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Value for Money

Statement 2016/17

2 Radian Value for Money Statement 2016/17

Value for Money (VfM) – Central to our business

Vision 2025In summary, by 2025 Radian will have a broad base of customers, a clear understanding of what customers want, and a focus on efficiency in the way we provide services. This will make Radian the most trusted brand for customers and partners across the south of England. Our Value for Money (VfM) strategy supports every step of this journey. The efficiency savings we make will directly affect our balance sheet, helping us to achieve more with less.

For us, VfM is an important part of our culture and means providing quality services at the best price we can. To do this, we will continue to focus on 3 things:

• First, economy – reducing costs and the level of resources needed.

• Second, efficiency – making the best use of our assets and resources to produce specified standards of service.

• Third, effectiveness – ensuring our services meet our customers’ expectations.

We will achieve the best results by getting all 3 things in balance.

Our journey over the past 6 years is shown by the achievements below:

• Our total cost of housing management (including overheads) per home per year has reduced from £591.04 per home in 2009/10 to £471.81.

• The cash flow that’s vital to our business has improved, with net arrears from social and affordable housing falling from 3.9% of total rent payable in October 2009 to 1.6% in March 2017. In the same period, our loss of revenue from empty homes has dropped from 1.5% to 0.51%.

• Customer satisfaction with our overall service (all rented tenures) achieved our best-ever performance in 2016/17 of 88% (80% in 2009/10). Satisfaction that rent provides value for money rose by 4 percentage points from 83% to 87%.

20.2% reduction in total cost of housing management since 2009/10

2 Radian Value for Money Statement 2016/17 Radian Value for Money Statement 2016/17 3

The 2016/17 budget included planned VfM savings of £4.9m towards the 2020 target of £12m. Here are some examples of our VfM activity in 2016/17:

• A series of changes in the delivery of our housing services resulted in improved income collection and a 14% budget saving, which equated to £2.3m.

• A review of our approach to managing empty homes (known as voids). This reduced cost and void loss and improved overall void turnaround time.

• The transfer of the care and support activities of Radian Support Limited to another organisation. This reduced the financial risks that were affecting our performance.

• A review of our overheads which included restructuring our finance and corporate services.

Our strategic intent During 2015/16 our Board restated our purpose, set out Vision 2025 (our strategic vision), set an ambitious development strategy and devised the next stage of our VfM strategy. VfM will support our drive to be one of the best housing organisations, provide quality services for our customers and to live our values. Given the challenges we face, VfM makes a key contribution to our future.

Our purpose is:

“Empowering people with the homes and services they need to flourish and build great communities.”

Vision 2025

Despite welfare reform and a tougher operating environment, our vision requires us to do the following things:

• Double our homes in management by 2025 and extend our reach to the South West.

• Keep our customer-satisfaction and income-collection ratings in the top quarter of similar housing associations. Do this while reducing our costs and raising our income by using digital service delivery, partnerships and cost sharing.

• Keep staff keen and interested in their work.

• Update and apply our strategy of merging with other housing associations.


Our 2016/17 performance: challenges and achievements

Our main challenges in 2016/17 were:

• The continued effect of welfare reform including Universal Credit and the Benefit Cap; the cap was further reduced in autumn 2016.

• The second year of the Government's 1% rent reduction (over 4 years) came in − this means our annual income is expected to be at least £11.5m lower than we had planned and we haven't been told what will follow this.

• Increased building costs mean our development costs have risen while our income is reduced.

• Cost and availability of land for development − on a UK-wide basis urban development land values had annual growth of 4.4% while greenfield development land values had annual growth of 1.3%.

2016/17 achievements include the following:

• Completing 418 new homes towards our ambitious 2015-18 ‘Smarter’ corporate plan.

• Collecting 101.02% (100.5% in 2015/16) of the total income (rent and other charges) due to us. We collected £117.8m of a total debt of £117.5m − the amount collected includes debt from previous years. This equates to £943,938 additional income against target.

• The 2016/17 budget included planned savings of £4.9m towards the 2020 target of £12m (we exceeded the budget with a surplus of £34.7m instead of the planned budget surplus of £17.7m).

• Receiving ‘Significant assurance’, the highest of 4 categories from KPMG for our December 2016 Value for Money audit (see page 7).

• Further reducing social and affordable rent arrears to 1.6% (target 2.2%) despite welfare reform (2015/16, 1.8%). This equates to £1,179,922 additional income against target.

Our 2010-17 arrears performance is shown in the chart opposite.

Collecting 101.02% of the total income (rent and other charges) due to us


1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

Arrears Linear (Arrears)

Social and affordable rent arrears (net of Housing Benefit)1 Aug 2009 to 31 March 2017

• Digital service improvements – 9,716 customers are now registered for our MyRadian online service portal (target 10,000 by March 2018.) This enables them to pay rent, monitor their account, and report and track repairs. We received about £19.2m of electronically generated payments in the year.

• We have adopted a light touch LEAN methodology to review key services, identify efficiencies and drive improvements. So far, these reviews have identified efficiency savings of £569,000.

• Saving £65,000 per annum by purchasing the freehold interest of our Eastleigh office, Collins House at the beginning of 2017.

• Renting out one floor of our Windsor office, Parkside House in March 2017.

• Improving turnaround time for empty homes, known as ‘voids’ – 21.4 days in 2016/17 (25.8 days in 2015/16). Our performance on rent loss for general needs homes remained strong at 0.51% (0.6% in 2015/16).

Challenges for 2017/18:

• Continue to prepare for accelerating welfare reform − the roll-out of Universal Credit and the proposed Local Housing Allowance cap.

