Trading places: Stronger communities, better businesses through stock rationalisation

StockRationalisation2

1 June 2016 | 1 June 2016

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Imagine it’s a rainy summer’s day, and three housing association residents in the same street have woken up to find they’ve no hot water.

They book an appointment with their landlord for an operative to come out to check out the problem. Later, three vans from three different housing associations arrive.

I’m exaggerating of course, but it’s easy to see the benefits to residents and our social business from creating more efficient operating areas through targeted stock rationalisation.

When you add the financial gains that can be made, which can be reinvested in building more much-needed affordable homes, the case is clear.

 

The rationale for stock rationalisation

Today’s article in Inside Housing makes the case for stock rationalisation, particularly in light of the 1% rent cut.

While it’s true today’s challenges are making the rationale stronger, it’s been at the heart of housing associations’ plans and efforts for a long time.

For many years we’ve taken an active approach to making the most of our assets. Our philosophy is to acquire stock in our heartland – and dispose of isolating outlying homes – so that new residents feel the benefits of being close to our services and also part of a community of Sovereign residents.

This is vital if we’re to achieve value for money while still delivering a good service and supporting communities.

Since our first transfer of 100 homes to a local housing association in Cornwall in 2006, we’ve completed 2,770 swaps, acquiring 4,066 homes from other landlords, while transferring out 2,083. This has also meant concentrating our investment in 30 local authorities, rather than 62.

 

Meeting the housing challenge

We embarked on a substantial stock rationalisation programme two years ago when we refreshed our strategy. We sought to swap 10% of our stock, which would halve the number of local authorities in which we worked. Our objectives were:

  • provide more local management for our existing residents
  • improve our operating efficiency by working in a much tighter geography
  • release significant value to reinvest in new homes in our core area
  • build stronger relationships with our local partners.

 

Sharing our experiences

Because we see it as being so important to our future, we have a team dedicated to delivering our stock rationalisation and asset management strategies and programmes.

They make sure everything is done properly, from due diligence to seeking residents views. And their work is not done after the transfer takes place. We continue to keep residents engaged so we can understand their needs and carry out repairs and improvements to their homes and work alongside local communities.

Over the years, we’ve gained a great deal of knowledge about what works and what doesn’t in stock rationalisation deals. This has helped us create a model that accurately assesses the value of stock to our business.

 

If you’re considering exploring stock rationalisation, our top five tips would be:

  1. Strategy-led not opportunity-led: It’s acutely important for a strategic approach to asset management and growth.
  2. Don’t underestimate the resources needed: Both organisations must provide the swaps with the resources and high-level sponsorship to make the deals effective.
  3. Trust – and due diligence: The better the data, information and trust on both sides, the simpler the process.
  4. Strong financial evaluation: Before you start, you need to explore the financial benefits and likely value of the rationalisation project, linked to strategic considerations. Don’t forget to look at the possible alternative uses of the investment too.
  5. Communications: This is crucial. The project can get stuck without good communications planning and execution in maintaining employee commitment, managing uncertainty, and establishing positive early relationships with transferring residents and employees.

You can read more about our experience in two reports we’ve produced about our experiences so far, Trading Places and Stock Exchange, to help others who want to take a similar approach.

 

This blog appears in the June issue of Sovereign News, our newsletter to stakeholders. 

 

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