A blooming market

As we at JSSPinnacle Housing develop and expand as a company, it is interesting to look back on how the housing management market itself has changed over the last five years, and to make some predictions about how it might develop in the future.

In the last 12 months two more London boroughs - Lewisham and Islington - have externalised housing management contracts as part of strategies to encourage diversity and/or secure improvements in service. In that same timeframe the London borough of Ealing has let a short term contract to manage one of its neighbourhoods - South Acton - Westminster and Wandsworth have repackaged and retendered all of their housing management and Sutton is looking at bringing its contracts back into in-house management - who says there is no marketplace?

These initiatives, when viewed alongside the PFI pathfinders, a number of small and large scale stock transfers and the New Deal for Communities projects, confirm the trend towards diversity and new models of service delivery. While it may still be concentrated on London a marketplace does exist.

Furthermore, there is also a growing level of contract sophistication. Proven contract models are now in place which go from a traditional contracting framework with separate contracts for each service area and clear client/contractor roles to new concepts of "service bundling" and single point accountability. What is important in this context is not which is the best model but that the market has sufficient maturity to allow authorities when contracting out services to use the framework which best fits each council’s style and culture. There is no longer any need for "one size fits all" contracting.

While this growing contract flexibility is to be welcomed it is probably worth dwelling on the emerging partnering model of contracting. This is based on the principles of joined up working, cross-cutting in service delivery, single point accountability, community empowerment and customer driven services.

A number of London boroughs have contributed to the development of this model - Hackney, Lewisham and Islington - but it has probably been developed most extensively in the current Westminster retendering exercise.

Westminster is letting the contracts for its 14 villages and two street property contracts on the basis that the management fee embraces the budgets/costs and responsibilities for delivering cleaning, grounds maintenance, repairs and major works functions as well as the full range of local housing services. The city council is looking to maximise the potential of partnering and will work with its chosen housing management providers to ensure this is achieved.

This approach means that accountability for services is clearly with one organisation. Whether or not that organisation chooses to deliver services directly, through contractors or other partners as far as the customer is concerned there will be only one person to blame if anything goes wrong on the estate - the housing manager. The "buck passing" and culture of blame which has been so much a part of local government will no longer hold water.

There is no doubt that the Westminster model has exciting possibilities, both as a vehicle for improving housing services and perhaps, more importantly, as the stepping stone to genuine neighbourhood management. It seems inevitable that other local authorities will pick up the concept and look to develop it further.

More embracing contracts may well become the order of the day for those councils who see outsourcing as part of their overall housing strategy. However, the question remains as to whether such approaches are still going to be confined to London. How long will it be before someone, somewhere outside London decides to test the water? In the context of Best Value it is becoming increasingly difficult for authorities with multiple contract areas to argue that real competition and an alternative provider(s) in one or two neighbourhoods or districts will not stimulate overall service improvements.

There is little evidence to suggest that continuing with monopoly provision is in the best interests of residents. Indeed, it would be no surprise if the real problem with SERCO’s contracts with Sutton are a product of replacing a public monopoly with a private monopoly rather than any failing on the part of either the company or the council. If their three contracts had been split between SERCO, (say) a housing association and the in-house team the outcome might well have been different. The pressure to perform would have been greater and the focus on the customer would have been heightened. These are the clearest benefits of a diverse marketplace.

It must surely, therefore, only be a matter of time before one of the metropolitan authorities experiments with outsourcing some of its stock. The case for continuing to say "in-house is always best" will become more and more difficult to argue if the performance in those authorities who have gone for diversity can be shown to have improved. Similarly the logic for a complete transfer of an authority’s stock needs to be reviewed. Clearly such transfers offer a solution to investment problems but they do not necessarily provide an answer to poor service performance. A range of solutions is surely a better way forward.

While there is reluctance among the metropolitan authorities to take the step, the subject no longer appears taboo. If only the same could be said of the housing association movement. With a few notable exceptions there seems to be little enthusiasm for embracing Best Value. Yet many RSLs have a stock profile which is spread across a number of local authorities making them ideally suited to trying different management solutions with different geographic areas of their stock. At the same time how much benchmarking with other providers and particularly those from the private sector is going on - very little based on our experience. The case for looking at alternative management models would be difficult to resist if benchmarking was taking place and was exposing high operating costs in comparison with other providers.

Whatever happens over the next two or three years it is likely that the marketplace will continue to develop. There will be more outsourcing and more innovation in contracting services out. A breakthrough outside London must surely happen soon and housing associations will only be able to ignore Best Value for so long.