• Achieving Vision 2025’s ambition of starting 560 new homes a year, while reducing costs across the business. This comes against the backdrop of a significant rise in the Building Cost Information Service (BCIS) forecasts for construction costs. Prices are expected to rise by 4.2% in 2017/18, up from 3.1% in November 2016.

• Continuing to provide services that are among the best-in-class despite our reduced income.


Our customers

Feedback from our customers is essential if we are to continually improve our services. Our customers have the best insight into the quality of our homes and services and play a key part in helping us to get more efficient and to improve our services.

In 2016/17, almost 2,500 residents (tenants and owners) took part in the annual STAR survey which helps us to understand our customer experience and how well our services are performing. The 2016/17 satisfaction scores held up very well against both the 2014/15 and the 2015/16 survey scores with some noticeable improvements that include:

• An increase of 2 percentage points in combined tenant and customer satisfaction with the overall landlord service − from 83.5% in 2014/15 to 85.5% in 2016/17.

• A 4 percentage point increase in satisfaction among tenants and shared owners with their rent as value for money – from 82.5% in 2014/15 to 86.6% in 2016/17.

• A four percentage point increase in satisfaction among all residents with how Radian deals with repairs and maintenance, from 70.9% in 2014/15 to 75.4% in 2016/17.

This indicates that Radian continues to improve its overall service to customers, despite a difficult welfare environment for social housing residents and tough economic circumstances for Registered Providers such as Radian. This research is done independently and in 2016/17 was accurate to +/- 1.8%, giving strong assurance that it represents our residents’ views.

In 2016/17 our Customer Relations Team received 347 complaints and 795 compliments (2015/16 - complaints 427, compliments 661). We have used the lessons learnt from complaints to improve the experience of our customers.

An increase of 2 percentage points in combined tenant and customer satisfaction

with the overall landlord service - up to 85.5% in 2016/17.


Internal Audit assurance

Our Board commissions an annual programmed audit to get assurance on our approach and to highlight areas for improvement. During 2016/17, 2 audits related to Value for Money (VfM).

First, a comprehensive (VfM) review was carried out by KPMG in December 2016. This took place against a well established VfM maturity framework which assessed us against VFM regulatory standard and good practice from elsewhere in the sector. It looks at culture & leadership, strategies, Scrutiny, benchmarking, and return on assets. It resulted in no recommendations and the strongest level of assurance: ‘Significant Assurance’. The audit showed we have strong performance against our peers (other registered housing providers) for key VfM cost and quality measures, such as planned repairs, the level of rent arrears, and several tenant satisfaction measures. The report concluded that the Board has a good understanding of VfM and they have challenged us to further improve our understanding of costs through a zero-based budgeting exercise in which all expenses must be justified before being approved for each new period. We received an excellent rating for our VfM strategy, which had set 6 VfM objectives for 2016/17. The Group’s approach to achieving better VfM includes actions on reducing costs, maximising income, growing the size of the business and doing things differently, such as using digital technology to improve services and processes.

A second audit on performance data and monitoring resulted in 6 recommendations (5 low and 1 medium level) and the second highest level of assurance: ‘Significant assurance with minor improvement opportunities’. The review did not identify significant concerns about the accuracy of our performance data reported to Executive or Group Combined Board (GCB). Recommendations included automating processes to remove the risk of error due to manual entry. We have already automated our housing Key Performance Indicator (KPI) process and are working towards a KPI store that will allow further automation of other KPI reports.

A Value for Money review was carried out by KPMG in December 2016.


Properties we manage or invest in

The table below shows the number of homes and other properties we managed or invested in at 31 March 2017:

Properties in management 2016/17

Social rent general needs housing – let at social rent (about 65% of market rent)

12,551

Affordable rent general needs housing – let at affordable rent (80% of market value)

1,745

Supported housing and housing for older people – let at social rent (about 65% of market rent)

1,537

Affordable home ownership 1,733

Care homes 33

Other social housing – (let at 80% of market rent) 1,210

Social leased housing 1,087

Non-social leased housing 19

Market rent housing 257

Properties managed for others 641

Total housing properties in management 20,813

Non housing properties in management 2,136

Total properties in management 22,949

HomeBuy loans 1,284

Total properties managed or invested 24,233

Properties under construction 1,090

* Data only includes homes in management that are tenanted at 31 March 2017 so does not include all homes developed during 2016/17.


The value of our assets

At 31 March 2016, we owned 17,043 general needs, older person and intermediate homes. The table below shows the number of properties owned by each of our 4 landlords within Radian Group. Also shown is the 2016/17 ‘total market value with vacant possession’ for all properties and the ‘average property market value with vacant possession’. Market value with vacant possession is the amount for which we could sell an unoccupied property on the open market. Our 2016/17 total market value with vacant possession for all these 17,043 properties was £3.8 billion.

Number of properties

Total market value with vacant

possession

Average market value with vacant

possession

DRUM

Affordable general needs housing 505 110,181,500 218,181

Other social housing 252 47,873,500 189,974

Social rent general needs housing 3,827 890,607,000 232,717

Supported housing and housing for older people 638 93,389,500 146,379

PORT

AL

Affordable general needs housing 174 £33,010,500 189,716

Other social housing 319 £70,756,000 221,806



SWAY

THLI

NG





WIN

DSOR





GRAND TOTAL 17,043 3,802,134,500 223,091

Note: we acquired a significant proportion of stock in our Thames and Rother areas through stock transfer agreements, which limit what we can do with them.


