Five Things Not To Include in a Social Housing Value for Money Statement
Published by Sarah Broadhead for PHHS in Housing and also in Central Government, Local Government
As the current financial year draws to a close, and the bedroom tax becomes a reality, thoughts will soon be turning to the Vfm Statements required within the housing sector’s Operating and Financial Reviews.
Here we set out five top tip tips on what not to include in them.
If you'd like top tips & help on what to include in them, contact us, or simply use V3a. It will do the hard work for you.
1: A Simple ‘Yield’ Calculation to demonstrate your ‘return on assets’
- Our turnover was a, our surplus was b, so our return was a/b*100 = xx%.
- The net book value of our assets is a. Our surplus was b. So our annual return on assets is b/a *100 = xx%
The second of these is the better, but is meaningless without reference to net leverage and how that compares with others. If you’re not leveraging your assets to their full potential, you’re not maximising the potential return on assets, and can’t demonstrate how you’re optimising the future returns on assets
2: The usual ‘where each pound’ of your rent goes
It may have been vogue but it won’t transparently demonstrate your overall operating costs and how they compare. You need to demonstrate your total operating costs (overall and for key areas) and how they compare. The HCA will be looking for clarity on the 37% variation in operating costs across the sector which their regression analysis was unable to explain.
3: A statement of your organisational objectives without detail of how you’ve delivered Vfm against them
A simple statement that the return on assets is used to further your organisational objectives won’t cut the mustard. The HCA & Investors will want to see examples of how ‘rigorous appraisal of all potential options for improving value for money have been applied’ to objectives . Particularly any non core housing activities - for which they will want to see an ‘understanding of the trade offs and opportunity costs of decisions’ taken to invest in them rather than bricks and mortar.
4: Any form of ineffective comparison with others
The HCA’s regulatory standards feedback document couldn’t make this clearer. ‘We expect that providers themselves will measure and evaluate their strategies and deliverables, in the overall context of achieving their organisational aims and objectives, and that this will be most effective where it involves comparison with other (and others’) approaches.
Make the ‘others’ meaningful and relevant. If you’re an LSVT which is older than 5 years, you’re a traditional HA. Get used to it. Compare regionally on costs but nationally on performance or outcomes. Cost is regionally influenced. Performance and satisfaction shouldn’t be.
5: No backward or forward look
If you can’t show where you’ve come from you won’t be able to show where you’re going. The bottom line remains the main focus of economic regulation. Year on year improvements expected in value for money will be judged by year on year improvements and changes in areas such as your operating margin, SBIT, EBITDA, adjusted net leverage and debt per home. Three years either way will be the minimum expected.