Making the DifferenceEmployee Conference 2008

‘What makes a goodinvestment strategy?’

Continuous Asset Improvement

Mark Johnson, Director of Property Services,

Nottingham City Homes

£1.1bn30 Year

InvestmentProgramme

£25.8m

Decent Homes

£10.3m

Major Capital Wks

£5.3m

Healthier Nottm

£11.4m

Green&Sust Nottm

£3.5m

Safer Nottm

£1m

Neb Nottm

Asset Management

£2.4mBudget

60 staff

Managed Programmes

£57m

NCH Asset Management

Nottingham Social Housing – Asset Management Strategy

ImpactsStakeholder InputsSpecial IssuesHigh LevelInputs

High Rise

Extra Care

Decent Homes

Non Trad

Corporate

Energy

EnvironmemtDevelopment

& Housing Capacity

Meadows

Lenton Flats

Sheltered Radford Flats

Cranwell

Standard Properties

Med Rise

Safety

Health

Employment

Energy

Investment

Post HRA Funding

Decent Homes

CESP/ECO

Revenue Funding

Capital Funding

Board

Tenants

Government

Councillors

Council Officers

New Build

Cladding Works

Content

Decent

Homes

Secure

Warm Modern

Crimee.g. burglaries

Healthe.g. respiratory

illness

Energy Efficiencye.g. SAP ratings

Fuel poverty

Healthe.g. accidents

Local employmente.g. Apprenticeships

Wellbeinge.g. place satisfaction

Social impact

NCC Housing Strategy

NCC Social Housing Stock AMS

NCH Board/PSComCouncil NCC ResidentNCH

Raw Housing

Data

Outline Policy Approach

Draft AMS

NCC Consultation

Draft AMS

Draft AMS

Resident Consultation

Options Appraisal

Stock/Funding gaps

Final Draft AMS NCC

ConsultationResident

Consultation

AMS Report and Approvals

Finalise Policy

Approach

Board Consultation

Board Consultation

Final AMS Report

Governance

Understanding the HRA Reform

Opportunities and Threats

HRA Reform Need to manage business via 30 year business

plan LA to keep all the rents. RTB rules stays the same. Keep all non RTB capital receipts. Rent convergence by 2015/2016 assumed

INCOME MUST SUPPORT OPERATIONALCOSTS AND FINANCE ALL INVESTMENT.

Key points

Introduced through the Localism Bill. Using 30 year business model to understand

viability of each local authority stock. Data used based on CLG prescribed

methodology. Housing Debt reallocated using Net Present

Value.

Investment Need v Financing Available - Long Term

0

10

20

30

40

50

60

70

80

90

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

£m

Investment need Financing available

(175m gap)

Repair Element 2011 2012 2013 2014 2015 Total Bathroom 9,722,995.65 659,724.77 500,977.48 689,997.40 759,383.69 12,333,078.99 Chimneys & Flashings 1,853,335.95 425,202.45 756,192.89 1,200,444.32 1,523,829.46 5,759,005.07 Communal Facilities 1,116,206.18 236,305.98 178,318.23 120,700.06 227,432.07 1,878,962.52 Doors 4,393,641.21 484,210.54 279,851.53 441,757.67 361,381.09 5,960,842.04 Electricals 5,352,356.11 1,033,026.21 265,484.33 598,849.74 914,234.16 8,163,950.55 Externals 15,570,192.66 1,769,365.97 1,897,021.39 5,998,712.72 4,861,750.21 30,097,042.95 Garages 478,374.42 27,302.79 100,440.24 208,887.05 264,340.31 1,079,344.81 Heating 9,823,245.29 1,981,641.77 796,956.86 1,457,087.09 5,249,953.71 19,308,884.72 Kitchen 21,154,305.31 1,305,076.07 2,327,190.14 1,774,141.36 2,782,559.15 29,343,272.03 Outbuildings 1,430,723.09 372,442.64 405,364.08 1,051,133.92 1,155,162.86 4,414,826.59 Plumbing 1,911,146.20 24,139.17 29,572.22 97,259.08 220,139.12 2,282,255.79 Roof 5,033,345.04 643,361.28 883,747.27 2,937,075.03 7,709,960.76 17,207,489.38 Safety & Security 12,158,822.65 4,426.39 3,185.12 55,818.62 16,977.94 12,239,230.72 Walls 13,352,275.07 484,753.36 525,876.52 4,103,735.04 3,044,835.79 21,511,475.78 Windows 5,213,260.01 111,545.20 6,933.31 5,842.28 16,939.57 5,354,520.37

Grand Total 108,564,224.84 9,562,524.59 8,957,111.61 20,741,441.38 29,108,879.89 176,934,182.31

Total elemental replacement costs can be reported by year over 10 or 30 year periods ( shown in red).

