Presentations from the 2013 Members’ Conference

Growth and how to fund it: Martin Huckerby of Sovereign H.A. and Malcolm Wilson of RCT Homes 3 The risks and rewards of a range of strategic options: results of the workshop sessions 6 Changes in regulation and how to respond to them: Mick Warner of the HCA 11 Mitigating the impact of welfare reform: Lee Sugden of Wakefield and District Housing 12 The role of residents in governance and quality assurance: Phil Adams of Greenfields Community Housing 14

2

Introduction John Hargreaves of HRS

In a short introductory session, after welcoming attendees and in particular

new members, John compared the strategic environment for housing associations to

a cold front sweeping across the country.

Prior to 2010 we had a warm spell, with a financial and political climate

largely favourable to housing associations, although we had to learn to live with

deteriorating levels of grant. We are now experiencing a period of unsettled

weather, with low visibility and uncertain conditions, as the front passes over and

the cloud system reflects the implementation of significant changes. Looking

forward we may get more clarity of vision, but we will have to learn how to live in a

much colder climate.

This year’s conference covered many of the sector’s strategic options, some

in the main sessions and others in the workshop groups. In a colder climate, in

particular because of the reduction in grants and the uncertainty of income flows, all

options are more risky than has historically been the case. However, progressive

associations are showing that they can find solutions appropriate to their situations

and catchment areas, even in the most deprived locations. The job of the Regulator is

getting more difficult as the sector adopts a wider variety of products, structures and

financing mechanisms. Nonetheless, the sector needs to gear itself up much as the

local authorities did after the second world war, if it is to provide a solution to the

current combination of social deprivation and housing shortage. For all this to be

accomplished, housing associations have to understand the risks they are taking and

learn how to manage them successfully within a carefully defined risk appetite.

How should we grow and how will we fund it: 1. Martin Huckerby of Sovereign H.A.

3

Martin Huckerby, the Finance

Director of Sovereign Housing

Association (SHA), was the first

external speaker. Sovereign made

£4.2million of savings last year,

facilitated by collapse of the

group, which had previously

consisted of four LSVTs.

SHA’s strategy is to maximise its

options, to which end it is

improving efficiency and

maximising the value of its

assets. It is seeking to achieve a

balanced portfolio through a

combination of development and

acquisitions from other

associations engaged in the stock

rationalisation process. It has

low exposure to outright sales

but is looking seriously at

generating a significant market

rent portfolio, so that the

Association would be providing homes to a wider spectrum of people, and has

begun a pilot scheme.

In Martin’s opinion bank lending and bond issues, possibly including private

placements, provide the best value for SHA. He believes that deals where the

repayments increase with RPI are more expensive over time. In terms of liquidity,

SHA is looking at options to ensure it has access to funds to meet its long term

commitments whilst minimising carrying costs. For instance it may be cheaper to

have the carrying costs of a standby facility that is intended to be used only in

emergency than to draw down funds and keep them in the bank whilst building up a

critical mass for new fund raising.

Sovereign has made two bond issues, the most recent for £250 million in May

2012. It has used this finance to pay down some of its existing bank debt

temporarily. There is a carrying cost until the monies can be invested but it provides

greater certainty to the organisation. In addition, having cash enables the association

to take opportunities as they arise, since it can respond at short notice.

Referring to the latest bond issue, Martin noted that it had taken a lot longer than

expected to put the security in place. He advised associations undertaking such

issues in the future to charge their properties before the issue, since this puts you in a

stronger position with the lawyers.

Sovereign’s strategy is based upon

maximising efficiencies and the

value of assets, while keeping

financial capacity in reserve to take

advantage of opportunities as they

arise. There are trade-offs between

maintaining spare capacity and cost,

and this is an area where the board

should consider its position

carefully. A low level of headroom

against loan facilities or covenants

carries the high impact risks of

covenant breaches or liquidity

failure. A high level of headroom

provides opportunities, although it

generates a higher level of

underlying costs.

Sovereign are testing the

performance of a relatively small-

scale presence in the private rented

sector with a pilot scheme. This is a

useful way of gaining some exposure to a

new product without taking on excessive

risk. More commercial products will

require a different approach to marketing,

customer service and cost control.

