A new world for Local Authority asset management

    A new world for Local Authority asset management

    April 2014

    The introduction of the new financial framework for local authority housing finance in April 2012 has given Councils the ability to set long term plans for the management of their housing assets in a way that was not possible under the old housing subsidy system.

    Housing Revenue Account (HRA) self financing has brought an increase in resources, and new freedoms and flexibilities, but has also transferred risk from central to local government.  

    There are a range of tools available to Councils to manage these risks, and to ensure they are in the best possible position to seize the opportunities available, to the benefit of their residents.

    One such tool is the Savills Automatic Valuation Model and Rents Consultancy service which can provide the authority with information on market rents and market values that can be used as part of the strategic framework for asset management in a number of ways.

    Improving return on Assets

    Since the introduction of HRA self financing, many Councils are keen to engage in building Council homes again for the first time in many years.  The Affordable Homes Programme challenges all landlords to offer “something for something” by releasing resources from their assets before seeking subsidy through grant.    This comes on top of the pressures in the financial climate and the need to deliver value for money. Providers will need to understand their costs and the value of their existing assets in different uses.  They will also need to consider what return on those assets means for them and how they will measure this in their business plan and against their purposes and objectives.  As part of this, landlords will need a clear understanding of latent value by understanding the values properties might reach under disposal on the open market, or conversion to alternative rental/shared ownership tenures.  The Savills tool can help by producing a batch report on indicative market values and rents which can be cross referenced against the values of the assets in their existing use.  

    This provides for a cost effective solution, suitable for strategic planning purposes which enables a Council to set proactive plans to generate value from their assets to provide resources for new development.

    In a fast moving world landlords need to know the potential value of their assets at all times.  We can help install systems that will alert staff to the available options whenever a property falls vacant, so that they can act immediately.   At the strategic level, we can model different policy options to deliver target receipts.

    Value for Money

    The definition of vfm has evolved over the years.  Earlier approaches focussed on the economy, efficiency and effectiveness of services.   Substantial gains were made from driving down the cost of inputs and managing more effectively.   Now the focus is on the Return of Investment in the properties.   Savills Asset Performance Evaluation can identify the return from managing the properties as they are.   But some will have much higher value used for an alternative purpose.  The AVM and rents consultancy service can assist by identifying the potential to release value through these routes.  This can provide an effective route to generate additional HRA “headroom”, providing resources for housing development that need not be constrained by any debt cap imposed under HRA self financing.

     
     

    Key contacts

    Cathy Osborn

    Cathy Osborn

    Director
    Housing Consultancy Portfolio

    Savills Margaret Street

    +44 (0) 203 107 5453

    +44 (0) 203 107 5453

     
     

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