Outline Business Case
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Outline Business Case
CommunitiesASD-Housing Services
Senior Responsible Owner or Corporate Director: / Gill Steward / Head of Service: / Jane Barlow
Date Updated: / 26 Aug 2011 / Version: / 1.6
Programme/Project Description: / To develop a single organisation to deliver housing services including all council owned housing.
Reviewers: / Alternative Service Delivery Programme Board
Author(s): / Asim Sahraouei- Project Manager
Document History
Version / Date / Author / Change
0.1 / 20 May 2011 / Asim Sahraouei / Initial Draft
0.2 / 23 May 2011 / Nisar Ahmed / Updates
0.3 / 26 May 2011 / Cathy Hadfield / Updated headline benefits and background Section
0.4 / 03 Jun 2011 / Nisar Ahmed / Updated finance section
0.5 / 05 Jun 2011 / Jane Barlow / Review and Updates
0.6 / 09 Jun 2011 / Project Team / Review and updates
1.0 / 13 Jun 2011 / Asim Sahraouei / Updates
1.1 / 14 Jun 2011 / Gill Steward / Review and updates
1.2 / 29 Jun 2011 / Asim Sahraouei / Updated project costs
1.3 / 12 July 2011 / Nisar Ahmed / Added project costs
1.4 / 20 July 2011 / Asim Sahraouei / Updated costs following review by Head of Housing
1.5 / 20 July 2011 / Nisar Ahmed / Section 1.4 updated with revised costs and 1.3 headline benefits
1.6 / 26 Aug 2011 / Asim Sahraouei / Updated Section 3.1.9
Outline Business Case1 of 18
Contents
1EXECUTIVE SUMMARY......
1.1Justification for Setting up the Business......
1.2Nature & Scope of the Business......
1.3Headline Benefits......
1.4Start Up Costs......
1.5High Level Risks......
2Background......
2.1The Service Currently......
2.2Drivers For Change......
2.3Vision of the Service for the Future......
3Options Appraisals......
3.1Options – Council Owned Company (ALMO))......
3.1.1Overview of Option......
3.1.2Strengths of the Option & Opportunities......
3.1.3Weakness of Option......
3.1.4Appraisal Against Strategic Objectives......
3.1.5Key Risks and Assumptions Associated with Option......
3.1.6Outline Implementation Timeline......
3.1.7Contractual Arrangements......
3.1.8Exit Strategy......
3.1.9Outline Benefits and Phasing......
3.1.10Potential Business Growth......
1EXECUTIVE SUMMARY
1.1Justification for Setting up the Business
[Justification for the undertaking of the business based on the anticipated benefits to be gained by the Council and its customers. The Business Case must show why the proposed delivery model will be the most effective method in delivering these benefits in a financially sustainable way (supported by the options appraisal). Social and environmental impacts must also be considered]. / On the 19 May 2010 Cabinet agreed to review the delivery of landlord services for the 10,507 council properties owned by Cornwall Council. The report established the following parameters for the review:- All tenants would remain secure tenants of Cornwall Council.
- There would be no stock transfer of housing
Tenants in Cornwall currently receive an unequal service. The historic investment in the housing stock has also been uneven with more funding made available in the former Carrick area through the creation of anarms length management organisation (ALMO). The Council is one of the largest landlords in the south west however it does not act as strategically in the region or as effectively in its interaction with Government nor does it place competitive performance pressure on local social housing providers.
The current service delivery model allows some potential benefits or efficiencies from procurement and joined up management but not as significant as could be achieved by bringing all housing services together.
The initial approach taken by the council was to look solely at the creation of a company to deliver council housing management. This was reconsidered by the council’s corporate leadership team in March 2011 and a decision was made to pursue the development of an arms length organisation which will deliver council house management but also general fund (GF) services currently delivered by the council’s housing service, consisting of:
- Homelessness assessment & homelessness prevention
- Housing needs assessments and Housing Register function including Cornwall Homechoice
- Management of Temporary accommodation
- Management of Gypsy and traveller sites
- Co-ordination of management of unauthorised Gypsy and Traveller sites
- Housing condition complaints (HMOs & single occupation)
- HMO licensing
- Tackling Empty properties
- Disabled Facilities Grants
- Private sector housing renewal (including housing improvement loans)
Option / Comment
Council owned housing organisation / This is likely to require Secretary of State approval and a test of support by tenants across Cornwall.
1.2Nature & Scope of the Business
[Clarification of the business activities and markets in which the business will operate. Identification of the competitive advantage offered and current or potential market share. Indication of the impact within the identified market(s)]. / Under the ALMO model the scope of the housing service will be the management of the council’s landlord function comprising of letting, repairing and collecting the rent on properties. In addition, the company will also take on responsibility for general fund housing functions from the authority.1.3Headline Benefits
[Identification of the main benefits to be realised including dividend and returns to the Council, Value for Money, social/customer benefits, inward investment (injection of income into Cornwall or money circulating within Cornwall e.g. via SMEs, environmental benefits]. /- The housing company will bring all current housing services together into a single, more efficient service that will deliver an equal housing service to all council tenants across Cornwall
- A single service will have the potential to act as a strong regional housing voice for Cornwall and place performance pressure on other social landlords in Cornwall.
