoting Resilience and Sustainability

Mitigation of the effects of welfare reform was at the forefront in 2014/15. The Welfare Reform hardship budget has been maintained and a number of initiatives were implemented, with outcomes reported to the Partner and Group Boards. The number of cases of arrears increased in the Partner Landlords that did not have a Discretionary Housing Fund, and as a result this will be extended across all Landlords in 2015. The re-designation of low demand high rise accommodation to meet the higher demand for smaller properties proved successful: more properties were let, void costs were reduced, and the number of high rise tenants owing more than £50 reduced by 5%.

The Treasury Management Strategy was agreed and work has commenced to review long-term funding arrangements. We are currently developing our Funding Plan with the aim of accessing competitive funding markets to reduce the cost of borrowing going forward and maximise the use of our property assets in providing security for the loans.

In conjunction with Partner Boards, key stakeholders were engaged through the merger and new partnerships and collaborative working relationships established.

Thirteen Group is committed to adding value to communities through social investment.

The approved Inclusion Strategy outlines the Group’s commitment to financial and digital

inclusion for customers.

Initiatives to help customers and communities included the Big Lottery funded Know your Money (KYM) project which supports customers with money management, promoting the local Credit Union and addressing fuel poverty through investment in fuel efficient technologies.

A Corporate Social Responsibility Strategy is being developed. The Housing Associations

Charitable Trust (HACT) model of calculating social value has been implemented and

initiatives are being assessed for added value.

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The Employability Service has been reviewed in line with the Corporate Social

Responsibility Strategy.

Committed regeneration activity on Swainby Road and Victoria in Stockton, and Mandale in Thornaby, has been delivered in accordance with the agreed programme.

3. Committed to Growth and Adding Value

The Development Strategy and delivery plan were agreed by the Boards and the main elements of our bid approved by the HCA, further confirming the ongoing recognition of VFM through development delivery.

Working groups were established to consider and develop market rented proposals and consider marketing social housing to new market groups/clients.

Greater caution was applied to the objective to support tenants into shared ownership due to some weaker sales’ performance, with decisions made to revert some stock back to rental.

Erimus Housing financially supported the submission of the successful bid by a consortium, which includes Thirteen, for the ‘Transforming Rehabilitation’ project. The lead partner for the ‘Through the Gate’ element is now Thirteen Care and Support.

The Fuel Poverty Strategy has been approved in principle and we have entered into a collaborative agreement with a range of other Registered Providers to form a joint company – Your Energy Services NE Ltd (YES) - to help reduce tenants’ fuel bills. Further options will be considered in 2015/16.

Ambitions to build mixed communities and enable added value have been appraised and targets are in place.

Development proposals to deliver mixed tenure and economy developments have been approved in Earswick York, Morpeth and Durham.

The potential for specialist developments such as Extra Care, retirement villages and student accommodation has been considered in both the Development Strategy and Older Persons Strategy.

The aim to review the commercial premises’ service to provide advice linking to neighbourhood sustainability has been deferred for future consideration, in line with the ‘Laying Firm Foundations’ business objective.

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6. VFM Outcomes and Achievements Return on assets We appreciate the importance of our assets, in ensuring that they generate a return in terms of their financial, social and environmental impact, and of maintaining our assets, particularly our housing properties, so that they provide good quality homes for our tenants to live in, and that they last for generations to come.

One measure of the return on assets is in terms of generating a surplus that can be reinvested in our business to support our objectives going forward, which is shown in the tables below.

The benchmarks shown are from the Homes and Communities Agency 2014 Global Accounts of Housing Providers, which are produced from the regulated social housing sector.

The benchmark figures used for Erimus Housing, Housing Hartlepool and Tristar Homes

are those for Large Scale Voluntary Transfer Associations.

The benchmark figures used for Tees Valley are those for Traditional Housing

Associations. The details of the return on assets for each Landlord Company are as follows:

Erimus Housing

Return on assets 2015

Social housing sector

benchmark 2014 £m

2014 2013 2012 2011

Operating surplus £'000 14,276 1,553 12,897 7,993 6,811 8,572 Housing property NBV £'000 335,538 29,778 321,607 277,161 256,497 241,783

Return on assets 4.3% 5.2% 4.0% 2.9% 2.7% 3.5%

The return on assets ratio shows a steady increase over the last 4 years with the figure being slightly below the sector average benchmark.

Erimus Housing was formed in 2004 to receive the housing stock from Middlesbrough Borough Council under a large scale voluntary transfer. The initial years include a significant investment in properties to meet the promises to tenants following transfer. Now that those promises have been met we expect the investment in our properties to be in line with a long term maintenance and improvement strategy and the return on assets’ ratio to be in line with the sector norm.

The return on assets’ ratio increased in 2013/14 following the transfer of 1,076 properties and associated buildings from Tees Valley Housing to Erimus, and Erimus transferring 119 properties and associated buildings to Tees Valley Housing.

The primary aims of this transfer were to provide efficiencies across the Fabrick Group within the management and maintenance of housing stock, to increase the strategic role of Erimus within Middlesbrough and to create increased capacity for Tees Valley to develop new properties.

The return on assets’ ratio increased further in 2014/15, which can be partly attributed to the inclusion of the rental income and associated costs of the stock transferred in 2013/14 now being included for a full year, along with no property impairment being identified this year (2013/14 £1,049,000).

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Housing Hartlepool

Return on Assets 2015 Global

benchmark 2014 £m

2014 2013 2012 2011

Adjusted operating surplus £'000 7,851 1,553 8,567 6,382 1,492 3,250 Housing property value £'000 177,701 29,778 158,256 146,510 123,192 100,649

Return on assets 4.4% 5.2% 5.4% 4.4% 1.2% 3.2%

The return on assets’ ratio shows a decrease in 2014/15 due to increased expenditure on Major Repairs and Property Depreciation, with the figure now being below the 2014 sector average. Whilst expenditure on major repairs is similar to last year, more environmental work being completed has made it possible to charge more to income and expenditure accounts, which has had an impact on the operating surplus. Housing Hartlepool was formed in 2004 to receive the housing stock from Hartlepool Borough Council under a large scale voluntary transfer. The initial years include a significant investment in properties to meet the promises to tenants. Now that those promises have been met we expect the investment in housing properties to reduce to levels more in line with a long term maintenance and improvement strategy, and the return on assets’ ratio to be in line with the sector norm.

