Time to update the way you operate your business if you want better tenant outcomes

We see an inflection point facing the social housing sector – triggered by much needed stock reinvestment, scaling of housing associations from mergers, financial challenges and increased regulatory, government and public scrutiny and oversight. This inflection point means that real change has to happen, and soon. We ask housing association boards and executives two questions:

1. Have you taken sufficient action to ensure your organisation can respond to increased scrutiny and oversight?
2. Are you confident that your organisation is set up to deliver the outcomes you seek to achieve, and avoid the ones you do not? Do you have the culture, data, processes, systems and governance to support frontline staff to identify and resolve complex issues?

Housing associations are instrumental in the English housing sector – providing housing management and landlord services to 16% of all households in England. In addition to providing vital social housing and community services, they also provide home ownership options for those seeking to get on the housing ladder. But housing associations are facing some serious challenges.

Housing quality is a real concern. About a third of social housing has mould and condensation. And while the UK has some of the dampest housing stock in Europe, problems with condensation and mould in the social housing sector are over twice as bad than in the private sector. With rising heating costs and fuel poverty, the worst off are often the most impacted.

Housing associations are making record investment to improve their housing stock – but at a cost. According to the Regulator’s measure of financial health – EBITDA MRI Interest cover – housing associations are at their lowest levels of interest cover since 2010. With inflation sticking, rising repairs and maintenance costs will continue to challenge financial performance. This challenge will grow as decarbonisation retrofit programmes take off in earnest and societal expectations continue to rise.

Social housing providers are grappling with a range of major external economic pressures. At the same time, they are spending record amounts on improving their tenants’ homes and fixing problems like damp and mould.

- Will Perry, Director of Strategy at Regulator of Social Housing

Despite these challenges, on aggregate the sector continues to have strong financial performance. But some associations are much worse off than others. When housing associations don’t perform, tenants lose out.

While the Regulator has had a tight grip on “economic” standards, until recent legislation, its powers to intervene on “consumer” standards, such housing and service quality, have been limited. Now, the Social Housing (Regulation) Act 2023 gives the regulator new enforcement powers and residents the ability to compare their landlord’s performance to others. And the Regulator will be looking at new ways to intervene when providers aren’t compliant with their standards – including up to £1m in financial penalties, revoking a regulatory registration, appointing a manager and potentially takeover or merger. Boards of directors are also now personally accountable – and could face fines or even imprisonment – for health and safety failures.

Our current government has been openly critical of housing associations, with various efforts to “name and shame” those who fall short. We expect that if Labour is elected later this year, pressures to reform the sector will continue but with added demands to deliver towards Labour’s vision of 1.5 million new homes. This inflection point for housing associations means that real change has to happen, and soon.

Housing associations are actively taking concerted efforts to improve their financial positions. Some are merging with other housing associations to consolidate back-office costs and increase their borrowing power. Some are cutting services that don’t contribute to their “core purpose” and are relying more on charitable and community partners to provide outreach and support. Others are implementing new customer-facing systems to reduce demand on frontline staff, adapting housing officer patch sizes to reflect updated customer contact models.

But the ways housing associations organise and operate their businesses, or their “operating models”, haven’t changed radically in the past twenty years. One of the key drivers of an effective operating model is culture, because culture drives behaviours that residents see. Other industries have developed their cultures to be customer-focussed, automated processes, streamlined governance and partnered with suppliers to manage costs whilst improving customer satisfaction through slick new interfaces. Generally, housing associations have introduced technology solutions on top of scaled but traditional ways of working. Going forward, we propose three areas for housing associations to consider:

1. Identify and deliver results that matter: Develop evidence-based objectives and outcomes and set these out clearly in corporate strategy and resident communications. Next, design means to empower staff to make the right decisions and resolve issues to deliver outcomes. For example, analyse complaints data to identify improvements required in policy and process. When designing new processes, work with frontline staff to identify and remove blockers – like unnecessary handovers and approvals.
2. One team, one service customer experience: Create a unified business (especially post-merger) under re-calibrated strategies that bring together different organisational functions, cultures, customer data, ways of working, processes and systems. In turn, tenants get a joined up, effective service no matter the touch point or step in the process. For example, consider how collaboration between housing, repairs and maintenance staff and contractors from across the business is working and its impact on customer satisfaction.
3. Use customer interactions as opportunities to capture valuable housing data: To take greater control over monitoring of housing quality, capture and connect data from voids, repairs, planned maintenance and capital works programmes. For example, use repairs call outs or pre-void inspections to gather detailed housing quality data and customer insights. Share data at a housing and neighbourhood level between DLOs and contractors to plan for and specify works more accurately.

KPMG’s strategic advisory team supports UK and international private and public sector infrastructure and government clients to address their most complex operating challenges – helping them match market and economic change with operating models that deliver real value to service users and to society. If you want to know more, contact: