House of Commons - Communities and Local Government Committee

Beyond Decent Homes - Communities and Local Government Committee Contents

Memorandum from The Audit Commission (BDH 52)

THE AUDIT COMMISSION'S ROLE INSPECTING HOUSING SERVICES

1. The Audit Commission inspects and monitors the performance of a number of bodies delivering housing services, and has been doing so since April 2000. These include local authorities, arm's length management organisations (ALMOs) and housing associations. We use our inspection powers under the Audit Commission Act 1998 (as amended). We are now commissioned by the Tenant Services Authority (TSA) to carry out inspections of the landlord services of housing associations. From April 2010 (subject to Parliamentary approval) the TSA will also commission inspections of local authority and ALMO landlord services from the Audit Commission as the Authority takes on the cross-domain regulation of social housing.

2. We have published a number of key lines of enquiry (KLOEs), which set out the main issues we consider when forming our judgements on the quality of various housing services. The Stock Investment and Asset Management KLOE sets out how social landlords manage and maintain their housing stock. A copy of the current KLOE is attached at Appendix 1.

3. Between 1 April 2006 and 31 March 2009, the Commission published 362 inspection reports, of which 203 included an assessment of social landlords' asset management capabilities. Of these inspections, 113 were of housing associations, 56 were of ALMOs and 34 were of local authority retained landlord service inspections.

4. Our approach to selecting local authority and housing associations for inspection has for some years been risk-based, and one where the Commission or the Housing Corporation/TSA determines the time and scope of an inspection. The arrangements for ALMO inspections are somewhat different. The government's policy of offering additional capital to high performing ALMOs replaces the risk-based approach with a programme more closely related to which phase of the ALMO investment programme a particular authority is in.

ALMO inspections

5. The Commission plays a key role in determining whether councils with ALMOs can access additional government funding for decent homes work. This is because CLG requires ALMOs to deliver "good", two-star services to release funding which, since April 2009, has been channelled through the Homes and Communities Agency (HCA). Between September 2002 and September 2009, the Commission has inspected more than 60 ALMOs. Where we confirmed that the ALMOs delivered "good" services, their councils have so far accessed approximately £5 billion in additional supported borrowing to deliver decent homes. It has not been an easy option—about one in four ALMOs has needed two attempts to reach this level.

6. To ensure that ALMOs maintain high quality services, it is also government policy that we re-inspect them within three years after they have achieved the "good" rating, especially in situations where the additional spending has not been completed within the three year time frame. The ALMO inspection programme has served as a driver for continued service improvement across this part of the social housing sector.

7. If all ALMOs not yet on the funding programme reach a "good" standard at their first inspection, then the future programme of ALMO inspections is as shown below.

The proportion of ALMOs delivering excellent services overall has increased from 5% before the ALMO was set up to 31% when the ALMO has had its second inspection.

Outcome of ALMO inspections (September 2002 to September 2009)

8. ALMOs we have judged as being excellent have a strong strategic approach with a focus on their decent homes target. This was set out in comprehensive asset management strategies, based on increasingly reliable stock condition information. The majority of major works services attained their "excellent" rating at re-inspection, when they had been able to demonstrate several years of delivering an extensive programme of improvements well. Decent homes work was on track, the quality of work was high and so, generally, was tenant satisfaction. Tenants were involved in decision making, had choices and received reliable information. We often found a comprehensive approach to procurement within a strong partnership framework.

9. It is difficult to generalise about poor ALMO services as there were only two examples in three years, and the two council areas concerned had little in common. Both lacked a strategic approach to dealing with their specific problems, and had budgetary problems. Tenants were not fully involved in decision making—indeed in one council, decent homes work had stopped without informing them and in the other, an historic lack of investment led to very low levels of decent homes.

Inspections of local authorities which have retained their housing stock

10. There has been only one excellent council housing asset management service out of 34 inspections of such authorities identified in the last three years. As with ALMOs and associations this council had a strong strategic approach. This was based on reliable stock condition information. Tenants were involved in decision making and had a range of choices. Decent homes work was on track, the quality of work was high and so, generally, was satisfaction.