Tees Valley Housing

Return on Assets 2015

Social housing

sector benchmark

2014 £m

2014 2013 2012 2011

Operating surplus £'000 6,204 2,586 6,934 7,493 6,610 7,547 Housing property value £'000 150,905 48,376 143,279 161,809 158,744 135,513

Return on assets 4.1% 5.3% 4.8% 4.6% 4.2% 5.6%

The return on assets’ ratio showed a steady increase from 2012 to 2014, with a slight decrease in 2015 to 4.1%, which is below the sector average benchmark. This reflects the fact that Tees Valley is a mature traditional housing association and our objective of developing new homes for those in need where possible.

There have been some significant changes to the activities undertaken within Tees Valley over the last year. Firstly with the stock transfer carried out during 2013/14 which now impacts the full year, along with the transfer of supported housing activity to Thirteen Care and Support, both transfers being within the overall Thirteen Group.

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Tristar Homes

Return on Assets 2015

Social housing

sector benchmark

2014 £m

2014 2013 2012 2011

Operating surplus £'000 7,090 1,553 (1,035) (4,116) 6,405 5,945 Housing property value £'000 179,887 29,778 169,743 146,802 127,163 98,150

Return on assets 3.9% 5.2% -0.6% -2.8% 5.0% 6.1%

The return on assets’ ratio shows a decline in 2013 and 2014 and whilst it is now improving the figure remains below the sector average.

The main reason for this is that Tristar Homes is in the final years of fulfilling promises to tenants following the large scale voluntary transfer (LSVT) that took place in December 2010. This includes a significant investment in properties, with investment in housing properties of £27.5million during 2014/15. Had this investment not taken place, the return on assets would have been 5.55%. Once the transfer promises have been delivered then we would expect the return on investments to increase to be in line with the sector norm.

19

Value of assets – Housing Properties

The properties are valued above based on their ability to generate income (rental income less expenditure on management and maintenance etc.) which is based on an independent valuation by a qualified valuer and produces a net present value (NPV) per property. We have analysed our properties further by reviewing a number of indicators including demand, voids and bad debts along with maintenance costs, and this has assisted the Boards in making investment decisions on properties.

Responsibility for delivering the Asset Management Strategy and appraising our stock rests with the Company’s Asset Management team.

As well as having a Technical Surveying team who carry out in-depth inspections of properties, through a combination of ‘income vs expenditure’ assessments and GIS mapping we are able understand the current and potential future performance of homes.

We have developed the option appraisal of our housing properties further, and are able to:

Assess current refurbishment requirements and costs

Examine historic repairs and predict future trends

Check the 30 year financial business plans to identify programmed works/costs

Examine neighbourhood indicators such as void costs and rent loss

Through this analytic method we are able to identify assets that make healthy returns and those that do not, as well as map areas and trends within estates, to enable us to deploy resources to areas most in need of attention.

This data, together with key financial data such as NPV, disposal costs and potential yield from market sales, is used to inform the annual business planning process. To enhance the data we hold, local intelligence, which may not be recorded on systems, is gathered from staff working in our neighbourhoods. We use GIS mapping to identify “hot spots” of low performing stock in order to focus our efforts on those areas most in need. An example of red, amber and green mapping is shown below.

20

We have developed a process to bring together all relevant data which is then reviewed by a cross-Group team to agree the options to be considered. These options can include developing objectives for the Neighbourhood Plans, which identify local issues to be addressed, proposals for investment or disposal, or entering into discussions with local authorities and other partners to develop a wider approach such as regeneration.

Once the options have been explored and developed they are reported to the Leadership Team for consideration and subsequently reports will be presented to the relevant Board for approval.

21

Investment in existing properties

The varying levels of investment detailed below reflect the specific and differing needs of each

individual landlord.

Erimus Housing

Erimus Housing has increased the level of return on assets whilst continuing to invest in its properties, e.g. carrying out major repairs as detailed below.

Major repairs 2015 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000

Expensed 7,190 6,778 6,729 8,738 6,758

Capitalised 2,966 5,385 5,787 3,085 5,676

Total 10,156 12,163 12,516 11,823 12,434

All properties achieve Decent Home standard and are upper quartile when benchmarked with Housemark.

The average benchmark for the housing sector of major repairs per property for 2013/14 was £1,179 for LSVTs, with the comparable figure for Erimus Housing in 2015 being £890.

The merger and bringing together of teams has provided the opportunity to review our ability to provide value for money for future years, and as a result slippage on planned works has been deferred to 2015/16.

Housing Hartlepool As mentioned previously, Housing Hartlepool made a significant investment in its properties to meet the promises to tenants following the LSVT from Hartlepool Borough Council. The table below shows the level of major repairs carried out over the past 5 years.

Major repairs 2015 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000

Expensed 6,140 5,268 5,269 5,868 5,280

Capitalised 3,215 4,243 2,379 1,425 879

Total 9,355 9,511 7,648 7,293 6,159

All properties achieve Decent Home standard and we continue to invest in energy efficiency programmes to further improve existing good performance levels.

The average benchmark for the housing sector for major repairs per property in 2013/14 was £1,179 for LSVTs, with the comparable figure for Housing Hartlepool in 2015 being £1,272.

The increase in 2013/14 and 2014/15 compared to previous years is due to the implementation of the next 5 year cycle of component replacement, a peak in costs that will not be replicated.

22

Tees Valley Housing Tees Valley has continued to invest in its existing properties. The table below shows the level of major repairs carried out over the past 5 years.