- Council tenants will remain council tenants as there will be no stock transfer or changes to secure tenancies.
- A self-financed housing revenue account creates opportunities to make long term commitments to tenants about improvements to homes and services, and enables us to maintain high quality decent homes.
- A self-financed housing revenue account creates opportunities to invest in creating new homes and regenerating neighbourhoods.
- Be a high performing service meeting the standards previously defined by the Audit Commission as three star standard
- Deliver organisation efficiencies that can be used to meet the tenant priorities of dealing with backlog repairs.
- Providing a greater level of anti social behaviour management.
- Place performance pressure on other social housing providers in Cornwall.
- To bring inward investment and additional external funding opportunities for housing in Cornwall.
- Further support Cornwall’s community involvement goals.
- Securely manage the Council’s housing asset worth nearly £1b.
- Positive public perception of independence in decision making of a housing company which is separate from the Council.
- Ability to maximise joint working opportunities between housing needs, housing options and private sector housing in terms of ‘shared customers’, improving the customer experience.
- Ability to take new business opportunities, reduce costs and develop wider business options as result of collaboration with other council established ALMOs
- An organisation in which they can be part of the management structure.
- Strong voice protecting the interests of the housing revenue account.
- A secure structure that will not change again in the medium term.
1.4Start Up Costs
[Identification of costs associated with setting up the business and initial injection of cash to run the business. An indication of turnover and break even point]. / Under the current model of using Carrick Housing Ltd as the vehicle for the Cornwall wide ALMO we anticipate significant cost savings in establishing the new organisation, compared to the option of creating a brand new company. An estimate of the costs is given below; Costs will be split between Housing Revenue Account (HRA) and the General Fund (GF).The start up costs will be shared (80:20) between the HRA and GF respectively. The HRA budget has been identified; however the GF budget still needs to be identified.Option / Description / Estimated start up costs
Council owned management organisation / Legal advice on the management agreement (Council and company)
Financial structure advice
Company House and other compliance costs
Tenants consultation
Shadow Board set up
Governance training
Project Management
Recruitment
Website redevelopment (Estimate)
Subgroup Operational and admin costs
TUPE costs (Estimate)
Sub total
Remuneration for Shadow Board (TBC)
10% Contingency
Total / £15,000
£8,000
£500
£50,000
£16,000
£10,000
£50,000
£5,684
£5,000
£12,000
£40,000
______
£212,184.00
£25,000
£21,218.40
______
£233,402.40*
* The cost above will be split 80:20 HRA and GF, therefore the HRA element of this is £186,722 and general fund funding of £46,680. The HRA element can be funded from the 2011-12 HRA operational budgets, GF funding to be identified.
* rebranding, livery on vans and new stationary will be charged to the company’s first and subsequent years revenue budgets.
1.5High Level Risks
[Identification of the top level risks and their likelihood and impact. High level mitigation statement to be provided]. / Change in legislation could affect the establishment of an ALMO.The council may face challenge(s) as result of some vocal but so far minority opposition to the proposal by Defend Council Housing.
2Background
2.1The Service Currently
[Description of the current business activities including the customer base/market to be served, operating centre(s), locations, current turnover, current staff numbers and recent trends and other resources].The history of the housing service to tenants in Cornwall is complex and the Government objective on achieving decent homes following an option appraisal has left a mixed housing market in Cornwall. In three former administrative areas large scale voluntary transfer has occurred and the former council housing is now owned and managed by Penwith Housing Association, Coastline Housing Association and Ocean Housing Group. In the former district councils of Caradon, North Cornwall and Carrick, following a tenant test of opinion the option of delivering decent homes through stock retention was chosen. In Caradon 92% of tenants voted in favour of stock retention, in Carrick 96% of tenants voted in favour stock retention through an ALMO and in a test of opinion in North Cornwall 98% of respondents voted in favour of stock retention.
These stock options decisions have influenced both the quality of the housing stock and the available investment in the housing service. In Carrick, the Council established an ALMO – Carrick Housing and following successful inspections a substantial programme of decent homes funding was secured and spent on the housing stock. In east Cornwall the goal was the achievement of decent homes using existing resources. This decision has influenced:-
- the current standard of the properties.
- the long term future expenditure requirements of the stock condition survey (maintaining decent homes for the next 30 years).
- the available revenue to invest in the housing service. A concentration of the available resources into stock investment has reduced resources for service delivery.
- the governance arrangements and the role and influence of tenants.
- the extent and use of corporate support services to deliver both traditional housing functions such as rent collection and other services such as ICT and call handling.
Description / East Cornwall in house service / Carrick Housing
Location of offices. / Wadebridge
Liskeard
Moorswater Ind Est Liskeard
Use of facilities at
Bude / Truro
Falmouth
Threemilestone
Total turnover as at budget 1.4.2010.
Rent and service charge income
Capital / £22.054m
£5.159m / £11.833
£2.692m
Staff numbers as FTE. / 150 / 173
Total number of properties managed.