Remaining resilient

Under the Government’s rent reduction policy announced in July 2015, we were required to reduce the majority of our rents by 1% in each of the next 4 years. In October 2015, as required by our regulator the Homes and Communities Agency, the Board reviewed our Long Term Forecast and Business Plan. To lessen the impact of our reduced income resulting from the rent reduction we have identified cost savings of £12m to be achieved by 2019/20, which is the last year of the rent reduction. As a result our projections show we will continue to improve our operating margins throughout the period of the rent reduction.

Despite this year’s 1% rent cut Radian has continued to perform well to improve its turnover and surplus from continuing operations, allowing us to increase both investment in new homes and our number of homes in management. We remain committed to providing value for money and have secured additional funding of £99.8m from the Affordable Housing Guarantee Scheme to support our development plans.

We stress test the Business Plan to assess the financial impact of the following major risks to Radian:

• Further rent reductions using a number of scenarios to test our sensitivity to them.

• Increased voids and arrears arising from welfare reform.

• Increases in inflation and interest rates.

We have identified cost savings of £12m to be achieved by 2019/20.


To complement our own scenario testing, our treasury advisors applied their own extreme scenarios. These are designed to be ‘perfect storms’ that would hit us hard, such as high interest rates coupled with low inflation. They found that our Business Plan stood up well to these extreme scenarios, when compared to our peers. Analysis of the stress testing scenarios shows the biggest threats to our Business Plan come from:

• Highly inflated costs.

• Long-term deflationary environments (recession scenario).

In the high-costs scenario, the impact of increased costs and decreased revenue would cause our debt and negative surpluses to grow over the long term. This would affect the business's longer-term potential. In the recession scenario, the negative rental growth and stable costs would result in a surplus continuing on a donward trend from the medium term onwards.

Another scenario we have to test against, the development problems scenario, is more of a threat to the business in the short term. It causes a fall in the yield of developments by increasing the development costs and reducing surplus through reduced sales. Similarly, a high-interest, low-inflation scenario is a threat during the short and medium term. It would cause a negative surplus from 2020 to 2023 but would not have a lasting impact.

The purpose of this analysis is to put the plan under extreme stress to highlight significant business and financial risks and key scenarios that would ultimately 'break' the business. The scenarios assume that management does nothing to address the worsening conditions. Yet, in reality Radian would expect to tackle these with such strategies as delaying repairs and maintenance work, cost cutting and tighter rent collection.

In the most severe circumstances we would counter any worsening of our position by reducing our costs further, running down development and selling some Group properties to improve our financial performance.

Our Business Plan stood up to extreme stress testing scenarios.


As reported in 2015/16, a strategic review of Radian Support in 2015 found that downward pressure on the service costs we needed to pay to sustain our business was inconsistent with the quality of service we aimed to provide.

As a result, in April 2016 the Group started to withdraw from providing care and support services and we successfully transferred them to another care provider by the end of September 2016. Radian Support Limited is being wound up.

An overview of the financial performance in our Business Plan is as follows:

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Our Business Plan shows strong financial performance after factoring in the reduction in social rents over the 4-year period.

We have modelled a development programme until 2022/23. When the programme is complete, our business will hold a higher cash surplus than now. We expect to continue development beyond this date, borrowing against our assets to increase the number of homes we build.

Our performance in these areas is monitored by ratings agency Moody’s, who in 2016/17 gave us an A2 rating with a negative outlook. On 26 September 2017, following their recent downgrade of the United Kingdom’s government bond rating, Moody’s downgraded the credit ratings of 55 organisations (including 40 housing associations), by one notch. As a result, our credit rating has moved from A2 negative to A3 stable.

The Homes & Communities Agency in 2016/17 judged us as G1/V1, the highest possible rating.

To ensure long-term funding for our plans and reduce refinancing risk, we sold £25m of deferred bond funding in 2016/17, at a premium. We deferred £18.75m of this sale over the next 3 years. This brings the total raised to £305m, of which £131.25m is deferred as at March 2017. We think the deferred structure will reduce our net interest cost by £2.0m in the 6 years to 2019/20. The cost saving in 2015/16 was £0.95m (2014/15: £0.6m).

Homes & Communities Agency in 2016/17 judged us as G1/V1, the

highest possible rating.


Building new homes

We build new homes to meet local need, for affordable rent, shared ownership, rent to buy, market rent and market sale. As well as studying development schemes for financial viability, we look at their suitability for our client markets, long-term maintenance costs and social value. The affordability and effect of all our developments are examined by the Executive Development Panel and where required, by the Group Combined Board.

2016/17 saw us develop a total of 418 homes, 310 of which were for social and affordable rent. We disposed of 97 homes as part of our active asset management approach.

The objective of our Development Strategy 2016-21 is to deliver an average of 560 new homes a year in that 5-year period. This will be a mixed tenure programme including Affordable Rent, Shared Ownership, Rent to Buy, Starter Homes, Help to Buy, Market Rent and market sale, supported by a range of other products.

We will use income from sales, grant funding and our retained reserves, combined with a strategy to reduce build costs. We will achieve this through innovative partnership working and by developing more schemes on land we have acquired ourselves as outlined in our Vision 2025. This includes growing our in-house construction service Radian Build to deliver 150 homes a year by 2021. During the year Radian Build delivered 29 homes.

2016/17 saw us develop a total of 418 homes, 310 of which were for social

and affordable rent.

Our target is to develop an average of 560 new homes each year

between 2016-21.