Major repairs 2015 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000

Expensed 1,362 1,518 1,692 1,485 707

Capitalised 802 1,588 2,192 1,222 1,341

Total 2,164 3,106 3,884 2,707 2,048

All properties achieve Decent Home standard and are upper quartile when benchmarked with Housemark. Reduced expenditure on major repairs is due, in part, to the transfer of stock from Tees Valley to Erimus, resulting in fewer properties being maintained. The average benchmark for the housing sector of major repairs per property for 2013/14 was £707 for traditional housing associations, with the comparable figure for Tees Valley Housing in 2015 being £538.

Tristar Homes

As mentioned previously, Tristar Homes has made significant investment in its properties to meet the promises to tenants following the LSVT from Stockton Borough Council. The table below shows the level of major repairs carried out over the past 5 years.

Major repairs 2015 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000

Expensed 10,274 20,934 22,425 3,990 694

Capitalised 17,191 9,605 8,642 5,799 224

Total 27,465 30,539 31,067 9,789 918

All properties achieve Decent Home standard and are upper quartile when benchmarked with Housemark. The decrease from 2013/14 is due to the majority of major works to properties having now been completed. The average benchmark for the housing sector for major repairs per property in 2013/14 was £1,179 for LSVTs, with the comparable figure for Tristar Homes in 2015 being £2,236. This demonstrates the significant investment in housing properties made during this period.

23

New development

During the year our Partner Landlord Companies used the capacity created from existing assets, along with grant funding and loans, to develop 564 new properties in line with our objective ‘Committed to Growth and Adding Value’:

Erimus Housing 92

Housing Hartlepool 198

Tees Valley Housing 134

Tristar Homes 141

We plan to develop a further 1196 new properties over the next 5 years:

Erimus Housing 117

Housing Hartlepool 228

Tees Valley Housing 466

Tristar Homes 385

The Board has approved plans for its subsidiaries to deliver 1196 new properties over the next 5 years, at a total cost of £95.9million. This investment will be funded from new borrowings and social housing grant from the Homes and Communities Agency, along with internally generated surplus. Undrawn loan facilities of £64.6million are available under existing arrangements.

Each development scheme is assessed using our development appraisal model, inputting data at a property level, which produces long term cash flows, a net present value (NPV) and payback period. The assumptions used are in line with our long term business plan and each scheme is approved by the appropriate Board.

It is recognised that new schemes do not provide a financial return in the short term, but do provide a social benefit in providing homes for those in need, and are included in the long term business plan to ensure that financial viability is maintained.

The appraisal method used allows us to compare schemes and assists with capital rationing across the Group linked to our Development Strategy.

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Debt per social housing property

The impact of our strategy for investing in new and existing properties on our debt per property is

shown in the following tables. The Partner Landlord Companies’ 30 year business plans show

that our objectives can be met from within existing facility levels and with no breach to financial

covenants. It should be noted that these plans are being revisited as a result of the recent budget

announcement and we envisage that they will still deliver loan compliance.

Erimus Housing

Debt per social housing unit

2015

Social housing

sector benchmark

2014 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000 £'000

Total Debt 114,629 114,616 114,444 85,000 82,000

Total social housing units 11,415 11,370 10,441 10,555 10,351

Debt per unit 10,042 17,238 10,081 10,961 8,053 7,922

The table shows a gradual increase in debt per unit in delivering new units and investing in existing housing assets. This has now settled at around £10,000 per unit which remains well below the sector average benchmark.

Housing Hartlepool


2015 Global

benchmark 2014

2014 2013 2012 2011

Total Debt £'000 68,000 50,000 47,000 50,000 49,000


Debt per unit 8,877 17,238 6,772 6,585 7,069 7,063

The table shows a marked increase in debt per unit in delivering new units and investing in existing housing assets, however this remains below the sector average benchmark.

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Tees Valley Housing


2015

Social housing

sector benchmark

2014 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000 £'000

Total Debt 86,054 87,454 94,630 93,463 74,615


Debt per unit 21,557 26,540 20,947 19,133 19,101 15,960

The table shows a gradual increase in debt per unit in delivering new units and investing in existing housing assets, however this remains below the sector average benchmark. In 2013/14 Tees Valley repaid £6m loan funding following the stock transfer to Erimus Housing. This has reduced interest payments going forward.

Tristar Homes


2015

Social housing

sector benchmark

2014 2014 2013 2012 2011

£'000 £'000 £'000 £'000 £'000 £'000

Total Debt 63,000 39,000 10,000 4,000 0


Debt per unit 6,047 17,238 3,752 993 393 0

The table shows an increase in debt per unit in delivering new units and investing in existing housing assets, however this remains well below the sector average benchmark and is expected to rise further as we complete our promises to tenants.

For all Landlords, we have fully funded the business plans from existing loan facilities and all debt levels are less than the sector average.

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Financial and operational performance Thirteen uses the HCA global accounts and FVA returns to compare high level financial indicators to national averages, and works with its peers in the North East region to compile a suite of performance data from FVA returns to compare financial performance.

We routinely benchmark key performance indicators internally with our Landlord Partners, and externally with the Housemark National Benchmarking Club. We also complete the Housemark Core Resource Benchmarking exercise annually to benchmark performance and costs.

Overall financial performance compares favourably with the global accounts, however there are some key operational indicators that are lower or median quartile when compared with the National Benchmarking Club. The key financial and operational indicators are presented below:

Management Costs £/unit 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 533 936 506 614 594 585

Tees Valley Housing 637 1,033 692 569 445 413

Housing Hartlepool 516 936 654 593 575 573

Tristar Homes 596 936 676 967 904 801

Maintenance Costs £/unit 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 924 1,035 860 825 863 699

Tees Valley Housing 718 1,000 678 543 463 533

Housing Hartlepool 955 1,035 896 976 1,007 920

Tristar Homes 1,070 1,035 948 920 1,109 916

Management and maintenance costs compare favourably with national averages, although we recognise that there are inconsistencies between Landlords.

