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Defining value for money
It’s important for associations’ definition of value for money to encompass much more than resident satisfaction, says Michael McDonnell
There can be no doubt that the housing sector is experiencing the most significant period of change for more than a generation. However, housing associations are evolving and stepping up to the new challenges in uncertain times by revisiting the commercial disciplines which sit alongside our social imperatives.
Fiscal limitations and increasing risks mean that social landlords must continue to take sound financial decisions if they are to align strategic plans with the competing demands of new homes, quality services and social investments that strengthen communities.
The benefits of strong commercial principles are obvious for almost all organisations that need to calibrate budgets and aspiration with difficult real world commitments. Great work has been undertaken across our sector in recent years by efficient, effective and ambitious associations that prove commerciality does not translate into ‘profit at any cost’.
The value proposition for housing associations can be difficult to define using linear, profit-driven or public service benchmarks. Healthy balance sheets are great, but what can they really say about an organisation that is primarily in the business of improving lives and life chances?
Customers will ultimately measure value by way of service delivery. But the customers we serve and the level of scrutiny we face have grown from tenants and their local communities to central and local government and international lenders.
“The value proposition for housing associations can be difficult to define using linear, profit-driven or public service benchmarks.”
The housing association perspective on ‘value for money’ (VfM) therefore needs to encompass much more than resident satisfaction. Making a real difference with a corresponding responsible use of resources is a priority issue for associations and the evolution of VfM regulatory measures should be seen as an important milestone in our emergence as substantial social enterprises.
While there are common themes, the precise interpretation of VfM is somewhat subjective to each organisation and to be meaningful it should be informed by the unique circumstances, ambitions, objectives and targets. In developing the Choice VfM statement, we settled on a broad definition that focuses on how we are delivering improved outcomes, while maintaining or reducing our gross cost per unit.
The approach is not intended to be revolutionary. Rather it is about ensuring VFM is a continuous process that enhances our performance, optimises use of our assets and improves our resource utilisation. Moreover, it guides all areas of operation by enabling colleagues across Choice to ask if we are doing the right things, the right way and for the right reasons.
“It is about ensuring VfM is a continuous process that enhances our performance, optimises use of our assets and improves our resource utilisation.”
This should not diminish our appetite for risk or force a view that perceives value as being just about rationalising and reducing costs. At Choice it’s about refocusing on objectives across the group, in a way that responsibly balances our challenges and opportunities to ensure sustainability into the longer-term.
In recent months, the tragic events at Grenfell have shocked and refocused all landlords into reviewing how critical decisions are taken.
Media, government and sector partners are rightly asking deeper questions about the values that define affordable housing provision. We should reaffirm that for housing associations, value is more than a financial return, and cost should always be aligned with our commitment to excellence.
Michael McDonnell, group chief executive, Choice Housing
