Like everyone else in the public sector, social housing providers are facing a double whammy in the form of increased financial pressures and growing demand for their services.
There was little to cheer about in the Budget, with no additional money for new build and the introduction of a welfare cap in 2015 that will put more financial stress on our tenants.
As rents become harder to collect from financially squeezed tenants, social housing providers will see a rise in rent arrears, which will be exacerbated when benefit is paid directly to tenants under Universal Credit.
On top of this, local authority housing departments and arms length management organisations are increasingly being expected to ‘take one for the team’ by funding services that were previously supported through the general fund.
Meanwhile, public expectations of housing services are increasing – which is not, in itself, a bad thing. Initial findings from an ongoing study commissioned by the Chartered Institute of Housing, Frontline Futures, reveals many housing professionals now play a myriad of roles and that the needs of tenants are increasing.
If housing organisations are to meet these challenges it’s vital they improve efficiency. Some have responded by reducing staffing levels, whilst seeking greater productivity from retained employees.
Another option is to scale down wider activities, such as employment and training initiatives for tenants, and refocus on the core purpose of managing housing stock. Neither approach is ideal at a time when demands on housing services are increasing.
It is ironic, therefore, that these difficult decisions are being made when the potential to make savings in procurement is under- exploited. The social housing sector spends some £13bn a year on goods and services and yet just a tiny proportion is done so via buying consortia which can deliver savings.
For example, the largest sector-based buying consortium Procurement for Housing, works with 850 landlords who manage three-quarters of social homes in the UK, and turnover is increasing year on year. Last year, the consortium managed just under £160m of social landlord spend. Now compare that, and spend managed by other consortia, to the £13bn annual sector spend. There is clearly significant capacity for more procurement savings to be made.
There is also a growing interest in wider procurement support such as market intelligence, spend analysis and technology solutions.
But a more fundamental change is required in respect of procurement. The procurement process, itself, needs to be recognised as a vital strategic activity. Organisations that equip staff with the necessary skills, knowledge and market intelligence are more likely to drive the best value from their contracts and assets.
As part of this change, within local government, housing departments and arms length management organisations need to be given greater self-determination in sourcing the goods and services that they need.
Shifting procurement to the heart of social housing organisations’ work ought to be an easy sell. It doesn’t have the downside of reducing headcount, it’s relatively painless in terms of workload and has minimum impact on tenants – unlike other cost-saving measures. The problem is the procurement function within organisations often has a low profile and lacks representation in senior teams or recognition at a political level.
Faced with the pressure to deliver more from increasingly stretched resources, it’s essential that social housing providers grasp the opportunities offered by a smarter, more strategic approach to procurement.