We look at each individual Landlord separately, and allocate costs according to the work carried out. Different Landlords have different levels of activity – the actual costs reflect the individual Landlord at a local level. Tees Valley management costs are higher than other Partners due to the profile of the stock being more rural and having scheme specific costs.

The overall management cost per unit for Erimus has increased marginally over the past year, in part due to a re-alignment of costs within the new Thirteen Group, as well as some short-term additional costs during the merger year. All others have decreased.

We are expecting to see savings in the longer term arising from the organisational structure that is now in place following the merger into Thirteen.

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Maintenance costs have increased due to service pressures such as the increased number of difficult to let empty properties and local service delivery. Standardising services will create efficiencies in future.

We drill down further using Housemark to measure the performance of the functions behind these high level numbers.

Tenancy Management 2015 Outturn

2014 Benchmark

2014 2013 2012 2011

Tenancy Turnover (%)

Erimus Housing 11.0% Lower

Quartile 12.0% 10.0% 9.4% 9.6%

Housing Hartlepool 11.1% Lower

Quartile 10.5% 10.5% 12.0% 9.5%

Tees Valley Housing 14.8% Median Quartile 10.4% 10.5% 9.1% 8.1%

Tristar Homes 12.0% Lower

Quartile 12.5% 11.0% 9.9% 10.3%

Satisfaction with service (%)


Quartile 82.0% 82.0% n/a 88.0%

Housing Hartlepool 91.0% Upper

Quartile 90.0% 92.0% 92.0% 92.0%

Tees Valley Housing 84.0% Lower

Quartile 84.0% 84.0% n/a 87.0%

Tristar Homes 86.0% Median Quartile 86.0% 86.0% 86.0% 83.0%

Tenancy turnover in Erimus, Housing Hartlepool and Tristar became lower quartile nationally at the end of 2013/14 but stabilised and improved marginally during 2014/15, assisted by a number of local neighbourhood interventions including a ‘support to stay’ programme targeted at vulnerable households. Neighbourhood plans are also being further developed and reviewed to address specific local issues as well as more detailed asset management appraisals of individual problem schemes or blocks, with appropriate staffing structures supporting this.

However, Tees Valley’s tenancy turnover and overall satisfaction with the service have both shown a decline on previous years. Tenancy turnover, including supported housing units, has increased from 8.1% in 2010/11 to 14.8% in 2015. This is being addressed through the range of initiatives as detailed in the paragraph above.

Customer satisfaction benchmark measures for all Landlords remain based upon previous STAR customer surveys, which across the Thirteen Group vary from 2012 to 2014. This also influences other VFM related benchmark measures. We recognise therefore that we will need to undertake a further Group-wide STAR survey and this is provisionally planned for early spring 2016. A suited programme of rolling baseline satisfaction measures has commenced to provide an interim baseline and help inform specific service customer delivery areas.

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Erimus Housing

Property Maintenance 2015

Outturn 2014 Benchmark

2014 2013 2012 2011

Average time to complete repairs (days)

9.8 Lower

Quartile 12.8 9.3 7.5 5.5

Satisfaction with service (%) 78% Lower

Quartile 78% 78% n/a 83%

Satisfaction with quality of home (%)

86% Median Quartile

86% 86% n/a 90%

Average energy efficiency rating (SAP rate)

74 Median Quartile

74 74 73 73

Housing Hartlepool

Property Maintenance 2015 Outturn

2014 Benchmark

2014 2013 2012 2011


8.6 Lower

Quartile 14.4 13.1 12.1 12.1

Satisfaction with service (%) 90% Upper

Quartile 90% 92% 92% 92%


89% Median Quartile

89% 92% 92% 92%


72 Median Quartile

71 71 71 69

Tees Valley Housing


2014 Benchmark

2014 2013 2012 2011


9.8 Lower

Quartile 13.9 11.2 8.2 8.6


75% Lower

Quartile 75% 75% n/a 84%


84% Median Quartile

84% 84% n/a 91%


74 Upper

Quartile 74 73 72 71

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Tristar Homes


2014 Benchmark

2014 2013 2012 2011


12.3 Lower

Quartile 10.2 12.8 19.0 17.0


80% Lower/Median

Quartile 80% 80% 80% 77%


83% Lower/Median

Quartile 83% 83% 83% 81%


71.73 Lower/Median

Quartile 69.5 69.5 68.7 69.0

Housemark benchmarking breaks the maintenance costs down into responsive repairs service and major works. After a period of increasing average completion times for repairs, this year has seen a reduction to just less than 10 days’ average for all Landlords, with the exception of Tristar Homes which has experienced a slight increase to an average of 12 days. We continue to focus on reducing the number of emergency repairs being carried out and are working towards a more useful measure of ‘1st time completions’ on repairs, as reflected by customer feedback.

As noted above, Erimus and Tees Valley satisfaction levels are based on the 2013 STAR survey which is lower quartile performance. Tristar’s satisfaction levels are based on the 2012 STAR survey, which is lower/median quartile performance, and Housing Hartlepool on the 2014 STAR survey which is median/upper quartile performance.

Our own in-house satisfaction testing, however, carried out at the point of repairs completion, shows extremely high levels of satisfaction with our repairs service at 99.2% (2014) and around 99% (2015). A concern remains, however, about the number of recall jobs which reduce efficiency and impair excellent customer standards and this relates again to the ‘right 1st time’ objective.

Overall property maintenance performance is good with all homes meeting the Decent Homes standard. Erimus and Tees Valley satisfaction with the quality of homes did reduce from upper quartile to lower-median performance, but since that survey we have undertaken extensive energy efficiency works to help customers save on fuel costs, as well as a number of environmental works to improve the immediate environment.