For many associations, the banks

and capital markets will provide sufficient

volume of funding at a reasonable price.

If considering less mainstream sources of

funding, ensure that there is a good

rationale for their use rather than these

more traditional sources.

How should we grow and how will we fund it: 2. Malcolm Wilson of RCT Homes

Speaking to the same title but with a different perspective was Malcolm

Wilson, the Deputy Chief Executive of RCT Homes. RCT is the largest stock transfer

association in Wales with more than 10,000 units, based in the Rhondda, Cynon and

Taff valleys, north of Cardiff.

RCT is looking at a different growth model because there is little grant

available, land values in the area are low and long-term finance is no longer

available from banks. The model requires no grant but is a true public-private

partnership involving RCT subsidiary Porthcwlis and Cardiff-based development

company Bellerophon. Its aim is to deliver a blended portfolio of new homes, from a

mix of high and low value areas.

Following an OJEU-compliant procurement process, which enables

development to take place in Wiltshire, Gloucestershire, North and North East

Somerset, Bristol, Bath and Swindon as well as Wales, Bellerophon was chosen as the

private sector partner, bringing with it £1ibillion of investment from a pension fund.

The model works as shown in the diagram (right). A new Limited Liability

Partnership (LLP) has been created, whose equity will be shared between

organisations putting in land, operators such as RCT and the developer. The large

scale of the initiative is aimed at generating economies of scale and a stable

development programme, thus driving down costs of construction. Once a scheme

is completed, the investor refunds the LLP and the operator starts making lease

payments, which increase over time with RPI. The developer is not planning to take

its profit up front but is taking a long-term view that the equity will increase in value

over time. The LLP will own homes outright at end of the 35 year lease.

4

RCT’s Porthcwlis model is

currently the only one of its kind, although

it is likely that similar models will come

into existence in the future, with

developers trying to maintain their volume

in the face of weak housing markets in

many areas while pension funds and the

like are seeking investment opportunities

that are low risk and generate an income

linked to RPI.

5

In terms of this particular

initiative, only associations with

interests in the geographical area

concerned will be able to take

part, although this would include

quite a number of our members.

Before deciding to take part in

this or any similar scheme, there

are a number of questions that a

board would need to ask:

Would market renting have a

good strategic fit with our

organisation and be within our

risk capacity / appetite?

Is there a sufficiently strong

private rental market in the area

to support the investment?

Are we prepared to take on debt

with repayments linked to RPI?

If so, how will we evaluate the

maximum starting level of

leasehold payments that provides a

sufficient buffer if rents increase more

slowly than inflation?

How will we satisfy ourselves that we

have sufficient trust in the other

members of the partnership to be able

to commit to taking part.

Malcolm has identified a number of risks to housing associations

participating in this initiative. The properties will be let at or near to market rents on

fixed-term tenancies of five years and are not aimed at the usual social housing

tenants, so there will be a different relationship with the customers. Operators must

control their costs over the 35-year lease period, while carrying the risk that the rents

may not rise as quickly as RPI. RCT is considering insuring the RPI risk on rental

income for short periods using its Igloo captive insurance arrangement. There may

also be difficulty in finding sufficient suitable sites.

The benefits of the Porthcwlis model are that there is no development risk for

housing associations, liabilities are ring fenced, and it addresses the housing needs of

the “squeezed middle.”

Model Structure Phase 1Overall Structure

LAND

LAND

Life Funds

MMC

Lease

Individual Charges on Long-leases

Long Term Finance at Build Completion

35 YEARS AT PC

Contractor

Land in Return for

Equity

Lease Lease

New LLP

Bellerophon

Arranges Construction

8

OPERATOR

LAND

LAND

Service CO.

Model Structure Phase 1Overall Structure

LAND

LAND

Life Funds

MMC

Lease

Individual Charges on Long-leases

Long Term Finance at Build Completion

35 YEARS AT PC

Contractor

Land in Return for

Equity

Lease Lease

New LLP

Bellerophon

Arranges Construction

8

OPERATOR

LAND

LAND

Service CO.

6

Procurement is an area of

increasing focus and complexity.

Organisations need to make sure that

they make the most of their scale by

negotiating better terms, which might

incorporate social value as well as price.