New homes across our 4 Area Panels

Affordable Rent*

Social Rent

Shared Ownership

Rent to Buy

Open market

saleTotal

AVON

Wiltshire 79 2 15 96

New Forest 5 5 3 13

Christchurch 8 6 14

ROTHER

Chichester 20 1 10 31

East Hampshire 63 22 8 93

Hart 2 2

Havant 18 16 34

SOLENT

Eastleigh 5 5

Fareham 24 4 6 34

Gosport 5 5

Southampton 33 9 19 61

Test Valley 8 4 13 25

Winchester 3 3

THAMES

Windsor & Maidenhead

2 2

TOTAL 265 11 96 38 8 418

* Note: Affordable Rent is set at 80% of market rent

Location and tenure of our 418 new homes completed in 2016/17:


How do our costs compare to others?

The national pictureEach year the HCA (Homes and Communities Agency) reviews the Global Accounts of private registered providers who manage or own 1,000 or more homes to track the cost performance of Registered Providers, excluding any income collected, against the sector median. This value shows the mid-point of a dataset and gives an idea of a "typical" value. The 2016 review shows that the social housing sector had a solid year of investment underpinned by strong in-year financial performance.

Radian’s headline social housing cost per unit in 2015/16 was £3,880 against a sector median of £3,550 and a top quartile of £4,430. The top quartile performance shows that we were ranked in the top quarter of our peer group. To ensure that our cost base remains appropriate in light of unprecedented welfare reform, the Group Combined Board carried out a VfM zero based budget review during the year.

This process identified £12m of cost savings and improved performance in the period to 2020 against our 2015/16 budget as a baseline (above our VfM target strategy’s minimum of £7.5m saving by 2020). Each department will contribute by reducing overheads and service costs and by creating efficiencies through greater collaboration and innovation.

This VfM review has helped us reduce costs whilst maintaining high-quality services. The table below shows the total cost of management for the Radian Group in 2015/16 compared to that of our peers. We have also included our cost per unit (CPU) for 2016/17, but we will not have a comparison against our peers for this period until December 2017.

CPU (£k’s) 2015/16

Headline Social

Housing Management

Service Charge

MaintenanceMajor

RepairsOther

Radian Group Limited 3.88 1.14 0.35 0.94 0.97 0.48

Sector Level Data

Upper Quartile 4.40 1.24 0.58 1.18 1.10 0.51

Median 3.55 1.02 0.37 0.98 0.81 0.26

Lower Quartile 3.119 0.78 0.24 0.82 0.57 0.12

Radian 2016/17 3.07 0.96 0.28 0.79 0.77 0.27

Note: Data from annual Global Accounts review


Our peer groupWe compare the cost and quality of our services with other housing providers through the HouseMark organisation. HouseMark doesn’t only compare cost; it also compares how satisfied customers are. For 2016/17 we chose to continue comparing our services against those of organisations with over 7,500 homes in London, the south east and south west. We have the tenth-largest stock size in our peer group of 22 organisations. In 2016/17, the group members include A2 Dominion, Optivo, Aster, Catalyst, Curo, DCH, East Thames, Family Mosaic, Vivid, Guinness Partnership, Hanover, Merlin, Network, Notting Hill, Paradigm, Peabody, Plymouth Community, Sentinel, Southern, Spectrum, Town and Country, and Yarlington.

We monitor the total cost per property of our housing-management, estate, major-works and day-to-day repairs services (salaries, overheads, contractor payments etc.) as well as the cost of central overheads per employee (e.g. personnel and IT). We also monitor the direct cost of housing management (e.g. salaries and other employee costs). Tracking the total cost per property provides a more meaningful comparison against organisations with different management structures. Our VfM target is to work towards the top (best-performing) quarter for both the cost of management and quality of service in our HouseMark peer group. A summary of our housing management cost and quality since 2009/10 is as follows:

Year

Total cost of housing

management per property

Housemark position

Satisfaction with overall

landlord service*

Housemark position

Key markers

2009/10 £591.04 29/31 80% 15/31 Developed new housing management and resident engagement approach

2010/11 £483.81 14/32 86% 7/32 Launch of new housing management approach

2011/12 £376.44 1/32 86% 5/32 VfM 2011-13 strategy achieved £4.61m dividend

2012/13 £421.35 8/31 87% 7/20 Investment in Welfare Reform preparation

2013/14 £427.33 5/31 87% 5/19 Launch of 2013-16 VfM Strategy

2014/15 £439.68 5/31 87% 5/31

2015/16 £475.66 8/26 87% 5/26 Launch of 2016-20 VfM Strategy

2016/17 £471.81 9/23 88% 5/17

Radian’s headline social housing cost per unit in 2015/16 was £3,880 against a sector

median of £3,550 and a top quartile of £4,430.

*Independent survey, which is highly accurate (2016/17 +/- 1.8% at 95% confidence level) including general needs and housing for older people’s tenures.

A detailed breakdown of our costs over the last 3 financial years (compared to organisations with 7,500+ homes in London, the South East and South West) is below:

Service costs for our social & affordable

rented homes

How we did in

2016/17 (£)

Our position

compared to our peers

Upper quarter starting point -

top 25% (£)

Median - middle of results in

group (£)

How we did in

2015/16 (£)

Our position


How we did in

2014/15 (£)

Our position


Housing Management

Total housing management costs

471.81 9/23 447.89 495.34 475.66 8/26 439.68 5/31

Direct housing management costs including:

