ANNEX B. Housing Asset Management Strategy

Transcription

1 ANNEX B Housing Asset Management Strategy

2 HOUSING ASSET MANAGEMENT STRATEGY Contents Page Introduction 3 Executive Summary 4 Section 1 A New Priority and Areas / Issues for Section 2 Resources Section 3 Principles, Data, Delivery: An Asset Management Framework Section 4 Repair, Replace, Renew: Prioritising Resources and Making Investment Decisions Section 5 Detailed Issues and Areas that Need Investment and Sustainability Reviews

3 INTRODUCTION 1. Milton Keynes Council needs 405 million of capital investment over the next thirty years to maintain its housing assets. The stock needs significant investment and / or replacement in the short to medium term because of its original build profile and low historic resources. 2. The Council defines housing asset management as investing in, maintaining and renewing the houses and flats that it owns to meet housing need. 3. It recognises that it will have to make difficult decisions that affect communities and individual households to ensure a housing stock that meets housing needs is sustained. 4. In some cases, the housing stock is at the end of its useful life and/or is hard to heat / insulate, creating a further cost in the region of 60 million. The Council aspires to building new homes to replace these poor quality assets, where they can t be economically improved and maintained and to change the supply to meet housing need more effectively. 5. This new strategy coincides with the Government s move to self-financing for Council housing in April 2012 under the Localism Act. Housing asset management is a necessary element of the Council s business planning for its housing landlord service. 6. The strategy is a high-level document based on robust stock condition information that identifies priority issues for investment and asset types that may require more than simple improvement. 7. The Council will implement the strategy for the benefit of all current and future tenants of Milton Keynes Council and with a local focus to ensure it listens to communities. The Council agreed an Accommodation Quality Standard in 2010 with tenants and to build on this, it will develop Neighbourhood Housing Asset Reviews with local people, initially in the priority areas / asset types identified in this strategy and in the Neighbourhood Regeneration Strategy. 8. Neighbourhood Asset Plans will document the analysis and delivery work that follow from the Strategy. They will be determined within the Council s wider resource allocation and project control processes. 9. The Strategy exists in the context of the Council s wider Asset Management Strategy and Plans, Housing Strategy / Policies and the Housing Revenue Account Business Plan (the Council also has a secondary asset management plan for housing land, garage sites and commercial premises). 10. Because Council houses are home for about 11% of the overall population, this strategy also has a key role for other Council priorities contributing leverage to the health and wellbeing of the community and the transformation of the Council emphasising its enabling and commissioning role. Why Introduce a New Strategy? 1. The Council s previous Asset Management Plan for housing, ended in 2010 to coincide with the completion of the Council s Decent Homes programme so there is a gap. Self-Financing requires a robust approach to financial planning that needs on a clear understanding of asset investment needs related to housing need. The Council has therefore taken the opportunity to look at how the housing stock that it owns meets the needs of residents in the long term. 3

4 2. By developing and using accurate and up to date stock condition information, the Council will be able to shape the investment and work needed to make sure the stock meets current and future housing needs and if it does, achieves the standards that it agrees locally with tenants and leaseholders. 3. This investment and work will range from the repair or renewal of individual elements and components within properties to the regeneration of neighbourhoods and the replacement of dwellings that are no longer fit for purpose with new ones. 4. This new approach and a bigger funding stream may mean different delivery relationships. The strategy therefore provides a context for both the consideration of a Regeneration Delivery Vehicle and the need to review the Public Private Building Services Partnership and other contractual arrangements. 4

5 EXECUTIVE SUMMARY 1. The Strategy, which will be subject to regular review, focuses on the first five years of self-financing capital investment within which, year one is treated as a holding year with some additional targeted works and the development of Neighbour Asset Reviews for a number of higher than average cost asset types. 2. Year two to year five focuses on continuing maintenance, the treatment of backlog and the implementation of Neighbourhood Asset Plans derived from the Reviews. 3. The Council s Strategic Priority for its housing assets is that they provide appropriate, sustainable homes in sustainable neighbourhoods. Homes will be structurally stable, safe to live in, sufficiently warm and offer a living space that enables mobility. This applies to existing assets as well as to any new ones that replace them or add to the stock to meet need more effectively. 4. The thirty-year investment need was under review at the time of writing and stood at 405 million for capital maintenance and improvement. Approximately 27% of that sum is heating renewal and 13% is kitchen / bathroom replacement with 8.5% needed for roofing works. 5. There is a further estimated cost of up to 60 million to insulate hard to treat and hard to heat properties. 6. The Council aspires to meet housing need more effectively and replace outdated assets by building new homes, which it estimates will cost in region of 100,000 per unit excluding the cost of land. 7. Several areas of Milton Keynes and / or types of housing asset present significant challenges and have above average investment needs ( 35,000) over the next thirty years. They need review to assess their investment needs and sustainability. These are (not in priority order) The Lakes estate and within that Serpentine Court Sheltered housing schemes and especially Almond Close, Buckland Lodge and Orchard House Non-traditional construction properties in the new town footprint and West Bletchley Heating and insulation across the stock Rural housing The Gables / St Georges Way area in Wolverton New and / or replacement stock 8. The Council is operating under a Self-Financing regime from 1 st April At the time of writing, it was likely that additional capital resources would be available but that these would be insufficient to meet the short-term investment needs of the stock. Resources will, therefore, need to be carefully targeted to enable both improvement and replacement or growth. 9. The Council is also exploring the possibility of establishing a Public Private Partnership regeneration vehicle, which will support the renewal of assets that no longer meet need. It will therefore need to review its arrangements with Mouchel Building Services. 5