11. Almost half of the councils where we inspected housing asset management had poor services. Most did not have an asset management strategy. Resident involvement was limited, including at a strategic level. The approach to procurement and the quality of stock condition information has varied considerably.

12. The Commission has looked at decent homes delivery as part of its Comprehensive Area Assessment (CAA) and will continue to report publicly on conditions in local areas through the Oneplace website. In the first year we have reported, with the other inspectorates, on the failure to deliver decent homes around the country. We issued red flags to three areas because of our serious concerns with current standards of council-owned stock and plans for improvement. We also included the condition of private sector housing as an area of concern in red flags in seven other areas.

Relevant Commission Research

13. In addition the Commission has undertaken a number of studies that touch on the decent homes debate. This submission specifically references three studies; Financing Council Housing, which looks at the Housing Revenue Account subsidy system, Building Better Lives which considers the local authority strategic housing function and Lofty Ambitions, which reviews policy around the energy issues of the nation's housing stock. The key recommendations from these studies are to be found at Appendix 2.

Housing Associations

14. Housing associations we have judged to be excellent have a strong strategic approach to asset management. They set this out in comprehensive asset management strategy based on reliable stock condition information. Tenants are involved in decision making, supported by choice and reliable information. At the time of the inspections decent homes work was on track, the quality of work was high and so, generally, was satisfaction. We often found a comprehensive approach to the management of asbestos and its removal, energy efficiency and procurement.

15. Poor associations had asset management strategies that were incomplete and which were often based on out-of-date stock condition information. Tenants were not fully involved in decision making. Planned maintenance was behind schedule. The position on decent homes programme was not always accurately reported, with plans and budgets sometimes based on inadequate data. However, we have found decent homes levels and energy efficiency measures can be positive in what are generally weak services, especially where stock was relatively new.

16. The Commission, following requests from the TSA, has carried out short notice inspections (SNIs) of housing associations for the last 18 months. Tenants' priorities such as responsive repairs have figured most prominently, with major works/decent homes included in the scope of just five of the first 33 SNIs. Results so far are unremarkable, with neither very high nor low performers identified in this service area.

Decent homes in the private sector

17. In three years the Commission has carried out 72 inspections of strategic housing services, many of which included in their scope the condition of private sector homes. We identified a much lower proportion of high performers overall in this sector, and private sector was a weaker area within the overall strategic service. Common weaknesses included lack of a strategy or a strategic approach (including for empty homes) and old stock condition information (including for Houses in Multiple Occupation). In addition, many had no measurable objectives to reduce non-decent housing, and were slow to deal with disabled facilities grants and the resulting adaptations.

Sector inspection outcomes

18. The following tables summarise and compare the overall service scores for ALMO, local authority and housing association sectors where the scope of the inspections included major works. They also indicate how sectors compare with each other.

19. ALMOs deliver major works well and better than other sectors, but slightly worse than their services overall. Housing associations deliver major works better than they do their overall services. Local authority retained services perform considerably worse than ALMOs and housing associations for both major works and overall services. We have found few councils that can deliver high quality services for residents in the private sector. We have also found few councils that deliver a strong, comprehensive approach to improving private sector homes in their area.

CONCLUSION

20. The Commission believes that the decent homes programme in the social housing sector has been a positive initiative. It has delivered benefits to large numbers of tenants reliant upon social landlords for the quality of their homes. For example, in the social housing sector, the percentage of decent homes has increased from about 62% in 2001, to about 85% in 2009. The different definition for decent homes in the private sector, linked as it is with vulnerability, makes for less clarity as to the current position.

21. Looking ahead the impact of the recession, and consequent refocusing of public spending priorities, is likely to challenge the sustainability of the programme in the medium term. This may threaten some of the gains that have been made in the social sector and lead to deterioration in the longer term. The outcome of the housing revenue account subsidy review will be critical to the longterm business planning of councils and future determinations on rent levels will be the key to the ability of all social landlords to maintain standards.