300.17 13/23 285.19 197.7 310.86 15/26 286.66 9/31

• Tenancy management

97.06 14/23 68.77 89.71 92.18 1/23 87.29 10/29

• Lettings 37.03 9/23 35.96 41.83 38.85 7/23 35.40 7/29

• Resident involvement

29.07 10/23 23.58 32.68 33.79 10/23 31.89 7/29

• Anti-social behaviour

50.5 16/23 34.48 44.73 58.04 20/23 52.29 19/29

• Rent advice / collection

86.52 13/23 77.19 86.20 87.98 14/23 79.79 15/29

Estate Services

Total cost per property

162.19 7/23 156.28 197.96 158.83 9/26 160.27 9/31

Repairs

Major works & cyclical maintenance

1,339.42 8/23 1321.25 1476.03 1,143.56 6/26 1,379.92 15/31

Responsive repairs & empty homes (voids)

812.13 7/23 793.03 886.37 866.75 13/26 887.88 17/31

Overheads (attributed to Housing Management)

Central costs per direct employee

7,986.45 8/23 7,673.02 9,614.86 6,734.64 4/26 7,024.78 6/31

Total Overheads

Overheads attributed to Housing Management

12,506,414 11/23 7,933,955 12,650,956 15,632,257 16/26 15,667,345 23/33

Adjusted turnover overheads cost (%)

8.39% 3/23 9.12% 10.17% 10.68% 15/26 10.99% 18/33

* Data from HouseMark at 6 September 2017. At this time only 2 of 22 peers had completed HouseMark’s verification process. Of the remaining 20, HouseMark has applied 2.0% to 2015/16 costs (CPI). Costs for many of these organisations may exceed this, potentially improving Radian’s ranking and reducing the top quarter’s performance. The final ranking will be posted on our website in January 2018.

Radian Value for Money Statement 2016/17 19

2016/17 outcomes in response to 2015/16 performance: How do our costs compare to others?

Housing management costs and overheadsOur 2015/16 VfM statement showed that overheads (£15.6m) had continued to be a significant chunk of our operating costs (10.68% of adjusted turnover) and needed to be reduced. Various activities such as housing management budget savings and improved income collection have contributed to a reduction in overhead costs to £12.5m (8.39% of adjusted turnover) as at the end of 2016/17.

Voids (empty homes)In our 2015/16 VfM statement we pledged to redouble our efforts to protect our income in the face of increasing welfare reform changes. We have further reduced our combined void turnaround time in 2016/17 to 21.4 days (25.8 days in 15/16.) We aim to reduce this further and have done a LEAN review which identified efficiency savings of £152,800 a year. These improvements aim to reduce the time we spend getting a property ready to re-let and are currently being implemented. We will provide an update on how this affected our performance in next year’s VfM statement.

We have further reduced our combined void turn-around time in 2016/17 to

21.4 days (25.8 days in 15/16.)


The table below gives an overview of our 2016/17 performance. The 2016/17 top quartile figures were from HouseMark as at 21 August 2017.

Our performance

Our measurement Outcome 2016/17

Board target

2016/17

Housemark upper

quarter 2016/17

****

Our outcome 2015/16

2016/17 v

2015/16 outcome

Social and affordable tenancies only net current arrears (as a % of annualised debt)

1.60% 2.2% 2.70% 1.74%

All net current tenant arrears (as a % of annualised debt)

1.50% 2.50% n/a 1.80%

General needs, intermediates and homes for older people (% rent loss due to properties being empty)

0.52% 0.80% 0.47% 0.64%

Combined void turnaround (time properties empty)**

21.4 days 25.0 days n/a 25.8 days

% of calls answered 93.00% 93.00% 93.90% 92.40%

Quality of Radian Direct service 96.30% 94.00% n/a 94.60%

Satisfaction with repairs*** 97.90% 95.00% n/a 98.00%

Repairs completed 'right first time' (at first visit)***

94.70% 94.0% n/a 95.00%

Overall satisfaction with our ASB service

82.60% 80.00% n/a 84.30%

Satisfaction with complaint handling

75.60% 71.00% 71.65% 79.60%

Satisfaction with complaint outcome

72.80% 70.00% 71.80% 79.20%

% of homes with gas certificate (at month end)

100.00% 100.00% 100.00% 100.00%

*Includes sheltered, supported, general needs, market rent, intermediate rent, shared ownership, leasehold debt and other charges such as sewerage and mobile home pitch fees. **Includes social rent, housing for older people, supported combined and affordable rents.***Satisfaction data is from our in-house survey.****At the time of publication 2 of 22 peers (with 7,500 or more homes in London, the South East and South West) had completed HouseMark’s verification process so this data is subject to change.


Active asset management

In general, there is high demand for our assets which are in good condition and perform well both on financial return and social benefit. Our relatively compact geographical spread balances the efficiency benefits of concentration with the risks of over concentration. We focus on consolidating stock through development to meet demand in our existing geographical areas.

In our asset management programme, we consider our stock and identify properties that are unrestricted by planning conditions, stock transfer covenants and other restrictions. This has shown how our contribution from low-performing assets might be improved through changing use or tenure, or disposal when the properties next become empty.

Our review has targeted properties that are more expensive to manage than the norm. These include older, non-standard properties that have underlying problems with repairs (such as recurring damp) and properties that are expensive to heat and hard to insulate. Other such properties identified in our review are properties outside our core geographical area, single flats in blocks managed by others and legacy properties that we inherited as a result of our merger.

Encouragingly, overall void loss for our stock improved during the year to 0.51% (2016: 0.64%) which is well within the top quartile of our peers (0.6%). Our review this year focused on 527 tenancies across 112 schemes that had been re-let in less than a 3-year period. We wanted to know whether there were any block, estate or asset management factors leading to the changes in tenancy.

The review identified 14 schemes where 10 or more tenancies displayed these factors and led us to refocus our asset and housing management approach. One such outcome is our decision to modernise Halliday Crescent in Portsmouth before letting it at a market rent.