6 10. To deliver the Strategic Priority, the Council has established an Asset Management Framework made up of Principles of optimise the life of its housing assets so that they meet housing need. In doing so it will provide Value for Money by seeking low costs and providing good services Data about assets, finances and performance that enables it to take strategic decisions about the way the asset meets housing need, tactical decisions about the investment needed to repair replace or renew elements or assets and operational decisions about programmes of work. Delivery relationships with clear roles and performance management in which the Council as the client ensures it has appropriate relationships with and achieves value for money from Mouchel as its agent, and with its contractors, which carry out the work. Tenant (including leaseholder) involvement will help to shape investment and deliver works. Self-financing offers greater predictability of investment so the role for tenants in setting standards, determining resources, procuring works and evaluating value for money will be reviewed 11. By investing to deliver the strategy, the Council seeks to secure three long-term outcomes: I. the asset continues to or better meets housing need, II. III. the Housing Revenue Account can continue to pay for maintenance of homes and management of tenancies over the thirty year life of the Business Plan properties are physically sustainable 12. The Council defines a physically sustainable housing asset as one that safeguards tenants and 1. Contributes to a thriving neighbourhood, 2. Contributes to an appropriate mix of property sizes and types that meets housing need in the neighbourhood and across Milton Keynes 3. Is structural stable and safe for the tenant to live in and for contractors to work in, 4. Is sufficiently warm and affordable to heat, 5. Provides a living space, which enables mobility and independence 6

7 1. ESTABLISHING A STRATEGIC PRIORITY AND PRIORITY ISSUES / AREAS FOR ACTION AND INVESTMENT: The Strategic Priority The Council s Strategic Priority for its housing assets is to enable: Appropriate, sustainable homes, which contribute to neighbourhoods that work for the local community and help to meet housing need across Milton Keynes The range of investment needs of the housing assets and the resulting financial pressures means the Council must prioritise investment. Investment will focus on safeguarding tenants and their households by addressing the following priority investment issues that underpin the Strategic Priority. STRUCTURE WARMTH SAFETY MOBILITY The Council will do this within the Local Quality of Accomodation Standard it has agreed with tenants under the regulation of the Tenants Services Authority and its successor Factors that Underpin the Strategic Priority The priority derives from legal requirements, tenants wishes, previous Council policy and data about stock condition. These underpinning factors are summarised below Statute 1. Responsibilities from Landlord and Tenant, Health and Safety, Construction, Public Protection and Housing Acts as well as resulting case law; especially the Housing Health and Safety Rating System applying to all homes, introduced by the Housing Act Legislation and regulation about carbon consumption and renewable energy, specifically the Energy Act 2011 as it affects energy efficiency and generating renewable energy Policy 3. The Tenancy Agreement and the Repairs and Maintenance Guide Maintenance_Feb_10.pdf, which identifies the repairs for which the Council and its Tenants are respectively responsible (both documents are scheduled for review in 2012/13) 7

8 4. The conclusions of the Council s Social Care and Housing Policy Development Committee Working Group in 2009 that future investment beyond Decent Homes should focus on meeting legal requirements and ensuring safety Working Group Priorities a. Statutory and Health & Safety-related works such as asbestos management, replacement of domestic heating systems and dealing with urgent failing components (this is reflected in all four priorities) b. Preventative maintenance work that reduces the need for reactive work and increased expense (this is reflected across all four priorities) c. Other improvements to the housing stock and external areas, which the Housing Revenue Account pays for (this is reflected across all four priorities) 5. The Council has a continuing commitment to providing a Value for Money (good and low cost) housing service. Tenants Wishes 6. The Council agreed the Milton Keynes Minimum Decent Homes Standard in This was an outcome of the Stock Options Appraisal Process by agreed by Cabinet in June It stated that the minimum level of work to meet Decent Homes would be carried out. If a kitchen, bathroom and central heating all failed in a home, only one would be fixed to meet this standard. Cabinet also instructed that capital programmes take into account health and safety issues and emergencies as they arose. 7. The Council consulted to develop this new Asset Management Strategy in 2010/11. Tenants told the Council that they wanted investment to improve the inside of their homes and the wider neighbourhood Tenant Priorities kitchens and bathrooms (reflected as Safety and Mobility priorities) energy efficiency (reflected as Warmth priority) the condition of the neighbourhood: paths, fences etc (reflected as Safety and Structure priorities) 8. The Council established the Milton Keynes Council Quality of Accommodation Standard in partnership with tenants in ation_results_v4.doc The Strategic Priority and priority investment issues above, directly reflect the four investment priorities of the Quality of Accommodation Standard (see box below). 8