This might include requiring labour to be

sourced from the local area or providing

access to funding for initiatives around

community development or the green

agenda. The benefits of these

procurement processes need to be sold to

the staff team and incentives provided to

maximise the level of compliance.

As we move into a more

commercial era (and organisations

involved in, for example, care and

support will know this already) contract

management will become an increasingly

important discipline, from both

purchaser and provider perspectives.

Workshop sessions: Improving efficiency through better procurement, bringing services in house, using shared services etc.

Two of the

workshop groups

discussed various

methods of

improving

efficiency. The first

group advocated a

mixed approach

that took into

consideration both

quality and cost

when measuring

efficiency. It noted

that some

associations missed

opportunities for efficiency gains because of silo working and called for collaborative

working across organisations to maximise the economies of scale.

This group also suggested that landlords should gain a detailed

understanding of the its activities, how they are undertaken and why. Existing

practices should be questioned to establish if there is a better way of doing things or

even if the activity needs to take place at all. Procurement procedures should be

clear so that there is a high level of compliance across the organisation.

Looking at the process of external procurement, the second group considered

that so-called modern procurement methods were in fact old-fashioned. They

advocated a more flexible approach based on collaboration and the sharing of ideas,

emphasising the value of the informal over the formal.

Both groups highlighted the importance of contract management. In some

cases it would be appropriate to take a more traditional approach with longer-term

contracts, subject to periodic reviews and using a performance

specification. The Social Value Act and the corporate social

responsibility agenda was driving organisations to include

different drivers in their contracts, focussing on non-financial

outcomes.

The second group looked specifically at bringing services

currently provided by contractors in house, for example using

your own DLO to undertake a wide range of repairs. This

should be subject to an options appraisal that would take

account of the potential to save the cost of VAT, as well as to

increase innovation, although it was uncertain whether bringing

services in-house improved the level of control.

7

Improved knowledge about how to

run DLOs effectively, combined with a

20% VAT rate have increased the rate of

insourcing. All organisations with a

sufficient size and concentration of stock

should consider this option, as well as the

possibility of using their maintenance

team to provide services to landlords

with a lesser presence in the area.

The shared services model provides

another route to saving the cost of VAT.

Like the options above, there will be

significant set-up costs so any decision to

make these strategic changes should be

thoroughly researched, compared with

alternatives and subject to a commitment

for at least the medium term.

Workshop sessions: Improving efficiency through better procurement, bringing services in house, using shared services etc.

The reverse option would be to procure services from other providers, rather

than running them ourselves. Costs and service quality should be benchmarked and

all services subject to market testing.

An alternative model that would avoid liability for VAT by taking advantage

of recent rule changes by HMRC is the shared services model. This was considered

by the second group who noted that many organisations are doing the same thing. It

therefore made logical sense to provide these services in common but, in practice, it

could be difficult to reach agreement on how this should be accomplished. The

group felt that housing associations had been relatively cushioned from the

government’s austerity programme when compared with local authorities, who

were moving ahead on this agenda by sharing ICT services for example. A start had

now been made on sharing services in the sector although its range was limited at

the moment. It was acknowledged that participation involved a reduction in direct

control.

8

Housing associations have always

had strategic choices to make but these

are becoming both more numerous and

more critical. We need to look more

carefully at our existing and planned

future assets to ensure that these are

delivering the maximum combination of

financial and social value.

Existing stock may be considered

for sale to, or swapping with, other

associations if it is outside your core

geographical areas or if it is linked to

services that you no longer with to

provide (e.g. care homes). Open market

sale could be more appropriate for stock

that has high maintenance costs,

particularly if the market value is high.

Most future development by

housing associations is likely to be at or

close to market rent levels. A market

rent product will need to provide a high

level of service, bearing in mind the

amount being paid and the degree of

competition. Associations also need to

consider the balance of stock in particular

areas, creating more balanced

communities, for example where the

social rented tenure has been dominant.

Four of our workshop groups

considered specific strategies for

growth, providing the answers to five

questions relating to the agreement,

management and delivery of the

chosen strategic objective. We have

organised this section in terms of

these questions so that we can easily

compare and contrast the implications

of the different growth strategies.