23. The original programme was not designed to address the wider local environment. However, given the importance to local people's quality of life and perceptions of the areas in which they live, and despite the impending financial constraints, it would be useful to now consider what a broader standard may include over a 15 to 20 year period.

DETAILED RESPONSE

INTRODUCTION

24. We have listed the Committee's specific questions followed by our response.

What lessons can be learned from the Decent Homes programme and equivalents in Scotland, Wales and Northern Ireland?

24. Scotland, Wales and Northern Ireland are outside the Commission's remit.

26. In England, the programme has considerably improved the quality of life for residents of social housing. It has shown what landlords can achieve when clear government targets are linked with a range of options with performance and financial incentives. Not all councils have resolved local political concerns when the stock retention option provided insufficient investment to meet the decent homes target. But the majority have done so and delivered large scale improvements to their homes.

27. For housing associations the challenge has been different. Many of the stock transfer associations were established because of the shortage of investment funding available to local authorities. Although the first stock transfer preceded the decent homes programme by more than a decade, it has continued to be an option to local authorities.

28. There have been 171 large scale stock transfers (involving 1.2 million homes) to housing associations since 1988. Of these, 96 transfers (involving 750,000 homes) have taken place since 2000, when the decent homes approach was first unveiled. For more traditional housing associations the key factor has been the age and nature of their stock. The ones which have had stock for many decades, or which have grown through the acquisition of existing stock are, in general, finding this more of a challenge than those which have grown through building new homes with Housing Corporation, now the HCA, support. However, across the housing association sector the scale of the challenge, given the access to private finance and average age of stock that is younger, is proportionately less than in the council sector.

29. Our experience of inspecting social landlords has highlighted the importance of maintaining accurate stock condition information, both for financial forecasting and for programming purposes. While sample surveys have provided reasonable estimates, detailed surveys have generally resulted in higher than expected costs. In addition, many landlords have identified a higher than expected need for adaptations to enable residents to remain in their homes in the longer-term. For example a Commission audit of the decent homes indicator in 2007-08 found that about one in four councils could not support its data returns to government with accurate supporting information. Housing associations, particularly those with older stock, may be in a similar position.

Where targeted housing fails to reach the Decent Homes criteria by 2010, how should this backlog be addressed?

30. All social landlords should account for ongoing long-term maintenance within their business plans. The outcome of the Housing Revenue Account subsidy review will determine whether councils have a more predictable longterm income and expenditure profile. This will identify at a local level where and why backlogs exist and should assist in establishing realistic but challenging timescales agreed with the government and its agencies, HCA and/or TSA, for corrective action. Whatever timescale is agreed, this should be subject to local discussions between landlord and tenants and be publicised.

Should minimum acceptable social housing standards be amended to take account of environmental standards, fuel poverty and the estate?

31. It is now seen as a weakness that some of the services most desired by tenants, such as spending on external common areas to design out crime, were not covered by the Decent Homes Standard. National surveys have shown that the condition of the neighbourhood, for example, clean streets, and the condition of roads and paving, are significant factors in making somewhere a good place to live. Local authorities and housing associations should already be working towards achieving a local Decent Homes Standard, in agreement with their tenants and residents as set out by the TSA in its draft national standards to be applied from April 2010. The Commission now believes now that minimum internal standards are close to delivery in social housing, it is time to focus on wider sustainability issues.

32. We have recently made recommendations to government about energy efficiency[80] measures, including the need to target spending on households in fuel poverty. However, while councils can tackle energy use in their own housing stock, they can have most impact where they lead, oblige and provide some element of subsidy to social and private landlords and private sector homeowners to reduce domestic CO2 emissions.

Do the management organisations—councils, including via ALMOs, and housing associations—need to change? Will they have sufficient funds?

33. The lack of public funding is clearly going to be a significant difficulty for the improvement programmes of many organisations delivering social housing services for the foreseeable future. How they respond to the requirements of their tenants in a financially restricted environment will require an approach to value for money that will need to be more robust if resources are to meet demands.

What are the implications for decent housing standards of the Government's proposal, currently out for consultation, to move to a devolved system of council housing finance?