9 2010 Quality of Accommodation Standard: Milton Keynes Council will manage its assets to ensure it invests its limited resources in providing appropriate, sustainable homes. The Council will invest to ensure that our homes contribute to neighbourhoods that work for the local community and help meet housing need across Milton Keynes. The Council will develop a Housing Asset Management Strategy for the years in partnership with key stakeholders. This will take into account the needs of the landlord, current and future tenants and leaseholders. Within this, the Council proposes that our investment priorities will be to ensure that our homes are: Structurally stable; Safe for tenants to live in and for the Council s contractors to work in; Sufficiently warm and affordable to heat; A living space that does not restrict residents and that they can fully use. Stock Condition Evaluation To support its Business Plan for Self Financing, the Council carried out a stock investment evaluation in October and November This involved a review of data quality of the information in its Keystone asset management database in October. The data was benchmarked as good. The stock has been categorised into 62 asset types, which can be cross-referenced by 59 locations with a range of sub categories. These categories were separately analysed in November 2011 by Savill s and Mouchel Building Services with an initial focus on sheltered housing. The resulting issues and areas that emerged as priorities for further quantification and consideration in years one to six will be subject to a Neighbourhood Asset Review and are summarised in more detail in Section 5. The Council is also investigating its new build options: demand remains high so new supply is necessary to meet current need and may be required to enable replacement movement / decant within the remaining eight areas identified below. Initial Priorities for Further Evaluation Area 1. The Lakes estate Initial Reasons Ongoing regeneration activity 2. Serpentine Court Costed investment / disposal analysis March 2009 and integral to Lakes regeneration 3. All Sheltered housing schemes Overall business sustainability and 9

10 and especially Orchard House Buckland Lodge Almond Close communal heating renewal costs plus for these three specific schemes Structural movement, high investment need, poor overall offer Structural movement which has created long term voids Bedsit accommodation in low demand and an opportunity to look at the provision in Newport Pagnell as a whole 4. The Gables Longer-term fire safety issues Proximity to Orchard House as part of a wider development footprint 5. Granby Court Historic movement, difficulty in marketing, site location and dwelling size 6. Rural stock Complex mix of build types and wide distribution with an above average investment need up to 75, Non-traditional Design and construction methods results in a lack of thermal comfort 8. Heating and insulation across all stock Applies especially to 3 and 7 10

11 2. RESOURCES At the time of writing, it was likely that additional capital resources would be available but that these would be insufficient to meet the short-term investment needs of the stock. Self-Financing 1. Having established strategic priorities for investment, the Council needs to establish how it will fund works to address the issues that arise. The Council is operating under a new Housing Revenue Account Self-Financing regime from 1 st April A draft debt distribution was under consultation until 6 th January DCLG intend to issue the final settlement on 27 th January It suggests Milton Keynes Council will have between million per annum for stock investment and borrowing headroom of 5.31m remaining when the debt cap is taken into consideration. 3. The Council procured Consult CIH, the consulting service of the Chartered Institute of Housing, to support its modelling to develop a robust financial plan. The plan covers issues such as, debt repayment, rental income, void rates and right to buy levels as well as revenue repairs and capital funding for improvement and the maintenance of a prudent operating balance. 4. The modelling demonstrates that the HRA financial plan is fully self-funding and can meet all its obligations under self-financing in the long-term, albeit with a need for extensive re-profiling of the capital expenditure in the short to medium term. The plan enables a programme of approximately 100 million in years 2-6 of the 30-year plan, which is a shortfall of c. 70 million across that period against currently identified need. In summary, there is a continuing pressure: significantly more but still insufficient capital. Other Avenues The government is consulting on the use of Right to Buy Receipts under self financing at the time of writing. They may be pooled nationally or distributed locally and are likely to be hypothecated for new housing at affordable rent. Consultation on the Green Deal suggests Government may create a major new fund for hard to treat single wall properties. As noted, elsewhere this is a significant pressure for the Council. The Council is exploring the possibility of establishing a Public Private Partnership regeneration vehicle, which will support the renewal of assets that no longer meet need and access funding from private sources. Revenue Revenue supports asset repair either as reactive work to deal with emergency or urgent situations or as proactive work to carry out maintenance in a planned way. The Council has historically made a revenue works budget of approximately 10 million available 11

