25 August 2020
I have thought for some time now that something doesn’t add up. Over the years, we have had to continually use money from our investment programme at an opportunity cost to invest in items which have never traditionally been included within a 30 year investment plan, and furthermore, we have not considered what impact this investment has had on the residual value of our assets.
Given this continual need to include more items within our investment programme coupled with the need to respond to the terrible Grenfell Tower fire in 2017, and the recommendations from the resulting Hackett review, this has rightly meant we have had to allocate more money from our already stretched investment programme to pay for additional building safety and compliance measures, and in some cases having to prioritise this work over existing investment for all the right reasons.
Compounding this is the government’s requirement that we meet zero carbon by 2050. Whilst we know this is the right thing to do and the government are suggesting funding will come forward to help reach these targets, the cost associated with achieving zero carbon will again largely sit outside of a traditional investment plan.
So, given we are now going to need to invest more than originally envisaged to meet the additional statutory, legislative and best practice requirements, in my opinion now is the time to start thinking about what that overall ask is for the future investment within our stock. Once this has been established, we can then develop a plan for the future that will not only meet current investment commitments but also the costs to accommodate the Hackett recommendations, building safety compliance, EPC level C and zero carbon.
Given the context of where we are, I firmly believe that we need a different approach that utilises a holistic stock condition survey, which incorporates all of the investment needs of our portfolio beyond that of just traditional component replacement.
Future funding is of concern but the answer may be in reviewing the potential hidden value locked within our housing stock.
In my opinion, the current Estimated Usage Value for Social Housing (EUV-SH) model, which is a basis of valuation unique to social housing, is generic and outdated and needs to be reviewed and updated. To emphasise this point, as an example at Thirteen we modernised two properties and introduced new technology and renewables. This increased the market values and the 30-year net present value (NPV) significantly yet did not increase the EUV-SH.
If we were able to unlock some of this potential added value, then we may have a reasonable proxy to explore future funding opportunities with our finance colleagues.
To conclude then, for me we really need to know what the size of the ask is and then explore how we might unlock the hidden value within our existing housing stock.
Russell Thompson
Russell is Executive Director of Property Services at Thirteen Group
Russell is the Executive Director of Assets at Thirteen Group and has responsibility for the Group’s Assets, Facilities Management, major refurbishment and investment programmes. Russell has a wealth of experience in asset & property management and spent 10 years as a consultant prior to joining Thirteen, he has also been a non-executive director for three organisations. Russell is the new chair of the Direct Works Forum, a membership group of 120 housing providers and sits on the National Housing Federation’s national group “Quality of existing Homes”. He is a Fellow of the Chartered Institute of Building and is a committee member of the York Hub. Russell is passionate about “making a difference” and helping others to be successful and is committed to changing the way we do things for the benefit of future generations.