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Voids % of Debit 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 2.4% 1.7% 2.0% 1.4% 1.2% 1.2%

Tees Valley Housing 3.4% 2.0% 2.9% 1.6% 1.8% 1.3%

Housing Hartlepool 1.7% 1.7% 1.8% 1.6% 1.2% 1.4%

Tristar Homes 5.3% 1.7% 2.0% 1.5% 2.0% 1.9%

Bad Debts % of Debit 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 1.9% 1.0% 1.2% 0.9% 0.8% 0.7%


Housing Hartlepool -0.5% 1.0% 1.4% 1.9% 2.1% 0.8%

Tristar Homes 0.5% 1.0% 0.5% 2.0% 3.9% 2.3%

Voids as a percentage of the debit has increased across the Group. Bad debt as a percentage of the debit has also increased.

Both of the above are considered further in the following sections.

31

Erimus Housing

Empty Properties 2015 Outturn

2014 Benchmark

2014 2013 2012 2011

Properties empty and available to let ( % of total stock)

2.4% Lower

Quartile 2.2% 1.8% 0.7% 0.8%

Average relet time (days) 77.1 Lower

Quartile 84.3 42.5 37.5 31.3

Void rent loss (% of rent debit)

2.4% Lower

Quartile 2.0% 1.4% 1.2% 1.2%

Housing Hartlepool


2014 Benchmark

2014 2013 2012 2011

Properties empty and available to let (% of total stock)

2.3% Median Quartile

0.9% 0.9% 0.7% 0.7%

Average relet time (days) 45.6 Median Quartile

24.6 26.0 20.6 27.7

Void rent loss (%) 2.1% Lower

Quartile 2.0% 1.6% 1.3% 1.4%

Tees Valley Housing


2014 Benchmark

2014 2013 2012 2011


7.9% Lower

Quartile 3.5% 2.2% 1.0% 0.9%


Quartile 63.8 32.8 27.7 27.5

Void rent loss (%) 3.1% Lower

Quartile 2.3% 1.2% 1.7% 1.2%

32

Tristar Homes


2014 Benchmark

2014 2013 2012 2011


3.2% Lower

Quartile 1.1% 1.2% 0.8% 0.9%


Quartile 32.8 19.8 21.8 25.8

Void rent loss (% of rent debit)

3.4% Lower

Quartile 2.3% 1.5% 1.9% 2.3%

The number of empty homes available to let increased again into 2014/15, reflecting once again the challenges of welfare reform, and also, most significantly, the local housing market and demographic position.

Our operating area demonstrates a level social housing demand, compared to much of the rest of the country, and a relatively stagnant private housing market which has created a highly competitive private rented sector operating at the lower end of the market, often benefiting from the oversupply of small 2 bedroomed terraced housing in the area. Again, our empty property strategy has been designed to address this competition through better marketing and improved presentational standards.

This has become a key priority for our operational teams, developing and then seeking to implement a series of marketing and lettings initiatives to over-turn weakening performance and compete with the private sector. By the last quarter of 2014/15 this had already begun to have a significant impact which should feed into the next financial year’s results.

Although the impact of long-term vacancies then being let has kept the relet time relatively high, there has been some reduction from 2014. It is not expected that this can drastically reduce in the short-term, with further long-term vacancies coming back into letting, but again the more recent performance continues to show a capacity to address the lettings and empty homes challenge. Further work on considering and reviewing poorer performing housing assets will also see some of this stock being taken out of the current portfolio, or redesigned for alternative management uses.

As a consequence of high numbers of empty properties and the time taken to let properties, in Erimus, Tees Valley and Tristar void rent loss continued to increase in 2014/15, though Housing Hartlepool’s void rent loss marginally fell to 2.1%. There is an expectation that for all Landlords this should reduce into 2015/16 in line with the above commentary.

Current Tenant Arrears 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 7.2% 4.1% 6.8% 5.1% 4.8% 4.6%



Tristar Homes 2.9% 4.1% 2.9% 4.7% 6.5% 16.2%

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Rent collected (% of rent due)

2015 Outturn

2014 Benchmark

2014 2013 2012 2011


Quartile 96.8% 99.2% 99.3% 99.2%

Housing Hartlepool 97.8% Lower

Quartile 96.5% 99.4% 100.0% 97.7%

Tees Valley Housing

98.7%

Upper Quartile

101.0%

99.2%

99.3%

100.1%

Tristar Homes 101.6% Lower/Median

Quartile 99.0% 97.4% 97.3% 97.6%

Trends for arrears and bad debts are harder to compare from year end to year end as they are affected by the timing of benefit payments.

Across the Group, however, the continuing impact of welfare reform and wider austerity has been seen in terms of further difficulties in maintaining clear rent accounts and pursuing outstanding debt. The stock profile within Erimus, with a higher percentage of homes of 3 bedroomed size and above, has exacerbated the impact of the spare room subsidy (bedroom tax) and the previous support from LA discretionary payments has reduced in 2014/15 from previous levels.

Performance for Erimus on rent collection does, however, show a slight increase within this past year, however Tees Valley reports a slight decrease, notwithstanding the year-end housing benefit cycle noted earlier. A renewed income management strategy including much greater localised and targeted support, as well as proposals for the introduction of a tenant reward scheme, are intended to further support rent collection and recovery activity. It should also be noted that the cost of delivering the rent service is still within the top quartile within the Housemark resource benchmarking report for 2014.

Operating Margin 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 26.2% 27.2% 23.5% 16.4% 15.5% 18.8%



Tristar Homes 16.0% 27.2% -2.7% -10.1% 17.3% 21.4%

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Growth in Turnover 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 3.5% 4.3% 7.8% 11.0% 6.6% 15.6%

Tees Valley Housing -20.4% 5.7% -5.4% 0.8% 8.8% 1.6%

Housing Hartlepool 3.1% 4.3% -1.9% 10.1% 6.3% 9.6%

Tristar Homes 4.0% 4.3% 4.4% 10.7% 47.0% 29.4%

Growth in total Assets 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 5.4% 7.7% 4.3% 19.3% 8.6% 5.5%

Tees Valley Housing -1.0% 4.4% -2.0% 0.9% 19.2% 8.8%


Tristar Homes 14.5% 7.7% 0.5% -0.5% 8.4% n/a

Turnover has grown steadily across all Landlords in 2014/15 with the exception of Tees Valley which is explained below.