Repair Element 2011 2012 2013 2014 2015 Total Bathroom 2,466,615.80 2,466,615.80 2,466,615.80 2,466,615.80 2,466,615.80 12,333,078.99 Chimneys & Flashings 1,151,801.01 1,151,801.01 1,151,801.01 1,151,801.01 1,151,801.01 5,759,005.07 Communal Facilities 375,792.50 375,792.50 375,792.50 375,792.50 375,792.50 1,878,962.52 Doors 1,192,168.41 1,192,168.41 1,192,168.41 1,192,168.41 1,192,168.41 5,960,842.04 Electricals 1,632,790.11 1,632,790.11 1,632,790.11 1,632,790.11 1,632,790.11 8,163,950.55 Externals 6,019,408.59 6,019,408.59 6,019,408.59 6,019,408.59 6,019,408.59 30,097,042.95 Garages 215,868.96 215,868.96 215,868.96 215,868.96 215,868.96 1,079,344.81 Heating 3,861,776.94 3,861,776.94 3,861,776.94 3,861,776.94 3,861,776.94 19,308,884.72 Kitchen 5,868,654.41 5,868,654.41 5,868,654.41 5,868,654.41 5,868,654.41 29,343,272.03 Outbuildings 882,965.32 882,965.32 882,965.32 882,965.32 882,965.32 4,414,826.59 Plumbing 456,451.16 456,451.16 456,451.16 456,451.16 456,451.16 2,282,255.79 Roof 3,441,497.88 3,441,497.88 3,441,497.88 3,441,497.88 3,441,497.88 17,207,489.38 Safety & Security 2,447,846.14 2,447,846.14 2,447,846.14 2,447,846.14 2,447,846.14 12,239,230.72 Walls 4,302,295.16 4,302,295.16 4,302,295.16 4,302,295.16 4,302,295.16 21,511,475.78 Windows 1,070,904.07 1,070,904.07 1,070,904.07 1,070,904.07 1,070,904.07 5,354,520.37

Grand Total 35,386,836.46 35,386,836.46 35,386,836.46 35,386,836.46 35,386,836.46 176,934,182.31

These costs can then be smoothed (Red) over a period typically 5 years to produce a replacement programme to meet investment requirements which maintains the total investment cost (green).

Threats from HRA Self Financing

Resources to finance capital expenditure will largely be generated through rent income and HRA Capital Receipts.

Higher interest rate on Housing debt than applies under current rules

Vulnerability to interest rate changes going forward Increase in Working balance required to cope with

additional risks – risk assessment required Assumes rents increase at RPI + ½% + £2 up to 2015/16 Self Financing model assumes that rents increase at RPI

+ 0.5% after rent convergence will be achieved.

OpportunitiesReducing Poor & Costly Stock

Reduction in 1000 properties will reduce the level of opening HRA debt by £9.8m. Saving in running costs and future major

investment, of poorly performing properties. Option of saving in interest charges, or the

incurring of fresh borrowing to finance new capital expenditure.

Keystone Sustainability Model

Citywide By Estate 17/05/2011 Criteria Criteria

Net Present Value (NPV) Rental income less investment costs less management costs less maintenance costs all depreciated over 30 years

Stock Turnover Information for void homes over the last 5 years, used within the model to show average annual stock turnover for estate

Tenancy Duration Information in average weeks for homes occupied within an estate based on 5 year information

Housing Management Assessment Housing management assessment carried out based on scoring each estate on difficultly to manage

Neighbourhood Satisfaction Provided by the 09/10 Status Survey. Used to calculate desirablity of estates

Home Satisfaction Provided by the 09/10 Status Survey. Used to calculate desirablity of estates

Deprivation Assessment (National Rankings by Super Output Areas Census 2010)

Used as part of the diresirablity of estates calculation

SAP 2005 Score used within the overall sustainablity model

Overall Stock Performance Stock Performance score based on all info above execept NPV

Overall Assessment (NPV & Stock) Combines the stock and financial performance to give one score for comparision with other estates.

