Derwent Living is 50 years old this year. It’s a good time to consider what we might look like in another 20 years time.
We have never taken that much public funding. Our current value is over £500m and we have had just £130m grant – 26%.
We are in no way ‘owned’ by Government. Grant funding buys an obligation to house those in need and no more than that in my view. We are owned by our shareholders who are typically tenants and Board members.
The big debate as we work towards 2033 is what are we here for?
We are a very diverse sector. Each of us has a unique geographical area, some do many things and others specialise. Derwent Living is a regional provider mainly across the East Midlands and focussing on general family housing. Each housing association board choses its strategy and how best to maximise social benefit and is independent of Government. We have a social business to run. We respond to local needs and the needs of our existing customers and tenants.
At Derwent Living we have set out a clear path to 2033.
The needs of existing customers are sacrosanct. Existing management and maintenance services are a given. We achieve 90% customer satisfaction and top quartile performance in the delivery of these services to thousands of households. But we want to be more efficient in how we do this and this has meant that we make a surplus on our core activities. In 2013 this was £1.1m and we plan to improve this year on year by concentrating on what we do best. Our operating costs are less than 50% of turnover and in the core business we have just 130 staff compared to 250 in 2008. By 2033 we will be supremely efficient through the use of new technology and a ruthless focus on costs.
We also realised that the scope for efficiencies in our core social business wasn’t enough to yield the profits/surpluses we needed to invest in social gain.
In 1995, Derwent Living began to invest in commercial activity to raise more money through profit making ventures. This is now 40% of all that we do and provides annual profits of at least £2.5m.
Associations have a duty to maximise their surpluses/profits once their core services are delivered and at a time when there is less public funding support we have to seek other sources of funding.
But what should we do with that profit?
Simplicity and focus makes successful organisations. The mix and match approach doesn’t work for us. We are not community based so the most efficient way for us is to use the profit to maximise new house-building and the many new jobs that come with it.
We think every pound gives a greater return this way. Our biggest estate is 190 flats and in many of our local authorities we have just tens or at most hundreds of homes scattered across the district. Putting money into local communities does not make sense for us. We can invest more effectively in the regional/national economy by building.
We try to keep our costs down by concentrating only on being a good landlord. We certainly don’t abandon people and we try to help by pointing them in the right direction, but it would be foolish and blatantly inefficient for us to try and run ‘add ons’ like social enterprises or ask our housing teams to expand into education or health.
The other major question is who do we house?
We cannot house households on benefit to the degree we have in the past unless grant levels are high enough to reflect the arrears risk. Bedroom tax may be swiftly followed by cuts for the under 25s and then the overall benefit cap that affects large families. Then there is universal credit and the inevitable short term hike in arrears that that will bring.
Our strategic response is to reduce the proportion of residents on benefit from 57% to 50%. (The national average is 63%). In terms of new development with our own money we will focus on households with low incomes who are not on benefit but who can’t afford to buy. The focus may be more on job movers and key workers housed from our own waiting list; a return to our roots.
We will still meet our legacy commitments. These are the 50% of relets for the grant we got or the section 106s we signed. We will honour those obligations but we have to keep our business viable for our existing customers.
The other key debate is about what we should build?
We build with our money rather than grant and therefore we seek to maximise the number of homes we can produce. We build houses for general needs. It’s what we do best and it is cheaper to manage and maintain. Others will focus on care and special needs/supported housing.
We will complete 750 new homes in the 3 years to 2014 and less than 200 of those are with Government grant. We like the freedom that running our own programme brings and question the bureaucracy and excessive strings attached. Our libertarian approach also extends to local authorities. We will only work with those who want to work with us and can use what we have to offer.
This is all adds up to a simple and focussed model.
As we go towards 2033 there are some key themes for all of us:
1. We must assert our independence. We are private organisations accountable to customers and shareholders and only accountable to Government where we have grant. We will still argue for public investment but should only take that funding if it’s right for us.
2. We must strive for greater efficiency. We have a duty to maximise our surpluses or profits.
3. We are all different and that will still be the case in 2033 but we all contribute to a total housing solution for the whole country. We all have a part to play. Defending our right to choose our own directions is vital.
Derwent Living is on a path to real independence. We housing associations must shape our own futures more than we do currently.