The first question that we asked was

“What kind of organisation would

this product / strategy be suitable

for?” Investing in existing

communities was thought to be

suitable for any association, although

it may be appropriate for stock

transfer landlords to complete their

initial investment programme before focussing more of their resources on this area.

Stock rationalisation would be most appropriate for organisations with a

dispersed stock profile who are looking for efficiencies, although it could also

provide opportunities for locally-based organisations, particularly of they are

seeking to grow. Stock rationalisation may not only be about geography:

associations may also dispose of stock that is no longer suitable for their purposes,

for example care homes, or stock that has a high open market value when compared

to its value as a social rented unit, particularly if maintenance costs are high.

The group considering selling services to third parties were less optimistic

about this strategy. They found that associations would have to overcome VAT

issues and set-up costs in order to make it work financially.

They were also concerned about the impact on the

resilience of the business to deliver its other aims.

The suitability of market renting as a strategy for

housing associations would depend particularly on location,

with the M4 corridor cited as a location where demand would

be high. It could be treated as contributing towards social

objectives by meeting a different layer of housing need or

simply as an investment activity to generate surpluses for

reinvestment in affordable homes and local communities.

Workshop sessions: Investing in existing communities, Stock rationalisation, Selling services to third parties, Market renting and Care & support

9

In terms of care and support, most

associations have sheltered housing with

relatively low level support, while a

smaller number provide much higher

levels of support for a range of vulnerable

client groups, including older people,

sometimes extending into the residential

care arena. As the funding for housing-

related support is squeezed, sheltered

housing will need to be re-organised,

with specific packages for residents

according to their needs, rather than a

one-size-fits-all approach. Associations

providing more intensive support will

need to demonstrate the value added from

their activities, particularly in relation to

reductions in expenditure by the NHS or

other statutory services. Partnerships

with local health providers could be

developed on this basis.

In terms of governance

structures, our advice is to keep these as

simple as possible. If considering setting

up an additional company, for example to

reduce the liabilities for taxation, ensure

that you take account of the additional

costs of governance, accounting and

company secretarial activities associated

with running an additional company.

Complex transactions, such as

large-scale stock swaps or sales, require

dedicated teams and specialist advice to

minimise the risk of a reduction in the

value of the assets.

The involvement in non-core

activities should be justified in terms of

the value to the business. This might be

financial, providing a monetary return to

the business, or social, improving the

quality of life for residents or the

resilience of local communities.

The care and

support activity could

be suitable for

organisations seeking

to grow, since

changing

demographics are

increasing the

demand for older

people’s services in

particular, or for

those for whom

providing support to

tenants forms part of

the association’s social role. The group noted that, once heavily committed to this

activity, to exit would be expensive and potentially cause reputational damage, so

the options were either to keep small or to “go for it!” It was noted that staff

working in this activity would need different terms and conditions for the

organisation to remain competitive.

Next we asked, “What governance structures would be suitable for this

product / strategy?” The groups considering investing in existing communities,

market renting and selling services to third parties all addressed the issue of

charitable status. There may be a need to establish a separate non-charitable

company to let at market rents or to operate social enterprises, depending on the

materiality of the activity to the business as a whole.

The move into more commercial activities may create tensions within the

organisation, with different areas of the business having differing aims and cultures.

Care and support needs a division

between different cultures within the

activity, with a hard culture in senior

management, focussed on contract

management and controlling costs,

combined with a soft culture at the front

line, aimed at meeting the needs of

vulnerable people. In general, non-core

activities have different skill

requirements, which must be addressed

even if the activity remains in the same

company as the core business.

The stock rationalisation activity also

requires specific skills and business

acumen, with the group advising that

“you get what you pay for.” The process

needs leadership from the board and executive team, with a dedicated team

established to run the project, including a detailed due diligence process.

Workshop sessions: Investing in existing communities, Stock rationalisation, Selling services to third parties, Market renting and Care & support

10

Our next question was “How will we

demonstrate value for money?” The group

considering investing in existing communities

advised that we should keep it simple. Social

return on investment is tricky to measure but

the value generated by providing support to

local residents might include savings on

benefit payments and the costs of keeping

people in prison, while there are many

benefits derived from enabling people to

return to work.