In 2015 the figures for Tees Valley and Erimus include a full year of activity following the inter-group stock transfer which took place in October 2013. The turnover of Tees Valley has been further reduced by the transfer of supporting people activity to Thirteen Care & Support, which has seen a reduction of £3.2m of turnover, with similar reductions in expenditure.

Operating margins are affected by the level of investment work being carried out on existing homes, with £25m expenditure being charged to the Income & Expenditure Account in 2014/15, which increases to £49m when capitalised expenditure is included. Tristar is a relatively recent stock transfer organisation expending £10m on this type of work during 2014/15, which has resulted in the operating margin being significantly below the benchmark, although it is now operating at a surplus.

Total assets for Erimus, Housing Hartlepool and Tristar have seen steady growth in 2015, with new property handovers and increased property valuations, along with additional cash drawn by Tristar and Housing Hartlepool in anticipation of future development and investment.

The total assets for Tees Valley have decreased slightly in 2015, despite an increase in housing properties of 5.3%, as cash and investments (within current assets) have decreased by £9m, which has funded the investment in new and existing properties. Future asset valuation will be impacted by the rent reductions imposed by the Government.

Thirteen Care and Support continue to add value to the Group, working with key partners and developing new relationships to help support clients in developing key life skills which they can then take forward as potential customers for the Group. At an operational level the added value of the “support to stay” initiative is sustaining tenancies, bringing benefit to the Landlords in financial terms and stability in neighbourhoods.

35

Gearing 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 31.9% 202.2% 33.8% 35.5% 31.4% 32.9%



Tristar Homes 17.7% 202.2% 11.6% 3.0% 1.2% 0.0%

Effective Interest rate (y/end) 2015

Social housing

sector benchmark

2014

2014 2013 2012 2011

Erimus Housing 4.3% 4.5% 4.5% 3.9% 4.8% 4.4%



Tristar Homes 3.7% 4.5% 3.9% 6.9% 7.3% 0.0%

All four Landlord Companies are less highly geared than the national average and this is

consistent with the debt per unit also being lower than average.

All Landlords are also experiencing interest rates that are lower than average which, coupled with

the lower levels of debt, means that they are paying less than average to service debt.

Overview of the Financial and Operational Performance of the Group

Whilst the Boards continue to review and challenge areas of under-performance, the formation of

the Thirteen Group has provided an opportunity to review service areas and associated staffing

structures, to make best use of resources and achieve the Group’s key priorities, which for

2015/16 focus on ‘Laying Firm Foundations’. As a result, the Group should be in a better position

than some other RPs to withstand the impact of the imposed rent reduction.

36

Value for Money Savings Erimus Housing, Housing Hartlepool, Tees Valley Housing and Tristar Homes all benefited from Thirteen Group savings, as detailed below, which have been apportioned between the Landlords for reinvestment in new and existing homes and services. As reported in last year’s VFM self-assessments, the case for merger included a range of projected efficiency savings over the first five years, with projected savings at the end of year 1 of £3.03m, consisting of procurement, staff and office savings.

The Group’s staffing costs (unadjusted for any potential pay award) for 2015/16 show a saving of £3.3m from 2014/15, which is a considerable element of the efficiency saving estimated from the merger and has been achieved a full year ahead of our original estimate.

Further details on our efficiency savings, which benefit all Companies within the Group, are provided below:

a) Service Reviews

We forecast savings of £415k in 2014/15 as a result of the review of the Lettings, Estate and Customer Involvement services. The reviews and restructuring have now been completed, and this shows a reduction in pay costs of £780k.

Innovative ways of working have been developed to help realise the efficiency savings anticipated. Service developments include:

Group Sign Ups

Individual tenancy sign-ups can take considerable time. We introduced group sign ups whereby a number of new tenants are invited into the office for a comprehensive presentation of the tenancy agreement, their obligations and other relevant information. This has reduced the amount of staff resources needed, and enables informed and detailed discussions. This was reflected in the new structure for the Operations Directorate allowing resources to be redirected.

Key Safes

Access to empty properties has been made more efficient through the implementation of key safes. Previously keys were kept in a central location and signed for as they were used. The key safe (a strong metal box with a combination lock attached to the door of the property and containing the keys) means that anyone requiring access can go direct to the property. The initial outlay for key safes was £30k, and while it is difficult to quantify efficiency savings financially, the time saved through reduced aborted visits as a result of keys not being available and/or travelling time to key-holding offices has been beneficial.

Mobysoft Rent Sense and Text Messages

Introduced as a pilot system in Partner Landlord Tristar Homes, this system prompts customers in arrears via text message to contact us to discuss their accounts. As a result, staff resources can be focussed on cases based around income trends, rather than the traditional ‘non-payment’ trigger, resulting in fewer cases to look at and allowing time to be spent on more complex cases.

In the current economic climate and with the impact of welfare reform, rent collection is increasingly challenging. While rent arrears have not reduced as a result of this initiative, the increase in cases in Tristar Homes has been less than in the other Group Landlords. The system will be rolled out across the Group with the implementation of the new integrated property and customer system.

37

b) Property Adaptations

Medical referrals for adaptations were previously taken on face value and completed to our properties based on an occupational therapist’s assessed need of their client. This was costly, our housing stock was becoming top heavy with adaptations and difficult to relet through the CBL scheme, and often resulted in loss of revenue and additional costs to remove the adaptations to make the property available for general needs housing.

Through a pilot scheme introduced into Erimus and Tees Valley properties, exploring alternative solutions to the provision of adaptations to our housing stock, we have been able to make best use of adapted properties, as well as allocating our previously adapted stock appropriately to clients who have been assessed as requiring the specific adaptations within them.