Overall void loss for our stock improved to 0.51% which is well within

the top quartile of our peers (0.6%).


We hold detailed stock condition data and constantly update it by:

• doing physical surveys with a dedicated surveyor

• regularly importing data from our repairs system to update information about fixtures and fittings

• collecting new data when homes are empty, during visits and inspections

• updating stock information after planned works

We use the data to inform our 30-year business plan and refresh the plan annually. We also use the data to inform our planned and cyclical works programmes for the coming 5 years. This means that for each individual property we can identify what work needs doing and when. As part of our asset management strategy we ensure we only allocate funds where appropriate. When we prepare our planned works programmes we do work validations to ensure we allocate funds where needed. We also employ a stock condition surveyor who collects stock data for us. This ensures we spend our money wisely.

We also review our stock’s investment performance, identifying which homes are free from planning conditions, stock-transfer covenants and other limitations. This helps us identify where we could improve the performance of low-performing assets by changing their use or tenure or selling them when they next become empty. Reviewing the gap between the open-market value of homes when they are vacant and their tenanted value influences our judgement about their future use.

In 2015/16 we did an analysis of properties we could consider for disposal if they became vacant. The properties were flagged in our system so that when they became void they would undergo further analysis for things like current condition, return on investment and future investment needed. During 2016/17 we sold 8 properties on the open market. After fees and associated costs, we generated £1.3m from these sales. We recycled any associated grant for these properties. The sales receipts will continue to support our strategic objective of providing more homes through a combination of new development, modernisation and refurbishment projects. We also reviewed Jordan Court, a block of 13 flats in Portsmouth. We agreed to keep these properties and we are now refurbishing them.

We use stock condition data to inform our 30-year business plan and refresh

the plan annually.


Poorly performing propertiesTo ensure we manage our assets well, we routinely analyse our asset data to identify poorly performing properties and understand the reasons for poor performance. We report these internally to the Housing and Asset Review Team (HART), who monitor and review them monthly.

Properties we class as poor performers are in 3 categories:

• Difficult to let – over 90-day waits.

• High turnover – average length of tenancy less than 3 years.

• High repairs – repairs per home exceed £3,000 or empty-home costs of over £7,500 in 3 years.

This year we investigated 118 properties across 19 schemes containing a difficult-to-let home. We focused on properties that have been empty for 10 weeks or more, and have seen a 27% reduction in these compared with 2015/16. If properties have been difficult to let, we have reviewed the reasons why and completed options appraisals to decide how we will manage the property in the future. This ensures the best use of our assets.

During 2016/17 we investigated all schemes that had an average repair cost per property of over £1,000 (average based on previous 3 years of repairs). There were 137 properties across 56 schemes that fell into this category. After reviewing them, we decided that 45 schemes (121 properties) were okay, leaving 14 schemes (16 properties) that Radian Services are investigating.

We also investigated all schemes that had an average void repair cost of over £2,500 per tenancy year. There were 78 properties across 28 schemes that fell into this category. After reviewing them, we decided that 24 schemes (69 properties) were okay, leaving 5 schemes (9 properties) that Radian Services are investigating.

Our regular review of our assets ensures we continue to provide high-quality affordable homes. This is shown by our continued reduction in void loss from empty properties, and the reduction in re-let times.


Group-wide return on investment

We operate in an area of high demand for social and affordable housing and maintain our homes well. We ensure we operate at a surplus and protect the value of our social housing assets. This enables us to meet our corporate and social goals and safeguard the value of our assets for future generations.

We measure our return on assets in 3 ways:

• The financial return on our own interest in homes after the deduction of government grant. This return, which is shown below, has averaged 6.8% over the last 3 years. This reflects a mix of higher return from our older homes and the lower returns for the homes we have acquired more recently.

• The financial return after interest on our own investment in homes, after deducting grant and loans. This measure takes into account that a large proportion of our investment has been borrowed from lenders. Our investment is the reserves we have built over the years by keeping our surpluses. Our return will fall as interest rates rise and our borrowing costs increase.

• The financial return on the combined interest in homes by us and our grant-providing stakeholders. This return includes the benefit to the community of sub-market rents, which is helped by the grant we received. We estimate the discount on market rents to be between 20% for homes let at affordable rent and 35% for homes let at social rents.

Measuring our return on assets

Measure 3 year average

2017Restated

2016Restated

2015

1 - Return on Radian's investment 6.8%% 8.6% 6.7% 5.2%

2 - Return on Radian's investment net of debt 11.6% 16.8% 12.0% 5.8%

3 - Return of combined investment of Radian and Government

13.8% 17.7% 15.3% 9.8%


Return on investment by tenureThe following table shows how returns – using Radian’s return on investment measure 1 above – vary by tenure type. Higher returns on general needs, leased and affordable rent properties, housing for older people and care homes reflect the high proportion of property acquired by transfer from local authorities, at low capital cost and with significant grant funding.

2017 Number of properties

Social housing

operating surplus £'000

Return on Radian's investment in homes

(measure 1)

2017 2016

General needs, leased affordable rent housing, housing for older people and care homes

15,866 49,772 11.5% 7.2%

Affordable home ownership 1,733 2,605 3.6% 1.5%

Other social housing 1,210 2,086 2.1% 3.3%

Social leased housing 1,087 1,874 100% 100%

Total 19,896 56,336

2017 Number of properties

Social housing

operating surplus £'000

Return on Radian's investment in homes

(measure 1)

2017 2016

Swaythling 7,051 21,463 7.2% 6.2%

Windsor 4,294 11,778 10.4% 8.4%

Portal 2,820 7,839 2.7% 2.6%

Drum 5,731 14,694 7.8% 6.5%

Total 19,896 55,774

Return on investment by landlordThe following table shows how returns using measure 1 vary by entity. Returns reflect different core geographical-area concentration. Portal has acquired the majority of its properties at market value more recently, which results in a lower return on investment. Our Group's social housing operating surplus is not the same as the total of the individual entities’ social housing operating surpluses because of the consolidation adjustments we've made.