Stock rationalisation proposals could

generally be appraised on the basis of return

on capital. Stock swaps should be a win-win

situation with increased value generated for both parties.

The group considering selling services to third parties were concerned about

two issues: firstly that organisations considering outsourcing activities to another

housing association would be faced with the need to pay VAT at 20%, severely

hampering competitiveness, unless the organisation can take advantage of the new

rules on shared services. The second issue is the potential for the quality of service

to existing customers to be compromised in the pursuit of financial returns.

Although the group looking at market renting queried whether this activity

would be the best possible use of funds, it accepted that there was high demand for

this product. It could provide both a financial return, including capital growth, and

social value by providing good quality housing to a greater number of people. There

would be a different relationship with customers, so the cost structure might be

different from the traditional social housing activity. Profits from this type of

commercial activity could be transferred back to the charitable parent via gift aid.

It is hard to make a surplus from the care and support activity since margins

are extremely tight, although making good use of technology can

help. It was thought that social value could be improved by

ensuring clients see the same care worker on a regular basis.

“How can the activity be funded?” was the next question

that we asked of the groups and the answers very much

depended upon the nature of the activity under consideration.

Investment in local communities could be supported by

donations from local businesses, grants from philanthropic

organisations or contributions from contractors, possibly on the

basis of a fixed amount per boiler installed. In time, social

enterprise activities could become self-funding.

One of the risks of asset sales is that,

in a low interest rate environment, the cash

may generate a lower income than the

units sold. It would therefore be advisable

to have a clear reinvestment strategy in

place before selling stock.

Government loan guarantees are

also available to support access to finance

for market rent developments from the

capital markets. Sale-and-leaseback deals

carry some different risks to traditional

sources of finance and these need to be

considered in your evaluation of financing

opportunities. In particular, the

negotiation of the initial lease payment

needs to be sufficiently prudent to ensure

that there will be enough net income to

meet the payments, even in an adverse

scenario. The lack of flexibility to, for

example, sell the asset and replace it with

another also needs to be considered.

In terms of growth rate, we would

refer you to the combined findings of the

workshop groups and the associated

recommendations referring to

understanding the strategic risk position

and setting appropriate limits on growth.

As we pointed out in the editorial of

the last HRS Review, the role of the board

and the governance process as a whole is

becoming more critical in the context in

which housing associations are now

operating. It would be wise to undertake a

review of governance in the light of this, if

one has not taken place recently.

This review should address, among

other things, some of the questions raised

by the HCA’s problem cases:

Does the board give sufficient challenge

to the executive over performance and

strategic decision making?

Is the planned rate of growth within

your financial and managerial capacity?

Is the governance structure as simple

and transparent as it could be?

Is the board fully aware of the significant

risks to the organisation’s viability and

performance, and how these would be

affected by strategic decisions?

Has the board agreed a minimum level of

headroom above the loan covenants and

does it monitor performance closely in

this area?

Does the board understand all of the

risks associated with its actual and

planned funding arrangements and are

appropriate control measures in place?

What assurance does the board receive

that all the elements required to deliver

the business plan and comply with loan

covenants are in place, including

confirmation that sales programmes are

on track?

Mick Warner is the Deputy Director

Regulatory Operations at the Homes

& Communities Agency. He began

his presentation by reminding

delegates that the HCA was now

primarily an economic regulator,

focusing on the Standards covering

Governance & Financial Viability,

Value for Money and Rent. The

Agency is taking a co-regulatory

approach, which puts the onus on

boards to demonstrate they are

complying with these standards.

Commenting that the Value for

Money agenda was here to stay, he

said that more efficient organisations

would be better placed to cope with

the more risky environment in which

housing associations are now placed.

The weak economic environment will

expose examples of poor governance

in the sector. Mick predicted that the HCA would issue more Regulatory

Judgements at level 3 for Governance (indicating a failure to meet the Standard)

over the next few months.

The Agency understands the need for innovation and has a statutory

objective “to support the provision of social housing sufficient to meet reasonable

demands“ but associations need to understand and manage the associated risks.