As a result of this initiative, recycling products and accessing the statutory Disabled Facility Grant funded through the local authority, savings of £241.8k have been realised, which have been re-invested in the service.

c) Mitigation of Impact of Welfare Reforms – Re-designation of High Rise Accommodation

Each tenancy turnover event can cost the organisation on average £3k, and we have considered a number of innovative solutions to sustain tenancies and reduce turnover. The re-designation of low demand high rise accommodation to meet the higher demand for smaller properties proved successful with more properties being let. The lost income from rent reduction is more than offset by improved demand and alleviating the difficulty in collecting rent and service charges not covered by welfare benefits.

A saving of £117k has been saved on void turnover and during 2014/15 the number of high rise tenants owing more than £50 fell from 36% to 31%.

d) Employability Team Outcomes

The employability advisers continue to support tenants into training and employment. In 2014/15 the advisers achieved 384 outcomes for customers:

97 into employment

244 into training

43 into work experience

This brings an Added Social Value of:

£205.2k relating to training

£88k relating to employment

In addition the team supported the ‘Routeways to Employment’ initiative, in partnership with a local company, Vacant Property Services (VPS), where customers complete a programme of training, learning and work experience in a particular service area or company and are offered a guaranteed interview if this has been completed, in order to compete for a job vacancy.

13 participants in total received training and work experience:

o 7 participants completed the Routeways programme

o 6 were successful in gaining employment – two with VPS; one with another

local company; and three with Thirteen

This equates to an Added Social Value of £61k

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e) Fuel Card Providers

A review was carried out to consolidate fuel card provision across the Group. Previously Fabrick used ‘All Star’:

Cost of fuel – approximately 2.5 pence per litre

Charge of £5.00 a year for use of wild cards

An additional charge of £1.65 was added on all cards per transaction

Rigid service in terms of monitoring

Vela used ‘Fuel Card Services’:

Cost of fuel – approximately 1.95 pence per litre

No additional charge for use of wild cards

Flexible service in terms of monitoring usage online

Fuel Card Services were selected as the provider to the Group, and based on set charges this gives a saving of at least £9k per year. f) In-house Legal Services The new organisational structure for Thirteen includes a Legal Services team, comprising a Group Solicitor supported by two Legal Executives and a Legal Secretary. A significant proportion of the Group’s day to day and operational activity is now carried out in-house. The team has already supported the Group in making significant savings. The outsourced legal service costs for 2013/14 were £1,630,471 compared to 2014/15 costs of £309,600, a saving of £1.3m. g) Procurement Savings

The formation of the Thirteen Group has provided the opportunity for all partners to benefit from Group-wide procurement savings. The last year has seen a number of contracts becoming due for renewal and new contracts being procured. When procuring for renewal of existing contracts, the actual savings against the existing cost can be calculated. If the contract to be procured is new, the procurement initiation procedure requires the budget holder to provide the estimated cost of the contract to be procured. In such cases the saving is calculated against the budget provided.

Existing contract renewal has realised actual savings of over £3m taking into account the

period covered by the contracts. This equates to a saving of £624.3k for 2014/15.

For new contracts, the actual saving against the proposed budget of £7.4m, taking into

account the period covered by the contracts, was £1.3m. For 2014/15 this equated to a

saving of £1.16m.

As the actual savings above are based on the whole contract renewal, the savings shown for 2014/15 have been calculated as a proportion of the lifespan of the contract. These savings will be ‘locked in’ by reducing future years’ budgets, allowing resources to be redirected as appropriate to meet the Group and Partner Company objectives.

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Summary of savings in 2014/15

Initiative Projected Saving

Actual Saving

Added Social Value

Staffing efficiency costs as a result of merger

£3,030,000

£3,300,000

Procurement Savings – renewals

£624,300

Procurement Savings – new contracts

£1,160,000

Review of Lettings, Estates and Customer Involvement

£415,000 £780,000

Funding of property adaptations

£241,800

Re-designation of high rise accommodation to mitigate impact of welfare reforms

£117,000

Fuel card for fleet provider review*

£9,000

Provision of in-house legal services

£1,320,871

Employability outcomes including people entering in to training, work experience and employment

£205,200 (training) £88,000

(employment)

Routeways to Employment programme

£61,000

Totals £3,445,000 £7,552,971

£354,200

Savings as % of total Group turnover

5.2%

*assumption

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7. 2015/16 BUSINESS PLAN AND TARGETS

Business plans for 2015/16 were developed for all Companies within the Group, taking into account the challenges and risks we face. Many of these initiatives are Thirteen Group commitments that will benefit the customers of all Partner Companies, ensuring collaborative working and making best use of staffing, budgets and other resources. However, the business plans are being revisited in light of the budget announcement to reduce social housing rents by 1% per year for four years and further initiatives will be discussed with the Boards as they are developed ahead of our revised FFR submission in October 2015.

Commitments:

Building a Great Organisation

Implement and ensure delivery and impact of Customer Service Strategy, including

Develop new 24/7 customer service standards to provide a consistent interface for

customers across the Group

Develop customer insight to identify and profile customer segments to understand

customer needs and provide access to services in a number of ways to meet the

diverse needs of our customers

Develop ICT capacity and self-service is fundamental to achieving 24/7 access and

offering bespoke services.

We expect to achieve efficiencies through the increased use of self service and ICT systems,

releasing resources from responding to customers through traditional methods.

Implement and ensure delivery and impact of the Customer Involvement Framework,

including:

Implement and embed new framework to ensure effective co-regulation and scrutiny

Develop bespoke customer learning programme to support involved customers

Develop Thirteen customer complaints panel to act as the Group’s designated panel

Implement People Strategy and related HR strategies, including:

Introduce Group pay framework and terms and conditions

Develop induction and volunteering programme(s)

Undertake skills gap analysis and implement Personal Development Performance Reviews for staff

Develop employee wellbeing programme

Monitor and review pension offer

Develop and implement Neighbourhood and Community Safety Strategy and develop

neighbourhood plans:

Review management of ‘out of town’ properties

Review management of non-general-needs schemes

Introduce ICT improvements including an Electronic Document Retention and Management

(EDRM) system and implement Integrated Property and Customer Service information

management system (IPACs). This will support agile working, reduce paperwork, and help

improve the customer experience through more effective and cohesive systems.