12 Capital Capital supports asset improvement. At the time of writing annual funding of approximately million was anticipated under self-financing. Capital resources under self-financing will derive from 1. Revenue Contributions to Capital Outlay 2. Borrowing 3. Grant Funding, statutory or competitive Pressures The key issue arising from self-financing is that the 14,000 properties within the HRA need significant short-term investment to ensure they remain fit for purpose. The estimated short-term challenge (2013/ /18) identified is approximately 190 million. It is comprised of three elements. Firstly, continuing capital investment (up to 18 million p.a.) is needed to keep abreast of on-going investment in new heating /electrical installations, kitchens and bathrooms to maintain Decency. This current investment need is funded within the new regime. A second investment requirement exists to deal with issues highlighted in the stock condition survey of They are included in Council s stock condition database but have not been addressed because of the Decent Homes focus. The latest outputs identify that there is a c. 70m backlog after estimated recovery from leaseholders for works to communal areas. This backlog is spread equally over years 2 to 6 of the plan. Detailed examination of potential high cost elements is ongoing but it is likely that little of this work can be deferred having had little if any attention while the Council sought to achieve the Decent Home standard. Much of the investment ( 35-40m) is to the external fabric: roofs, rainwater goods and fences Thirdly, up to 60 million may be required to enable a major improvement in energy efficiency of approximately 4,000 properties of non-traditional construction (flat roofs and/or solid walls: without lofts/ cavity walls that can be readily insulated), and which are classed as hard-to-heat. This is not identified within the Stock Condition Database or included in the DCLG proposal. Nor does it yet take into account partnership work under the Community Energy Savings Programme at the Lakes estate (the actual costs here will be used to develop fully costed proposals and bids). There may be opportunities for social landlords under the Green Deal, its replacement, which is out to consultation until 18 th January Significant resources may be available for hard to treat single wall properties, which make up much of the former development corporation stock. 12

13 3. ASSET MANAGEMENT FRAMEWORK The Council has to tackle an ageing stock, that has had limited investment in the context of insufficient resources in the short-term and continuing high levels of housing need. Its stock is also not simply assets, it is individual homes within communities where people have roots and ties. Any decisions the Council makes need therefore to be transparent and based on full evaluations taking condition, resources and the wishes of the neighbourhood into account. To support and evidence this transparency, it has created an Asset Management Framework. What is a Framework For? An Asset Management Framework (AMF) enables the Council to use its resources to deliver its priority and meet its statutory, regulatory and contractual responsibilities by 1. objective resource allocation, 2. prioritised works, asset rationalisation and redevelopment, and 3. robust service delivery or procurement decisions. The AMF is therefore designed to: ensure the Council understands the extent to which it s housing assets meet housing need and contribute to the physical, social and economic sustainability of neighbourhoods and the wider Milton Keynes community demonstrate that assets that meet need are the most likely to generate the optimum rental income stream for the HRA prioritise resources to fill the most significant gaps in meeting need, contributing to sustainability and generating income What Makes up the Framework? The AMF comprises four elements, principles, data, delivery and involvement: 1. Principles that give clarity, which are to meet housing need by optimising the life of housing assets and contribute positively to the neighbourhoods in which they are located In doing so, it will provide Value for Money by seeking low costs and providing good services. 2. Data that enable strategic decisions to be taken about the way the asset meets housing need, tactical decisions about the investment needed and operational decisions about performance and programmes of work. 13

14 3. Delivery relationships where the Council is the client, setting the strategic priorities allocating funding and overseeing performance; Mouchel is its agent, managing works, performance and ensuring information about assets, costs and service quality are fed back to the Council and contractors which carry out the work. These elements are explained further below. 4. Involvement of tenants and leaseholders to ensure that investment decisions are transparent and that people have a say about the procurement of work and materials to their homes as well as the quality of the delivery services. It will help to shape investment and deliver works. Self-financing offers greater predictability of investment so the role for tenants in setting standards, determining resources, procuring works and evaluating value for money will be reviewed. Explaining the Elements of the Framework 1. Principles The Council has these underpinning principles to give its housing asset management a clear purpose. Housing Need Housing needs are defined in the Council s Housing Strategy and Allocation Policy, which is derived from statute. Optimising Life Optimising life is carrying out work to keep components, elements and assets going until they reach the best financial and customer satisfaction point to change them. Work to assets to do this falls into three broad categories: emergency, reactive and proactive It is dependent on good quality data about stock condition and cost of works and materials. Positive Contribution to Neighbourhoods The Council s housing assets coincide with the neighbourhoods of poorest health and wellbeing including worklessness. The quality of the home and the way works are procured and carried out can make a significant difference to health, education, employment and health outcomes. Value for Money Value for money is about doing the right things (effective activity that is shaped by a clear purpose) and doing them as well (economically and efficiently) as possible. The service aims to be good, low cost and continuously improving in achieving its purpose. In quality of home terms, it is an agreed balance between costs and tenants satisfaction with their home, communal area and wider neighbourhood. In delivery terms, it is an agreed balance between cost and quality of labour and materials that can be measured as an outcome by customer satisfaction and work 14