Participation in non-regulated activities must not prejudice the ability of a provider

to meet the Standards. The regulator is here to protect public assets and value.

Mick went on to highlight some of the causes that the regulator had

identified of organisations becoming problem cases. These included an

inappropriate culture, complex structures, poor risk awareness, inadequate

controls, and ineffective treasury management. Cultural problems included a lack

of challenge of the executive by the Board and an excessive focus on growth.

Treasury issues included poor monitoring of covenant compliance, the use of

innovative funding arrangements, problems putting security in place, lack of

headroom on loan facilities and reliance on uncertain transactions, such as asset

sales.

The current nature of regulation makes Boards responsible for obtaining

the necessary assurance that risks are within the association’s capacity and are

being effectively managed. Mick urged associations to ensure that they would be

able to cope in a worst case scenario and to have appropriate contingency plans in

place. Business plans need to be tested against an adverse scenario affecting the

business as a whole, not just against individual sensitivities.

11

Changes in regulation and how to respond to them: Mick Warner of the HCA

12

As tenants transfer to Universal

Credit from October this year, they will

cease to receive Housing Benefit (which

is generally paid to the landlord) but will

by default receive the housing element of

their Universal Credit as part of one

monthly payment per household. This

change will take place gradually over a

period of about four years, although new

claims and changes of circumstances will

transfer to the new system immediately.

The findings of the demonstration

projects indicate that business planning

assumptions on rent collection rates,

write-offs and the cost of collection

should be subject to a major revision.

Associations must be prepared to provide

much more active support to tenants to

assist them with paying their rent and

would therefore need to find out much

more about the lives of tenants and their

families. As Lee pointed out, landlords

will need to be flexible about preferred

payment dates but also firm in terms of

the interactions with tenants to ensure

rent is paid on time.

Lee Sugden is Executive

Director of Resources at

Wakefield and District

Housing (WDH), one of the

largest stock transfer

associations in the country,

with more than 31,000 units.

He began by explaining that

the association had decided to

get involved in the

demonstration projects for

direct payments because they

wanted to influence key

aspects of the proposals, and

also because they believed

tenants should retain the

choice to have their housing

benefit paid to their landlord.

The projects are also seeking

to understand the impact of

the changes on claimants, the

support they might need and

where the trigger point should

be for payments to revert to

the landlord.

WDH has calculated that £72imillion of their £116imillion annual income is

now at risk due to a combination of direct payments, the under occupancy

deductions or bedroom tax and the overall benefit cap. This could reduce its

development capacity by the equivalent of one new home per week.

WDH had selected 1,900 people to take part in the project, of which 119 had

asked for budgeting support and 75 for bank account support. 8 of these tenants

were already more than eight weeks arrears and so were not transferred onto direct

payments. To date, about half of the tenants are only paying part of their rent, while

the cost of rent collection has increased to £250 per tenant per year.

Lee’s advice was to allow tenants to choose their specific payment date and to

find out more about their income receipt and payment patterns. He also

recommended actively reminding tenants of the need to pay their rent, before

payment is due, on the due date and afterwards if payment has not been made.

Once direct payments in introduced across the country, all landlords will be

competing with other payments for their rental income. Direct payments may be

viewed by some tenants as “a credit card for the poor” allowing them to build up

arrears of two months that may never be collectable. Lee pointed out that this was

only a small part of the overall effect of welfare reform.

Mitigating the impact of welfare reform: Lee Sugden of Wakefield and District Housing

13

The wider impact on local

communities of welfare reform and the

austerity programme as a whole needs to

be considered in your strategic planning.

An area in decline with high levels of

unemployment and a loss of local

shopping and social facilities is likely to

cause a reduction in the value of the

association’s assets. In this context, it

would be worth investing in social

programmes to sustain the quality of

local neighbourhoods, as well as taking

steps to promote digital inclusion among

the tenant population.

Lee highlighted some of the less obvious impacts of welfare reform. With the

introduction of Universal Credit, administered centrally, local partnerships with

Housing Benefit teams will be lost. In addition, the transfer to monthly payments

will benefit loan sharks, while local shops may suffer from the change in shopping

patterns.