Social value: doing more with less

We are a social business and our success cannot be measured only by our financial efficiency. We have set most of our rents at social-rent level to house people in need who are on low incomes. Strong financial performance enables us to invest in services and borrow money to build more homes. We also aim to provide a social and environmental return in the form of wider benefits for communities.

This approach has a long tradition in Radian. To help maintain it, our 2025 Vision includes high modern standards of service, while reducing our costs and continuing to protect our income. We also provide services that meet the regulator’s detailed requirements. And the way we invest will sustain communities and avoid the need for costly interventions in the longer term.

Our priorities are to:

• Fulfil the regulator’s requirements in relation to our obligations to the community, including the involvement of our service users.

• Target employment and training at hard-to-reach customers who are most at risk from welfare reform.

• Focus our community investment resources on activities that will sustain our revenue stream and minimise our long-term management costs.

Since 2010, our 4 Area Panels of residents and independent members have worked hard to improve services across our regions. In 2016 a review took place and in consultation with panel members, it was agreed to merge the panels. Now called the Residents’ Panel, this single panel has studied customer feedback, analysed satisfaction results and looked at ‘community make up’ to develop local priorities. The result of the review has meant that by the end of 2016/17 we had saved £30,618 due to savings from fewer meetings being held, staff time and other associated costs. Compared to the combined 2015/16 Area Panels budget of £180,200, the 2017/18 Residents’ Panel budget is now £106,300, making a total saving of about £73,900 after the review.

Merging our 4 resident Area Panels has resulted in a total saving of

about £73,900.


Our Communities and Involvement (CI) team actively works with partners so we can share resources and secure funding to deliver our community investment programme. In 2016/17 we secured over £165,000 of partnership and in-kind funding.

For example, the Round About Café was awarded £22,764 to recruit a job coach to help residents in the Southampton area. Using the café as an established base, the coach is supporting people to become employed including raising their confidence in job searching and applying for jobs.

We also deliver initiatives to reduce housing management costs. For example, fly-tipping costs Radian thousands a year. In one neighbourhood alone the figure has been £7,000. The CI team has been working with grounds maintenance and neighbourhood teams to look at initiatives to reduce the impact (and associated costs) of fly-tipping. A recycling project in Mansbridge has shown a 42% reduction in the cost of tackling fly-tipping in the local area. Recently, during and after the Great British Clean Up week the CI team organised 7 events working with other teams, residents and local organisations. In Longwood Park’s ward alone, over 50 bags of litter were collected along with 3.75 tonnes of household waste, of which 75% has been recycled.

In 2016/17 we secured over £165,000 of partnership and in-kind funding.


In 2016/17 Radian responded to the pressure imposed by the rapidly changing political and financial environment by adopting a new rolling strategic plan. This plan focuses on transforming our business so we can do more with less. We have adopted a new Board structure that is designed to be more agile, enabling quicker business decision making. The Board has reduced from 14 to 10 members, and the number of supporting committees from 5 to 3. More responsibility for operational decision making is now delegated to the Executive. Our goal is to reduce bureaucracy, be more commercial and be a lot clearer in how we use information while communicating well up and down through the organisation.

Our strategic plan focuses on 5 key areas: Grow and diversify, Transform new home delivery, Transform customer service, Transform productivity, and Transform our people.

In response to the 'Smarter' corporate plan objective to 'establish process improvement as a core business capability' the Executive Team adopted a light touch LEAN approach to improving Radian's processes. In 2016/17 we did several light touch LEAN reviews of our processes, looking at Mutual Exchanges, Allocations, out-of-hours work and voids. Efficiency savings of £569,000 were identified and 'task and finish' groups are busy working towards making the savings a reality. Here are some of the efficiencies we are bringing in:

• Centralised allocations and lettings team, saving £97,000 a year.

• Digitalising the mutual exchange process, saving over £52,000 a year in officer time

Getting better at what we do

Our new rolling strategic plan focuses on transforming the business so we

can do more with less.


Our current reviews are looking at our recharges process and our former tenant arrears collection process. We know that we do not recover enough of these charges and our reviews have identified ways we can improve on this, thus increasing income collection by effective recovery of these debts.

To help support our core purpose and maximise income, we have reviewed our for-profit activities.

This year we have reviewed our management company schemes budgets and identified a number of opportunities to improve our income collection.

For example, we have identified costs worth £58,219 that are eligible to be collected from residents as part of their tenancy agreement that we had not collected.

The next step is to work with our development team and external developers to provide in-house management agent services in key areas. Providing these services directly rather than through an external agent will create a saving for both our residents and Radian.

We have identified costs of £58,219 that are eligible to be collected from

residents that were not being recovered.


Welfare reform

Changes to welfare benefits affect the affordability of all social housing for both existing and prospective tenants.

Throughout this period of unprecedented change, our financial performance has remained strong, with rent arrears continuing to remain below our internal target, and within the upper quartile when compared with our peers.

In autumn 2016, the Welfare Reform and Work Act 2015 further reduced benefit entitlement for families on out of work benefits. The maximum entitlement in a year is now £20,000 for couples and lone parents, and £13,400 for single claimants.