General needs housing
Supported housing
Hostel spaces / 6844
4678
2166
16 + 1 house NON HRA Funded (Hendra Pk, Liskeard) / 3663
3173
490 (to be qualified)
18 units + 1 Flat HRA funded (Polruan House, Truro)
Total number of leaseholder properties managed. / 193 / 158
Stock condition needs (future major costs predicted over 30 years at current prices without inflation). / £199m / £84m
Repairs delivery vehicle
Emergency repairs
Responsive
Capital
Gas servicing / Partial in house service in south east and Ocean Housing
Ocean Housing in-house
CLC Contractors Ltd and Mears
Ocean Housing / About 80% of all repairs are delivered through the Carrick Housing DSO the remainder is a mix of small local contractors.
Additional housing function / Supported people services / Supported people services
UPVC factory
Direct service organisation
Call handling and receptions / Tenant receptions at Wadebridge Trevanion House and Higher Trenant and Liskeard at Trewithan House
Reception facilities provided by customer services at One Stop Shop Wadebridge
Call handling provided by customer services / Reception at Carrick House Truro
Reception facilities provided by customer services at One Stop Shop Falmouth.
Call handling managed by Carrick Housing
Out of hours call handling / Cornwall Lifeline / Cornwall lifeline
ITC support and housing support systems / Capita and full support package from IS service / Archouse and partial ITC support from Cornwall Council.
Other housing services which are funded by the general fund have been amalgamated as part of the creation of Cornwall Council and do not have significant disparities in the way in which they are delivered.These services are delivered by 115staff, with an overall revenue budget in 2011/12 of £2.59m.
2.2Drivers For Change
[Site the mission statement and high level objectives, the fulfilment of which will lead to the proposed benefits being realised. These may be commercial (expected dividend, potential growth) or non commercial (customer satisfaction, Value for Money, socio economic and environmental) objectives.The drivers should include improved service performance, reduction of costs and potential for inward investment within Cornwall].
•Identify service overlaps and bring about efficiencies – overheads, procurement, and service delivery.
•Exemplar to other providers, influencing housing management across Cornwall.
•The creation of a strong identity for housing which would not be so effective should landlord and general fund functions be split.
•One stop approach for housing – easier for our tenants and customers.
•Consistency of service delivery to Council tenants - aspiring to 3 star excellence.
•Improve performance and customer service.
•Potential business opportunities by creating an arms length company.
2.3Vision of the Service for the Future
[Site the mission statement and high level objectives for the service. Identify what the service could look like in the future. Provide a vision from both end users point of view and commercial arrangements. This may include commercial (expected dividend, potential growth) or non commercial (customer satisfaction, Value for Money, socio economic and environmental) objectives].An emerging vision for the new arms length housing company is that it will be:
•A high performing Housing Company providing an exemplar service.
•A One stop approach for Housing.
•An employer of choice.
•An ambitious, innovative and business focussed organisation.
•A Listening and Learning organisation which ensures we meet the needs of our tenants and customers.
The tenants have also set out their objectives for the housing management services and believe that the new organisation should:
- Offer high levels of tenant involvement.
- Offer a simple management structure tenants can interact with and one which is easy to monitor and scrutinise.
- Offer opportunities for tenant control.
- Protect tenants rent money in the Housing revenue account.
- Flexibility for tenants to change the service standards.
- Sustain the selected delivery option for a further 10 years.
- If the resources are available it should be an organisation that can deliver a wide range of activities that benefit tenants.
3Options Appraisal
3.1Option – Council Owned Company (ALMO))
3.1.1Overview of Option
[Provide an overview of the option to explain how it would operate with summary of strengths, weakness , risks, opportunities].The Council would establish an arms length management organisation (ALMO) using the existing Arms Length Management Guidance published by Communities and Local Government for the creation of housing management ALMOs.
The proposition would be to create a single new ALMO which will bring together the council’s Housing Service with Carrick Housing. The intention would be to use the vehicle of Carrick Housing as the basis for the company, but to create a new organisation.
Housing ALMOs have to date required Section 27 approval from the Secretary of State to transfer the management of council housing to another organisation, and will also require a robust test of tenant opinion to ensure that the tenants are supportive of the new method of delivery of their management.
The Council already has an existing ALMO and this experience allows a degree of confidence in both the implementation and the future service delivery.
It is assumed that a single ALMO would deliver all the Housing Revenue Account functions along with the general fund functions currently being delivered by the Housing Service of Cornwall Council.
This delivery model present synergy opportunities and potential savings for other services without significant cost increases in the ALMO for these general fund Services.
3.1.2Strengths of the Option & Opportunities
Prior to the inclusion of the general fund functions in the housing company, evaluation of 4 housing management models was undertaken by the council with tenants.The arms length model meets the first objective of the Council in the creation of a single housing service. In the evaluation matrix tenants gave this option the highest overall score and whilst it has some negatives it does have relatively high weightings across a number of criteria.
The model offers the Council a vehicle that is housing focused, has opportunities for inward investment (an example being Carrick Housing new build programme and also the delivery of some additional services funded by Supporting People), can maximise the benefits of self financing and asset management and critically the Council retains a level of strategic control over it.