34. The Commission has for some years argued[81] for a new housing finance system for councils that is more accountable to local people. The government aim is that councils will finance their businesses from their own rents and revenues, in exchange for a one-off allocation of housing debt. How this would impact on individual authorities is not yet clear but moving to a system that in general facilitates an ability to plan for the longterm with some certainty will make it easier for councils to hold informed local debates about longterm programmes. This should provide stability and predictability in their relationships with their tenants.

How should the Decent Homes target for private sector homes occupied by vulnerable people be taken forward?

35. Improving housing can in turn improve public health and children's education, and make communities more sustainable. Councils and Local Strategic Partnerships (LSPs) need to be more proactive to improve standards in the private sector, which comprises 80% of homes in the country. Overall, standards are now worse in the private sector. The removal of a target for government runs the risk that, at a local level, councils would now consider it less important. A longterm target that covers all sectors might help to refocus councils' efforts.

36. Recent studies and CAA fieldwork have shown that many councils do not have up-to-date information about the condition of private sector homes in their areas. Nevertheless, some councils have used regulatory powers and accreditation schemes to improve the quality of housing without spending significant sums of public money.[82] The Commission has highlighted that looking after the nation's existing housing stock is an important function of local authorities, running alongside enabling new housing provision, and one that does not often get an appropriate level of attention.

Are adequate arrangements in place for the future regulation of minimum acceptable housing standards?

37. We are currently working with the regulator, the TSA, to ensure that there are robust arrangements for ensuring that high standards are achieved and maintained from April 2010. The Minister for Housing has the power to direct the TSA on the standard of social housing under the 2008 Housing and Regeneration Act. In that context the current proposal is that the TSA's national standard on quality of accommodation will be linked to the Decent Homes Standard, or its successor, as a minimum.

38. Potentially the development of the national register of social housing (NROSH) can be seen as an opportunity to improve ongoing monitoring in a co-regulatory environment. However, progress has been slow over several years and the information deficiencies outlined earlier need to be tackled at a local level if a national register is to be of value.

Are there local examples of innovative best practice with wider post-2010 applicability?

39. Yes. Examples can be found in our inspection reports, and in our studies on market renewal pathfinders and strategic housing[83] delivery. We promote these examples of positive practice though our website. Appendix 3 sets out some examples we have identified in our reports and we can supply the Committee with more if requested.

APPENDIX 1

STOCK INVESTMENT KEY LINES OF ENQUIRY

BACKGROUND

This document details the key lines of enquiry (KLOEs) used by the Audit Commission Housing Inspectorate when looking at stock investment and asset management services. It is one of a set of documents produced by the Housing Inspectorate. To find out more about how KLOEs are used please read the guidance notes available from the Audit Commission website at: www.audit-commission.gov.uk/housingkloe

KLOE documents are designed to provide inspectors, inspected bodies and others with a framework through which to view and assess services.

While the Housing Inspectorate has packaged some services together in producing these KLOE documents there is no expectation that inspected bodies should organise and deliver services in a similar way. The Housing Inspectorate remains committed to supporting service structures that best meet the needs of service users and that focus on service delivery outcomes not processes and structures.

KEY LINES OF ENQUIRY

These are the overarching questions that inspectors will be looking at, to assess the effectiveness and efficiency of services.

Access, customer care and user focus

— How effectively does the organisation communicate and consult with its service users and stakeholders about stock investment and asset management?

— How easily do service users access the service?

— How clear and comprehensive are service standards from a service user's perspective?

— How does the organisation respond to service users?

— What service user satisfaction has been achieved through stock investment and asset management?

Diversity

— How does the organisation respond to the diversity of its community to ensure that all users, or potential users, have fair and equal access to stock investment and repairs and maintenance?

Capital improvement, planned and cyclical maintenance, major repair works

— Does the organisation comply with the statutory requirements and good practice on stock investment and property maintenance?

— Is the organisation carrying out the right maintenance and improvement work to the right homes at the right time?

Responsive repairs

— How effective and responsive is the organisation in keeping its homes and communal facilities in a good state of repair?