15 staying fixed, as throughput by the time taken and carried out on time and as outputs by volumes that are right first time. The Council will ensure it has a good intelligence about market conditions and forces, using procurement best practice to ensure costs and quality are controlled. 2. Data The Council has to have accurate and up to date data so that it can work with its Business Partner, Mouchel Building Services to assess sustainability, risk and investment need in relation to housing need and manage performance. Mouchel provides cost, quality, works and stock condition data: maintaining Keystone, from which it provides reports for the client about components, elements and homes by type and within neighbourhoods The Council uses the data and the reports to consult with tenants and leaseholders, set strategic priorities and agree tactics for delivery and resource allocation with Mouchel. Additionally good data enables robust decisions to be made in delivery, quality to be assured and costs to be controlled. The data used to do this is as follows Cost data for Contracts made up of materials, labour and overheads Cost data for Agent: how much it costs to manage the contracts Works data: the cost and content of individual jobs and programmes Stock Condition data: the structural condition of properties and the replacement needs of elements and components Satisfaction data that helps us understand how people experience their home and the Council s services Total cost data over time of maintaining rather than replacing individual elements feeds into the calculation of economies of scale used to support planned maintenance programmes. Performance data, which enables the Council to consider the quality side of Value for Money. The Council collects data through its financial and property information systems but most importantly in an asset management database maintained for it by Mouchel. It has invested in the Keystone system and validated the data, which it holds. Stock data currently comes from several main sources, which are used to update the Keystone Condition database 1. Stock Condition Survey Stock Condition Validation Asbestos Surveys 4. Ad hoc neighbourhood and structural surveys 5. Operational financial and quality / quantity assurance checks The data was benchmarked as good quality in October We use the data to consider the investment needs and sustainability issues across the borough 15

16 within neighbourhoods of property types of individual assets 3. Delivery The delivery of services is through a supply network that is lead by the agent Mouchel Building Services within the Public Private Partnership to The relationship is managed through a Service Level Agreement that was rebased in MBS manages the Council s primary and sub-contractors, materials suppliers and manufacturers. Client, Agent and Contractors The Council aims to deliver services in an efficient, economic and effective way through clear relationships with defined responsibilities between contractors, agent and client. The Client, Milton Keynes Council 1. establishes robust investment and rationalisation priorities 2. directs funding to those priorities 3. enables the regeneration of neighbourhoods in a way that supports and shapes the sustainability of the housing assets 4. acts as delivery partner to relet properties promptly and to manage tenancies so that misuse and neglect of homes and communal areas is minimised. The Council will procure and shape this supply network so that it carries out the necessary work at the right cost and quality levels to assets, their elements and components. The Agent of the Council, Mouchel will direct work to assets that delivers 1. repair and replacement of components through a responsive maintenance procurement process 2. renewal of elements through a planned maintenance procurement process 3. refit of properties through a planned maintenance procurement process The Contractors procured on the Council s behalf by Mouchel Building Services carry out work to Council assets. They 1. Use materials and components that provide the optimal balance between cost and durability 2. Ensure work is completed at the right time for the tenant and the landlord and is right first time, on time, every time, and all the time to minimise cost, optimise life and provide a high quality experience for the tenant. Categories of Works Delivery The Council categorises the work it undertakes very simply so that work that prevents tenants from being at risk is done very quickly. Other day to works are done at tenants convenience and work that is necessary to keep assets in good condtion or make major changes is done in a planned and therefore cost effective way. 16

17 Works Categories Emergency: a situation that puts safety of customers or the structure of the property at risk so must be dealt with quickly and made safe Reactive: work following a report by a customer or employees carried out by appointment Proactive: work on the basis of data about the assets that is organised. It may be funded through capital or revenue and may be carried out on single dwellings or groups of properties. Delivery Processes The ways in which work the Council commissions work to its assets: Repair is reactive and optimises the life of the components within an element of an individual property, where work is right first time on time every time and does not fail because of workmanship but only where the component or element must be replaced Replace tracking the life of components so that the number of times they can be repaired can be reasonably predicted and carried out to optimise the life of the larger Renew where analysis of data shows the replacement of components becomes so frequent across properties within a neighbourhood and / or construction type it will no longer be value for money to continue to tackle them in a reactive way. Refit takes place when simply renewing elements cannot remedy the issue in a way that provides value for money to the landlord or to the customers. It takes place across communities but is likely to be tied to particular construction methods and / or property types. It is likely to involve an improvement in design and specification. Because of the scale it will; be a capital scheme Rationalise where the asset may be structural sound but does not meet need it creates an opportunity for new more appropriate housing or other development Regenerate: regeneration is considered where there are external economic or social drivers or both refit and rationalisation are necessary because need is not met and the structure is not sound: therefore, the sustainability of the wider neighbourhood is undermined. Performance All Housing Landlord Services are considered by the Tenants Performance Scrutiny Group. The Quality of Accommodation, and Repairs and Maintenance Standards have sets of measures. They are published on the Council s website. A Housing Annual Report is also published each year. 17