For claimants who receive more than the benefit cap allows, their Housing Benefit or Universal Credit is reduced to bring them within the cap. Alongside this, as of April 2016 the government has frozen working-age benefits, including tax credits and Local Housing Allowances, for 4 years from 2016-17 to 2019-20.

We have invested significantly in preparing for welfare reform and continue to do so as we manage the arrival of Universal Credit. We have modelled our rents in each of our local authority areas to assess how affordable they are for those affected by the benefit cap.

This has informed our development strategy to ensure we build affordable homes. We have also identified which of our tenants will be affected by future reforms, such as the introduction of rents that will be capped at Local Housing Allowance rates in 2017/18. We are working with them to help them prepare for any shortfall they may face between benefit entitlement and rent.

This information is shared with our Board and informs them of any risk we may face if tenants cannot pay their rent.

We have invested significantly in our preparation for Welfare Reform and continue to do so as we manage the

arrival of Universal Credit.


We have invested in an enhanced Tenancy Sustainment team and full time Universal Credit Officer to ensure our tenants receive the help they need to sustain their tenancies.

In previous years, we have focused on preparing tenants for Universal Credit; we have now shifted that focus to tenants who are new recipients of Universal Credit and may need help with budgeting and money management.

During 2016/17 our team of Welfare Benefit Officers dealt with 2,626 cases. In total they helped our tenants access £3.3m of additional benefits.

During 2016/17 our team of Welfare Benefit Officers dealt with 2,626 cases

and helped our tenants access £3.3m of additional benefits.


Health and Safety

Following the devastating fire at Grenfell Tower in London, we have been busy assessing our high-rise buildings using guidance from the Department for Communities and Local Government (DCLG).

We own and manage 7 buildings that are over the 18-metre threshold, which meant they required additional safety checks. We can confirm that none use the cladding installed at Grenfell.

All blocks have been subject to updated fire-risk assessments and inspections by the fire service. No major issues have arisen following the inspections.

To be thorough we also reviewed our 5-story blocks. One block was found to have partial Aluminium Composite Material (ACM) cladding so, to be prudent, we sent a sample to the Building Research Establishment. Following testing, DCLG told us the sample had failed the fire-resistance check so an assessment of the block was done by Radian, Hampshire Fire & Rescue Service and Southampton City Council. The result was that the property was deemed safe for residents to remain and the Fire Service said it was a well-managed block. Minor repairs were identified and will be tackled.

We implemented a resident communication and engagement plan which ensured residents had access to staff during evenings and weekends to answer queries and provide assurance. This is continuing and has been well received.

Our fire-management procedures have been reviewed and we continue to work in close partnership with the Royal Berkshire Fire & Rescue Services, with which we have a Primary Authority Agreement. Given the heightened awareness of the risks, local fire services have also been doing unannounced, or short-notice inspections that assess building-management process and compliance documents. 8 blocks have so far been inspected. No enforcement action has been taken or concerns expressed about our fire-safety management.

We implemented a resident communication and engagement plan

which ensured residents had access to staff during evenings and weekends to answer queries and provide assurance.

Radian Value for Money Statement 2016/17 33

Our future plans

As part of our VfM programme, we will continue to identify savings that will add up to £12m by 2020 while maintaining out total cost per unit at the median of the Homes and Community Agency's global accounts and the quality of service to our customers.

To achieve this, we are working with a digital consultant to transform our services and processes to make sure we fully use the digital solutions available to us. We have identified quick wins that will make our services more accessible to residents, and improve the efficiency of their contacts with us, such as further enhancing our self-service options for customers. These will free up time for our customer services team to deal with more complex queries.

We are developing a contact strategy that will enable us to explore new technology to help with this.

To do this successfully, we need to understand our customers’ needs and wants, so we are starting a project to segment our customers into defined groups. We can use this to inform our service design in the future. This will ensure that the services we offer are current, and relevant to our diverse customer groups.

For key processes we will apply our light touch LEAN methodology to ensure we remove bureaucracy and unessential activities. This will reduce costs and further improve customer satisfaction. These reviews are key to reviewing our current systems and identifying where digital improvements can be made. We are continually investing in the development of our Customer Relationship Management (CRM) system, which will speed up our processes and free up officer time. As part of our VfM programme, we

will continue to identify savings that cumulatively total £12m by 2020.



More information

Financial efficiency Adding social value

Radian’s financial statementsOur financial performance including an operational and financial review.

Our Impact 2016/17A review of the impact of the Community Investment team during 2016/17

Value for Money strategy 2016-20Our approach towards delivering cost and quality improvement.

Benchmarking dataHouseMark ‘On the Ball’ benchmarking report for Radian 2015/16 (produced on 30.9.2016)

Latest performance dataScrutinised by Radian Scrutiny Group.

Radian annual reportsOur Residents' Annual Report. Supporting websites

Procurement strategy 2015-18Achieving Value for Money from purchasing.

Round About Café websitewww.roundaboutcafe.org

Asset management strategy 2016-19Ensuring our assets are maintained to an agreed standard and perform well financially

HouseMark’s websitewww.housemarkbusinessintelligence.co.uk



Radian is a trading name of The Swaythling Housing Society Limited, a Registered Society under the Co-operative and Community Benefit Societies Act 2014 (registration number 10237R) and a registered provider with the Homes and Communities Agency (registration number L0689). Registered office: Collins House, Bishopstoke Road, Eastleigh, Hampshire SO50 6AD.

Authorised and regulated by the Financial Conduct Authority. Part of the Radian group of companies.

Contact usRadian Collins House Bishopstoke Road Eastleigh Hampshire SO50 6AD

T: 0300 123 1 567

E: [email protected]

www.radian.co.uk/vfm

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