Score Value NPV Score Value SAP Score Value STOCK 9 10 <-12k 10 <=50 10

8 <-8k 9 8 >50 9 8 7 <-4k 7 6 >54 7 6

5 6 <1 5 4 >62 5 4 3 4 >1 3 2 >69 3 2 1 2 >8k 1 >81 1

Score Combined

Stock & NPV >32

>22<32

NCH NPV/Stock Performance Assessment

Stock Performance

• Stock Performance data on : • Stock Turnover - Northgate• Tenancy Duration - Northgate• Housing Management Assessment – Housing

Managers Scored – On the ground intelligence• Tenant Neighbourhood Satisfaction - Status• Tenant Home Satisfaction – VMS/Status• Income Deprivation Rankings (Census 2007)

NPV - Calculus

• NPV’s (Net Present Values) Calculated using:

• Rents • Void Costs • Property Investment Costs • Repairs & Maintenance Costs • Housing Management Costs• Keystone - Future modelling

Estate Properties NPV

Stock (Incl.

SAP 1-3)

Combined Stock & NPV

SAP (1-10)

Abbey Bridge 123 -2,582.41 12 20 5

Ainsley 37 -7,170.10 12 20 4

Arboretum 84 -2,731.48 17 21 8

Arboretum HIMOs 106 -13,475.02 17 25 8

Arboretum Sheltered Selhurst Court 29 1,794.70 12 16 3

Ashwell Gardens 43 660.40 12 16 5

Aspley 1,409 -2,673.88 13 21 6

Aspley Sheltered Keverne Clos 49 2,400.97 12 16 2

Austin Street 102 7,140.55 11 15 3

Bakersfield 150 4,217.30 11 15 7

Bakersfield Sheltered Woodview Court 25 10,395.37 10 14 3

Basford 313 1,393.10 11 15 5

Basford Sheltered Clover Green 36 5,927.32 11 15 4

Basford Sheltered Fenton Court 33 6,528.94 10 14 4

Basford Sheltered Kersall Court 40 4,947.99 12 16 2

Basford Sheltered Kibworth Close 36 -1,801.19 11 19 3

Basford Sheltered Rona Court 33 2,340.61 12 16 3

Beechdale 466 -2,711.97 13 21 5

Beechdale Bungalows 508 3,789.62 13 17 5

NCH NPV/Stock Performance Assessment

NCH Investment ApproachNPV Range by Estate Value

General Themes

-£12,000,000

-£10,000,000

-£8,000,000

-£6,000,000

-£4,000,000

-£2,000,000

£-

£2,000,000

£4,000,000

£6,000,000

£8,000,000

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101

Individual Estates

£ Estate Values

High Tariff Stock;

Options Appraisal

Improvement Plan

Invest and optimise

Positive Value Stock

Negative Value Stock

Investment by Estate

NCH NPV/Stock Matrix

Neg

ativ

e

High

posi

tive

Low

Action

Review

Review

Maintain

Stock Performance

NPV

Arboretum

Cranwell

Lenton Flats

Kingsthorpe

Bilborough

Radford Clifford/High Hurst

Woodlands

xxxx

xxxx

xxxx

xxxx xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

NCH NPV/Stock Matrix

Decommissioning proposal

Scheme No of props

NPV£m

Debt Reduction

Lenton High Rise 384 -4.407 -4.041

Highurst & Clifford 90 -1.211 -0.947

Cranwell Estate (part) 138 -3.070 -1.452

Meadows – Hobart/Pitcairn 79 -2.987 -0.831

Meadows – ‘q’ blocks 144 -2.220 -1.515

Stepney Court 29 -0.467 -0.305

Robin Hood Chase 10 -0.095 -0.105

Meadows – 2 x sheltered 61 0.401 -0.642

TOTAL 935 -14.056 -9.838

Continuous Asset Improvement -Summary• Tenant consultation on properties – 71%

in favour of demolition • Saves £23m on HRA – Opening debt and

reduced spending • Council agree to NCH building 500

properties from debt headroom and savings

• Better stock for our tenants

Thank You!