18 Financial, partnership and project performance is tracked, managed and corrected through wider Council processes 4. Involvement The Council has a range of ways to involve residents in, which are outlined on its website Involvement in Asset management will be through three key routes 1. Neighbourhood Asset Reviews The Council will work with local people in areas or across house types where it considers that a review is necessary. The method will be determined locally in partnership but will typically involve open meetings, steering groups and home visits. The reviews will ensure that the Council shares accurate data about stock condition and investment options with residents. Their individual and collective views will be documented to assist the Council in decision-making. This kind of approach is important to ensure the Council recognises that while it is managing its assets it is affecting peoples lives and homes. 2. Tenants Performance Scrutiny Group The wider Tenant Scrutiny Group sets its own agenda with officer support to test the quality and cost of a range of Housing services. Because repair and maintenance services are high cost and have been tenants priority this area will continue to receive frequent attention. 3. Tenants Asset Management Group (formerly Building Services Tenants Group) This group will be reviewed in 2012/13 and an enhanced role established. 18

19 4. MAKING INVESTMENT AND RATIONALISATION DECISIONS To fulfil its roles as a community leader, the owner of the assets and as client in the delivery relationship, the Council needs clear processes for deciding where and how and when to direct investment in or to rationalise assets to meet its strategic housing asset priorities. This is especially critical in years one to six of self-financing, the period largely covered by this Strategy, when resources are significantly outweighed by investment need. 1. Investment Process The Council s processes for determining its annual Revenue Budgets are identified in its Financial Regulations and Standing Orders. It also has a medium term planning process that varies from year to year. Within this process, budgets for each aspect of responsive work are determined. These are day-to-day repairs, change of tenancy works and gas appliance maintenance. Capital investment in housing assets follows the Council s overall process of capital resource allocation. This is made through either a bid process prior to the start of financial year for the main programme or in year bids when works are urgent or unforeseen. In both case the Capital Projects Review Board considers proposals. The overall process is also subject to the Scheme of Financial Delegation. 2. Rationalisation (disposal) Process The Council s approach is determined by its corporate Disposals Policy, which is applied through a supplementary housing process document by the Strategic Housing Asset Management Group. In summary, individual or groups of assets may be identified proactively through the asset management database or reactively recommended for disposal by any housing Head of Service or the Mouchel Building Services Manager. The Housing Asset Management Group will consider a business case, which assesses cost of bringing into use against rental income and the contribution of the asset to meeting housing need. Any decision to dispose will be considered by the Council s Valuer. Disposal routes will be those that are most economically advantageous to the Housing Revenue Account and best support meeting current and future housing need. 3. Desired Outputs from Investment and Rationalisation The approach of the Council to housing asset investment uses sustainability criteria and operations factors outlined below to evaluate the risks and benefits that arise from housing need, landlord business sustainability, asset location and stock condition. Investment or rationalisation is assessed against its ability to secure three outputs from the asset: 19

20 1. continuing to or better meets housing need, 2. ensures the Housing Revenue Account can continue to pay for maintenance of homes and management of tenancies 3. ensures properties are physically sustainable 1. Continuing to meet or meeting housing need better The first consideration is strategic for the Council: will the asset meet need and is there evidenced continuing demand? Does the property meet the needs of the people who live there now and are likely to in the future? Is there a lack of a type of asset? All decisions on the rationalisation, development or allocation of investment to individual or groups of Housing Revenue Account assets will be determined firstly by the ability of the asset in question to meet the evidenced current and future housing needs of Milton Keynes as defined in the Council s Housing Strategy. To receive investment, the asset must provide suitable accommodation and be lettable for a period of at least ten years (i.e. there is a medium to long term demand and need for this property type in this location) Should there be no evidenced need, disposal and demolition will be considered to generate either a receipt or site, which will be more likely to enable identified needs to be met. 2. Ensuring the Housing Revenue Account can continue to pay for maintenance and management. The second consideration is tactical for the landlord service as a business: does the level of investment compromise or take the Housing Revenue Account into deficit. Is the investment affordable at all? Decisions will be contextualised by the HRA Business Plan, which has to be sustainable (not fall into deficit). Investment therefore needs to ensure that the property will continue to generate rental income (a return on investment) over the period of the business plan or an agreed shorter period for individual or grouped assets (e.g. blocks of flats) to a value that recoups the investment cost. 3. Ensuring Assets are Physically Sustainable The third consideration is both strategic and tactical and is how investment can make the asset sustainable in its own right and assist it to contribute to a sustainable neighbourhood and city? The investment will need to demonstrate a contribution to the sustainability of Milton Keynes as a place to live, work and do business and to the immediate neighbourhood as defined in the relevant strategies. Council homes need to enable neighbourhoods to function as places to work and in which communities thrive. The Council defines a sustainable housing asset as one, which Contributes to a thriving neighbourhood, Contributes to a mix of property sizes and types that is appropriate to housing need in the neighbourhood and across Milton Keynes Is structural stable, safe for the tenant to live in and for contractors to work in, 20