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Ensure FRS102 accountancy compliance. Promoting Resilience and Sustainability

Deliver regeneration projects such as Grove Hill and North Ormesby in Middlesbrough, and

Victoria Estate in Stockton (including option appraisal of Elm House).

Complete current development pipeline projects and schemes and continue to review and

appraise new commitments: including Scotswood (Gateshead), Morpeth, York and Whitby

Review impact of Private Sector Empty Homes Project

Implement and ensure delivery and impact of Empty Homes Strategy:

Establish new empty homes standard

Revise lettings system and related processes

Review/pilot additional incentives and enhancements

Develop and commence implementation of renewable energy installations, including customer

advice programme, in line with the Group’s Asset Management and Fuel Poverty Strategies.

Implement and ensure delivery and impact of Asset Management Strategy to ensure best use

of, and return on, assets, including:

Progress Landlord investment programme

Appraisal of all older person properties and Care & Support premises

Review of stores and material supply chain provision to identify the most cost effective and efficient solution

Develop sub-contractor supply chain within a framework that will drive costs down through procurement of fewer sub-contractors and larger packages of work

Establish main contractor supply chain through a pre-procured framework to achieve value for money and insulate costs from the recently announced RICS expected rise

Review the vehicle fleet to consider options of procurements, type of vehicles required and efficiency and carbon emissions

Implement and ensure delivery and impact of Income Strategy to help reduce tenancy turnover

by 1% and reduce costs of empty property reinstatement:

Review and re-launch of discretionary fund

Review/implement rewards and incentives scheme

Implement and ensure delivery and impact of Inclusion and CSR strategies:

Social investment profile

Employment and training initiatives

Digital inclusion

Green agenda

Food poverty agenda

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Committed to Growth and Adding Value

Review governance structure of Group to meet the future needs of the organisation

Review local authority contract-related services e.g. homelessness services, concierge and

landscape services to ensure they are fit for purpose and delivering value for money

Review Student Accommodation provision to determine viability and proposals for the future

Expand ‘Support to Stay’ model to help vulnerable customers sustain their tenancies

Explore business case for market rented company/business line, including potential re-

marketing of existing stock

Assess and review sales programme and develop a business case on asset value realisation

Carry out second stage review of ESCO implementation and review viability before extending

the scheme

Install cautious approach to continued development of new housing, focusing on sites that

help build neighbourhood resilience and explore potential for specialised development

provision, in line with the Group’s Development Strategy

Implement Older Person’s Strategy

Develop Community Monitoring Business Plan and review options

As mentioned previously, the business plans are being revisited in light of the budget

announcement, and we will be working through these initiatives in consultation with all stakeholder

groups.

Our initial thinking with the Thirteen Board is to focus in the first instance on performance,

ensuring that we reduce relet times, maximise rental income and scrutinise expenditure in relation

to repairs and maintenance, but these alone will not bridge the gap and in the coming months we

will be looking at a range of initiatives in order to increase income and/or reduce costs alongside a

fundamental review of the business model.

Progress against business plan objectives will be monitored by the Landlord Partner Boards and

the Thirteen Board.

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8. SUMMARY We believe that the evidence detailed in this self-assessment provides assurance that the Thirteen Group, incorporating Erimus Housing, Housing Hartlepool, Tees Valley Housing and Tristar Homes, understands and complies with the VFM standard. The following table is a summary of what we are doing to meet the expectations of the standard and where in this self-assessment document more detailed evidence can be found.

The specific expectations of the VFM standard

Have a robust approach to making decisions on the use of resources to deliver the provider’s objectives, including an understanding of the trade-offs and opportunity costs of its decisions.

The decision making process that supports the Group’s strategic objectives is set out in section 5 which provides details of the frameworks and processes used to undertake option appraisals and examples of decisions made. It also provides clarity on how the information is collated and presented to ensure that, ultimately, the Boards are armed with accurate, timely and contextualised data to help inform their decision making.

Understand the return on its assets, and have a strategy for optimising the future returns on assets – including rigorous appraisal of all potential options for improving VFM including the potential benefits in alternative delivery models - measured against the organisation’s purpose and objectives.

Thirteen’s Asset Management Strategy, which encompasses all Partners within the Group, is described in section 5, setting out the Group’s planned approach to ensuring best use of its asset base against the backdrop of the financial analysis and understanding of the organisation’s return on assets at a granular level and how this is being used to inform decision making.

Have performance management and scrutiny functions which are effective at driving and delivering improved VFM performance.

The Group’s approach to performance management and scrutiny is provided in sections 5 and 6. Analysing and understanding the Group’s financial and operational performance and expenditure has enabled us to prioritise service improvements to drive improved performance and value for money.

Understand the costs and outcomes of delivering specific services and which underlying factors influence these costs and how they do so.

The comparative cost of delivering services is set out in section 6, which includes the detail for all Landlord Partners in the Thirteen Group as well as benchmarking data used last year. The HCA Global accounts have been used in addition to the services of Housemark when benchmarking costs and performance outcomes.

Annually publish a robust self-assessment which sets out in a way that is transparent and accessible to stakeholders how they are achieving VFM in delivering their purpose and objectives.

We believe that this self-assessment, which is published on the Partner Landlord and Thirteen websites, effectively sets out details of how the Group is achieving VFM in delivering its purpose and objectives. A customer friendly version of the document is also being developed with customers.

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9. FURTHER INFORMATION For further details on any of the information included in this VFM self-assessment, please contact: Linda Minns, Head of Governance – email: [email protected]; telephone: 01642 947081. Janice McNay, Compliance Leader – email: [email protected]; telephone: 01642 947161. Thirteen Group

Northshore Road

Stockton on Tees

TS18 2NB

mailto:[email protected]

mailto:[email protected]

Documents

Housing Properties at Valuation · The challenge of meeting the regulatory requirements of the HCA, most specifically the revised Viability Standard requiring a comprehensive Assets