Void repairs

— How quickly, and to what standard, does the organisation complete repairs to its empty properties?

Gas servicing

— Does the organisation comply with gas safety regulations?

Aids and adaptations

— Does the organisation enable service users with disabilities to continue to live in their homes, if they want to?

Value for money

— How well does the organisation maximise the impact from its resources on stock investment and asset management?

— How effectively has the organisation established partnerships geared to achieve value for money and improving its performance to service users?

— Has the organisation used procurement to achieve value for money in delivering services that benefits service users and others?

Related guidance

Details of other guidance relevant to stock investment and asset management services are available on the Audit Commission website at: www.audit-commission.gov.uk/housingkloe

Positive practice identified during inspection

As well as scoring and reporting on housing services, the Audit Commission identifies and promotes positive practice through inspections. Every inspection looks for examples of positive practice and innovation, creative ways of overcoming barriers and resistance to change, and ways of making better use of resources. Regularly updated positive practice from housing inspections can also be found on the Audit Commission website at: www.audit-commission.gov.uk/housinggoodpractice

Descriptors

Descriptors are provided to help organisations understand how the quality of services is assessed against the KLOEs. Descriptors of excellent (3 star) and fair (1 star) services are included below to give an indication of what we would expect of services delivered to such standards. These descriptors are not intended to act as a checklist or to prescribe the services that organisations would be providing if they were judged by inspectors to have an excellent or a fair service.

APPENDIX 2

RECOMMENDATIONS FROM RELEVANT STUDIES

40. Audit Commission recommendations to government from "Financing Council housing" (2005), "Lofty ambitions" (2009) and "Building better lives" (2009).

Lofty ambitions

41. The government should:

— do more to promote a sustainable response to the challenges of reducing CO2 emissions and fuel poverty by:

— reviewing expenditure on winter fuel payments to ensure that it is better targeted toward reducing fuel poverty and is spent in a way that also reduces domestic CO2 emissions; and

— building on the Community Energy Saving Programme, ensuring that the programme of work to deliver the Heat and Energy Saving Strategy prioritises energy efficiency improvements in fuel-poor households;

— review, in the light of the experience of local area agreements from 2008 to 2011:

— the usefulness of national indicator 186 as a means of measuring progress on CO2 emissions reduction in local areas; and

— whether the voluntary approach to the agreement of local targets on CO2 emissions is delivering the progress required to meet national targets;

— assist councils to better target activities by rapidly taking forward plans for a national energy efficiency data framework that will improve access to data—for example, on:

— energy efficiency of homes from energy performance certificates (EPCs);

— measures installed through the energy supplier obligation schemes; and

— domestic energy consumption at postcode level; and

— use the opportunity presented by the 2010 revision to Part L of the Building Regulations to introduce a requirement for householders to improve the energy efficiency of homes when undertaking major improvements.

Building better lives

42. Communities and Local Government should:

— rationalise the initiatives that have been introduced in response to the credit crunch, and clarify objectives, eligibility and scope to:

— develop effective delivery chains for all initiatives;

— clarify councils' opportunities and obligations; and

— appropriately manage public expectations;

— work alongside local authorities and professional bodies to address the shortage of resources and skills among council housing strategists (alongside its commitment, in response to the Killian Pretty report, to address these issues in council planning departments); and

— use ministerial speeches and other opportunities to stress the importance of the strategic housing role.

Financing Council housing

43. The Commission makes two key recommendations:

— The government should review the council housing subsidy system considering the following matters.

— releasing from the system those authorities that can be self-financing, linked with high performance;

— giving a specific focus on solutions for those authorities that currently rely heavily on the system;

— ensuring that any re-designed system incorporates the six principles identified by the Commission in this study; and

— pending any reform of the system, the government should produce an annual report on the national Housing Revenue Account (HRA) to improve accountability.

— The government should consider that the local Housing Revenue Account (HRA) could reflect broader landlord costs. This would produce a better match between national priorities and local choice, result in greater equity between local authority and housing association tenants and support the government's liveability agenda.

APPENDIX 3

EXAMPLES OF POSITIVE PRACTICE