21 Is sufficiently warm and affordable to heat, Provides a living space, which does not restrict residents and that they can fully use Defining a Physically Sustainable Asset To define a sustainable asset the Council will evaluate individual assets and through Neighbourhood Asset Reviews, groups of housing assets across the borough by considering the following questions Sustainability Question Is the Site Suitable? Is there an appropriate Property / Size Mix? Issues that must be addressed in the Review 1. The asset is sustainable if it is in the right place: to invest there must be a business case about making the neighbourhood better (creates more economic, social and physical capital) 2. The business case must show how the Council can work with others to improve estate layout and connectivity with neighbouring areas. 1. The asset is sustainable if it offers bedrooms and living accommodation that meet needs. To invest there must be a business case based on improving how Council dwellings offer the right mix of bedroom numbers for current need. 2. Are they suitable for the future demographic make up of Milton Keynes (age, health, family sizes etc) 3. Does the supply fit the needs of the local area as well as Milton Keynes as a whole now? Is there Structural Integrity? 1. The property has structural integrity if it has had no need of structural monitoring or work, monitoring determines the property is not moving in a way that makes or will make it unsafe to occupy in the near future if remedial work has resolved the problem 2. Where assets are under review for other reasons, the Review will establish if the core building methods work over time or do if significant risks may arise in the future. Is there Safety in the Home (including the home as a workplace for Council employees)? 1. What do we need to do to minimise the risks in the home and communal areas to customers and employees? 2. Issues that will be considered include but are not limited to fire, asbestos, legionella, fear / risk of crime and actual crime. 21

22 Is there sufficient Space and Accessibility? 1. Can customers, get in and out of their home? 2. Can they move about in it without restriction? 3. Can they use all of it? 4. Is it sufficiently modern and in good repair? Is there Sufficient Warmth? 1. Is the property well enough insulated to minimise consumption? 2. Does it have a heating system that will keep costs to the minimum for the customer over time and offers value for money to the landlord? 3. Can the asset be adapted to generate sustainable power at a reasonable cost to the Council? 4. Summary of Areas and Issues which Need Investment Introduction This section provides an overview of the key expenditure elements and issues, which require rationalisation or development in the short and medium term. Key Expenditure Elements The following pie chart (figure 5.1) shows the top ten elemental costs over the thirtyyear period. Heating is the most significant single cost and it is captured in the priorities that follow as a result. 22

23 Capital Maintenance ( million) bathrooms external decoration fencing heating kitchens other paths roofing structural windows wiring Where this work occurs in the early years of the business plan, it cannot be deferred. It is either necessary meet Housing, Health and Safety Rating System requirements, sustain Decency as defined nationally or to meet the Milton Keynes Home Quality standard. It is clear that heating replacement is the single most significant investment need for the stock. It is the highest spend, accounting for 27% of the investment need. It outweighs the next highest issue, kitchens by a factor of 2.6, so clearly needs prioritisation to both reduce costs to the landlord and to impact on heating costs for tenants. Establishing Priorities for Investigation The asset data review of September 2011 identifies that further investigation is needed on a number of asset types / locations within the matrix of 62 types, which are cross-referenced to 59 locations. The costs in each of the 59 locations have been assessed by asset type. Nine intuitive areas were selected from these as a basis for testing and further investigation, which can then be modelled into the HRA Business Plan. These were, in no specific order: 1. Sheltered housing, 2. Granby Court 3. Mellish Court 4. The Gables 5. Rural stock 6. West Bletchley REEMA blocks 7. The Lakes estate 8. Serpentine Court 9. Former Milton Keynes Development Corporation non traditional assets 23

