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industry news


Rent cuts force HAs to limit repairs expenditure


Government policy to impose annual rent reductions is forcing social landlords to cutback their expenditure on planned repairs programmes. Faced with a perfect storm of the enforced rent cuts, increasing rent


arrears (caused by welfare benefit reforms) and pressure to spend more on building new homes, many housing associations are cutting back on major repairs and planned maintenance work to balance their budgets. As part of a drive to cut public expenditure (and the huge housing


benefit bill of approximately £28 billion), the Government decided in 2015 to impose one per cent rent reductions on housing associations in each of the four years up to 2020. An investigation carried out by Inside Housing has shown that in


2015/16 associations responded to the Chancellor’s announcement (in July that year) by reducing their collective spend on major repairs by 7.3 per cent to £386m and their spend on planned maintenance by 1.6 per cent to £630m. In contrast, expenditure on routine maintenance (the day to day repairs reported by tenants) actually rose by two per cent to £1.54bn.


Efficiencies


The overall spending profile changed during 2015/16 – with 60.1 per cent of expenditure on routine maintenance, up from 58.7 per cent in 2014/15. Traditionally social landlords have been urged to spend less of their repairs and maintenance budgets on reactive repairs and more on planned works, based on up to date stock condition data and to increase efficiency and value for money. The figures were based on responses from 100 associations and they


relate to expenditure in the year before the new rent reduction policy officially came into effect. The full impact of the rent reduction policy will become clearer when associations publish their audited financial reports for 2016/17. Housing associations have been under increasing political pressure to


increase their output of new homes, contributing to the Government’s headline target of one million additional homes being built by 2020. Now it appears that HA boards and executive teams have tried to


balance the books by cutting their expenditure on major repairs programmes. These works are intended to maintain the condition of tenants’ homes and cutbacks are potentially putting at risk their compliance with decent homes standards.


Cuts


Cuts in repairs and maintenance budgets have been achieved through a combination of deferring planned works, enforcing efficiency savings on contractors and removing contingency sums. It remains to be seen what reaction this might prompt from the Homes


and Communities Agency. Only last Autumn the regulator warned HAs it would be checking their business plans for signs of them failing to maintain their housing stock properly. The HCA said the mean major repairs cost per property is forecast to


decrease by 10 per cent from £1,032 in 2016 to £928 by 2020. It said where costs appear “unusually high” it will challenge boards.


However, it added: “We will also seek to understand the assumptions within business plans where there are significant reductions in maintenance and repair expenditure to gain assurance that this is not a sign of a registered provider failing to maintain its stock or a simple balancing figure in which significant capital investment programmes are being pushed to future years.” The HCA also said associations relying on ambitious cost savings need to have clear plans in place and mitigations if they cannot be delivered.


“HAs have been under increasing political pressure to increase their output of new homes, contributing to the Government’s headline target of one million additional homes”


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www.housingmmonline.co.uk | HMM March 2017 | 17


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