There is a significant issue for social landlords to address in relation to digital

inclusion. Only about 20% of WDH tenants currently have Internet access while the

DWP wants 80% of claims for Universal Credit to be on-line by 2017.

The DWP has recently issued guidance documents on vulnerability, which is

not defined in detail although indebtedness is one of the criteria for justifying

remaining with payments to the landlord. Lee recommended that associations use

these criteria to assess the risks of individual tenants going into arrears. He

suggested that the Irwell Valley gold standard could come into its own as increasing

incentives for people to pay their rent.

14

While we would not expect most

associations to convert to the community

gateway model, Phil’s presentation raised

some important issues regarding the role

of residents in helping organisations make

the best decisions and deliver services in

the way that their customers would want

them.

One of the most valuable aspects of

the Community Gateway model is the

scrutiny of the open board papers by the

Community Gateway Group prior to the

board meeting. The subsequent report

from the Chair of the Group enables board

members to gain a clear picture of the

views of residents about the performance of

the organisation and its strategic direction.

When reviewing your governance

structures, you should consider your

arrangements for ensuring that the views

of residents are properly considered by the

board, taking into account the advantages

and disadvantages of this model.

Phil Adams is the

Chief Executive of

Greenfields Community

Housing (GCH), a stock

transfer association in Essex

with around 8,000 homes.

GCH operates using the

community gateway model,

which has a high level of

resident involvement in the

governance structure of the

organisation. Phil began by

acknowledging that the

community gateway

approach had not yet

inspired the nation but he

went on to set out how it

was possible to create huge

rewards for the

organisation and local

communities from using

this model .

The governance structure at GCH incorporates a Board of fifteen members,

including six tenants and one leaseholder, plus a Community Gateway Group

(CGG), which has nineteen members, all of whom are residents. CGG meetings take

place prior to each Board meeting and all public Board papers are discussed. The

Chair or Vice-Chair of the Board attends the CGG meetings while the CGG Chair

attends the Board meetings and reports to them.

Residents are also involved in a committee that, jointly with the local

authority, administers a fund that supports both community activities and the

development of new homes. They also take part in a number of sub-committees and

working groups, for example a Value for Money Steering Group of 16 tenants has

recommended to the Board how savings against business plan should be spent.

As a result of this structure, GCH has nearly 400 involved residents. The

challenge that it has set for itself is “What difference does it make to my mum?”

Residents ask difficult questions to keep the executive on their toes, while the

Strategic Plan was developed with residents from scratch.

The role of residents in governance and quality assurance: Phil Adams of Greenfields C.H.

15

The disadvantages include the

longer lead time required for more in-depth

consultation with residents, although this

may be overcome by placing issues in

which decisions may be needed over a short

time scale, such as development, under the

auspices of a committee with specialist

input from board members with the

relevant commercial expertise.

This involvement has developed trust, confidence and respectful relationships

between staff, board and residents. GCH has found that residents want to influence

strategies and policies and to monitor performance information. One of the areas

where residents have had an impact is in relation to the void standard. Residents

wanted voids let to higher standard which has increased the cost of repairs and rent

loss but, as a result, tenants keep their properties in better condition, reducing costs

over the long term.

GCH has a wide programme of activities aimed at generating social value,

including creating job opportunities, running a health and well-being programme and

providing a help line for tenants with financial or emotional problems. The impact of

these activities includes an increase in compliments, employment and customer

satisfaction, along with a reduction in people not in employment, education or training

(NEETs).

Phil highlighted some of the risks arising from a high level of resident

participation in governance, which include getting into too much detail and not to

getting to the strategic level. It is also more time consuming, requiring longer lead

times for decision making than other approaches.

The Board and the CGG had started from a position of mutual distrust but now

a strong consensus had developed between them. Phil ended the conference by

commending the greater involvement of tenants in governance and performance

management.

Chris Mansfield, HRS, who is also a board

member at Greenfields Community Housing

Hargreaves Risk and Strategy 48 Broomfield Avenue London N13 4JN Tel: 0208 8245 0737

John Hargreaves: j.hargreaves@HargreavesRS.co.uk Chris Mansfield: c.mansfield@HargreavesRS.co.uk Sharron Preston s.preston@HargreavesRS.co.uk www.HargreavesRS.co.uk