24 A threshold of 35,000 was established as an indicator of areas and types that would require further investigation and possibly special treatment as result. 35, 387, 52 is the average unit cost over thirty years excluding sheltered housing and communal area costs. The values that underpin this figure are 41,026 including sheltered housing and 39, 383, 89 excluding sheltered housing alone. Sheltered housing in Milton Keynes has a high investment need distorted by its relatively recent construction in most cases, which includes reliance on communal heating and a need for warden call systems. It also excludes communal areas, which is common industry practice, but can distort the business sustainability of assets. The following chart (figure 5.2) shows average costs with sheltered housing and communal costs included for transparency. (Figure 5.2) The picture (figure 5.3) shifts when sheltered housing and communal costs are removed Figure

25 Gables Granby Court Lakes Mellish Non Traditional REEMA Rural Average Cost Stock Average Initial Priorities From this analysis, nine specific areas / issues have been identified. The following table sets out the areas and issues that need further exploration. The analysis used the methodology set out in section four to establish if the assets are sustainable. A range of options on each issue will then be produced for further consideration within the identified review timescales. Area/Type/Issue Initial Reasons Review Timescale 1. New/replacement stock 2. Heating and insulation across all stock Indicative construction costs (excluding land) c K per unit To address silting up through underoccupation and enable movement for stock assets that may need to be replaced and regeneration Bungalows appear to offer the best solution. Potential sites within the HRA or available through the HCA Demographic pressure from ageing population and demand indicated through Strategic Housing Market Assessment suggest new latent demand of c. 250 Applies to especially 3, 8 and 7. Commenced 2011/12 Identification and detailed appraisal of 25 / 150 sites and review of development costs Discussion paper by 31 st March 2012 Initial evaluation of options by 30th June 2012 Options at 4 and 7 apply. 25

26 3. The Lakes estate regeneration 4. Serpentine Court 5. Sheltered housing schemes: overall asset sustainability and two specific schemes in the short-term Orchard House The Council s stock of c1,000 is pepperpotted with privately owned homes and has a unit cost of c 42,000 The Lakes is the Council s pilot for physical regeneration and it is working in partnership with local residents and Bletchley / Fenny Stratford Town Council. Ongoing regeneration activity through CESP is securing investment for some Council properties. Implications for HRA assets and investment will be reviewed following further development of a Regeneration Vehicle The scheme of 196 dwellings (8 leasehold) was the subject of a costed investment / disposal analysis in March The analysis demonstrated an investment need of c13 million: 66,000 per unit The scheme is integral to wider Lakes regeneration. It has the highest turnover in MK. Infill sites for some replacement housing identified. Demolition and replacement of Serpentine Court is likely but has not been formally agreed and proposals will be further developed through the Regeneration Vehicle. Only day-to-day maintenance and urgent health and safety work will continue to be carried out until a decision is reached. The schemes are wholly in Council ownership and there is therefore no tenure complexity Asset consideration cannot be made in isolation from the wider commissioning of older peoples housing, care and support Global cost of c. 50 million over thirty years. Unit investment needs in the region of 54,000 notably communal heating and warden call system renewal Commenced 2011/12 Paper to Cabinet January 2012 seeking approval to continue to explore delivery vehicle models Phase 2 of the Lakes Renewal Project will include a masterplanning exercise to develop options considered under phase 1. This will be carried out in spring/summer 2012 Commenced 2011/12 Residents on the Lakes take part in a referendum in autumn 2012 and following master-planning referred to above. They will be given a range of choices including redevelopment of the Serpentine Court site Commenced 2011/12 Neighbourhood Asset Review report 30 th June

27 costs. Wider costs of communal facilities are being established. Almond Close Structural movement, high investment need, overall poor offer. Overlap with 5 Detailed proposal needed for wider area with consideration of replacement new build-bungalows Bedsit accommodation in low demand Provides an opportunity to look at the provision in Newport Pagnell as a whole Detailed proposal needed with consideration of replacement new build-bungalows Only day-to-day maintenance and urgent health and safety work will continue to be carried out until the review is complete. 6. Rural stock Complex mix of build types and wide distribution with an above average investment need of c. 40,000 with individual variation from 33,000 to 74, Non-traditional Alternative, divestment approaches, such as rationalisation, stock swaps, etc. should be considered as part of a rural regeneration / community solutions approach Only day-to-day maintenance and urgent health and safety work will continue to be carried out until the review is complete. Approximately 40% of the stock with an investment need of c 37 k for ongoing maintenance and 15K (estimated) for insulation. Focussed in the development corporation footprint with Reema blocks in West Bletchley a sub set. Neighbourhood Asset Review report by 30 th September 2012 Respond to Green New Deal consultation: deadline 18 th January Gather data to enable bid by 31 st March 2012 Ongoing meet to meet Housing Health and Safety Rating System requirements Non-traditional construction results in a lack of thermal comfort. Possible funding solution through Green New Deal hard to treat fund 27