The Hidden Costs in Housing Operations

By Shariq Kochhar - May 21, 2019

Housing teams are under pressure. 

To work faster. To work more efficiently. To reduce cost and improve tenant experience.

But could it be process, rather than people, holding them back?

Reducing Costs and Improving Tenant Experience

We work with some of the biggest and most advanced housing associations in the UK. And we’ve seen that conditions for providers are tougher than ever.

With the government’s 1% rent reduction scheme in its third financial year, the vigorous search for efficiency is forcing housing associations to reduce expenditure in an effort to improve their bottom line.

In a recent survey by Gowling WLG, 92% of the 50 Housing Associations surveyed considered themselves under pressure. 74% cited that property repairs and maintenance would be the first budget line to be attacked. But it’s not just the expenditure on contractors or suppliers. 82% are considering reducing team size to curb spending.

Survey of 50 Housing Associations

In 2016, providers reduced expenditure on major repairs on average by 10% per property to ÂŁ1431. The Regulator of Social Housing had envisioned this expenditure will reduce overall, in total, by 16% between 2016 and 2020.

Pressure is building fast. The Regulator of Social Housing predicted an increased reduction of 14% for the year after - and this year’s figures show that even this figure will soon be surpassed.

It’s not just cost that’s putting Housing providers under pressure.

Tenants are demanding more.

The post-Grenfell Social Green Paper outlines the Government’s findings and direction of travel in reforming housing.

It indicates that repairs and maintenance are a key issue for tenant satisfaction.

It indicates that they’re demanding more than ever from their housing providers.

And that in the future, their voices will be heard - and affect the fortunes of Housing Associations good and bad.

Avg Repair Expenditure 12-17

Uncovering Hidden Cost in Repairs

Ask yourself: what is the true cost of repairing and maintaining property in your organisation?

Not just the cost of materials.

Or the teams - external contractors, local labour, even DLOs.

Adding up hourly rates, trip charges and materials only reveals part of the picture and doesn’t reflect the total cost of ownership.

To understand this, indirect operational costs need to first be addressed.

Consider how much it costs to set up a contract. To manage service levels. Process work orders, invoices and payments. Not to mention using work order management systems (that often demand multiple entries) and managing repeat and unnecessary work orders. It all adds up.


The Impact of Invoicing

Let’s start with an example that we see in many of the Housing organisations we work with.

The simple invoice.

Have you ever considered how much that single piece of paper, email or PDF really costs your organisation? We’ve seen that little things in big organisations add up.

Processing individual work orders can be time intensive for a housing team.

If one were to consider even a conservative estimated average cost of processing an invoice for a housing team - we estimate to be around ÂŁ20 - processing 100,000 invoices a year would make it an additional ÂŁ2M cost.

But it’s not just a cost for the Housing Team either. The efforts are often reflected on the supply side too.

If there is already a team dedicated to this at a Tier 1 or DLO, it means obvious operational costs.

If not, the maintenance manager themselves might be tasked with invoice management, in addition to daily sales and operational activities.

This is no good. It means sales are actively lost to invoices being generated.

Or worse - being adjusted.

DISCOVER YOUR HIDDEN COST

Work Order Processing Costs

Could be the difference between survival and extinction for suppliers.

Why? Because these indirect costs, when combined with wafer-thin margins contractors maintain to bid competitively, means they are stuck. It also builds more risk into contracts with big suppliers.

Take for example a Purchase Order (PO) generated by a contractor when an initial site visit is requested for a job to be done. In any given situation, the contractor could arrive and realise immediately that the job is bigger or more complex than initially stated. This PO, as a result is useless.

But it doesn't go anywhere. It can't be adjusted, it needs to be redone. Another PO must be generated for the actual cost of the operation, which means the old PO requires human effort in being tended to and removed from a system. Right now, this takes more time and resources than a traditional contractor could devote without encountering rising admin costs.

Following the collapse of construction giant Carillion, the social housing sector has seen a number of collapses, from Kinetics, to Rok, to the biggest Connaught (ÂŁ660m turnover).

In their failure, they have been exemplars of a failing operating model exacerbated by a growing list of constraints imposed by housing providers.

Which leaves housing providers exposed to one of two inevitable outcomes.

Either the contractors earn back their costs by adding hidden margins, or they’re forced to scale back, delivering a poor quality of service to avoid cost overruns.

It is clear to see, however, that the most significant impact of this is on social tenants themselves.

When the impact of invoicing on a contractor’s bottom line is transferred to Housing Associations, these organisations have no choice but to manage cost constraints by cutting budgets on repairs.

And we come full circle.

Resident experience is compromised. Costs are (sort of) saved. But never both.

The Case for a Better System 

From our learnings and our extensive work with some of the most prominent Housing Associations, we have carefully observed the needs of the community.

Yes it's possible

We’ve learned that Housing Associations ought to adopt a framework for repairs & maintenance services that encourages and supports tenants to look after their home.

It should hopefully function as a system that fundamentally empowers not just the residents using it, but also the contractor firms who are approaching social housing from a disadvantaged standpoint.

How We Unlock Opportunities to Save Cost and Improve Service

Our platform allows tenants or housing associations to report a job in moments using secure communication between customers, agents and tradesmen.

On the other side of the platform, tradespeople can quote a price for the work and offer their availability. This accelerates the time taken for the completion of work and will also track the whole process from start to finish for transparency, accountability and compliance.

This means no more admin. Ever.

All those invoicing costs could be a thing of the past. All those POs become a distant worry that will never furrow your brow again - because with us, this is never an issue.

If you’re interested to know more, or see how your own costs stack up, click below to book a fast, free demo with us.

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