April 2003: ready or not?

Not many articles on supported housing start by quoting Churchill, but it could be argued that we went through a period of 'phoney' war while we prepared ourselves for Supporting People.

If the beginning of the end is not in sight, at least we are now approaching the end of the beginning.

We probably only have six months or so left for new schemes to be set up under transitional housing benefit, and with many of us now implementing budgets and charges for 2002/03, attention can turn to the practical issues affecting how we work with Supporting People.

These include ensuring that information technology supports the needs of Supporting People, the longer-term strategic impact of the new regime on the sector and the impact of rent restructuring.

Landlords with April rent years will have already separated out the cost of support services from those of housing management.

While this might be clear in itself, it may well have required a review of how those services were costed, especially how overheads were apportioned and viability was approached.

At the same time, Supporting People cannot be disassociated from rent restructuring.

There are at least two schools of thought: to converge now or not to. There are advantages and disadvantages in each approach, but the approach adopted may impact on a landlord's ability to capture and retain business in the post-April 2003 world.

Administratively and practically, there is something to be said for having decided to take the plunge and converge now – possibly moving any excess of costs over housing management into support, if that is appropriate.

You will also have considered your organisation's ability to fit within the rent increase ceiling or gain approval for rents above it. If you take this path, you can plan with confidence and model your future knowing that you have a stable baseline.

On the other hand, have you really addressed the fundamentals of your position?

The alternative course of action is to have properly costed your services, both housing management and support, and then seek to address any problems which arise as part of a Best Value review.

Such decisions cannot be made without some thought as to what the future will look like. A major concern is that the Supporting People pot will simply not be big enough for all its clients and that the current estimates will not be supported when they reach the Treasury.

Even if it is appropriately sized now, how will it change over time? If demand continues to grow while the pot remains unchanged in real terms, how will funders get their needs met, providers be adequately recompensed and our tenants receive the proper support?

There are at least two potential outcomes, which may be interdependent.

First, there may be much greater competition between funders. The sector's efforts to address past questions of viability through seeking to properly fund future services may entice new entrants to the market, possibly from the private sector.

How well prepared for that are you? Are your underlying systems and procedures, your staff training and tenant feedback good enough to give you confidence for the future? Or will there be a gradual deterioration in the nature of the contracts given, which will lead funders to more basic levels of service specification? Supporting People in itself may suggest otherwise, but time and financial constraints exert their own powerful pressures.

An alternative outcome, although one interlinked with the first, is that Supporting People gradually follows a path already trodden by that of registered care, with an initial burst of additional provision increas-ingly eroded by charges pegged to RPI or less and followed by a withdrawal of provision as providers cut back on unviable services.

Obviously, we cannot predict the future, but we can assess the dangers of alternative strategies and thus have a greater chance of reacting appropriately to the inevitable shocks.

The approach set out of seeking to achieve convergence in year one, if it is to be achieved through bundling costs outside the rent envelope into support, runs the risk of pricing support charges at unviable levels.

This may not be an issue in the early years but will inevitably become one later as funders pay more attention to charges. At the same time, the scissors effect of costs (particularly staff costs) increasing at a higher rate than income will return to continue the gradual snipping away at viability that has affected the sector.

There are also powerful subsidiary issues that will affect us in unpredictable ways. Political pressures and those of capped or restricted future budgets may drive local authorities to prioritise some clients above others.

While the DTLR is alive to this, it is impossible to say how it will work out in practice. If you provide services to a particularly high profile client group, will you be at the mercy of prevarication and delay while funders confirm their responsibilities or the DTLR seeks to enforce them?

Obviously revenue funding is just one part of the process. If you are seeking to expand provision, what are the capital grant issues?

The Housing Corporation has given no indication that it will change its traditional funding role, although grant funding levels may fall from 100 per cent.

How well other funding sources or private finance can make up any shortfalls remains to be seen – the concern here being more one of how target rents fit within rent envelopes and the ability of providers to gain acceptance to non-compliant rents through rent plans. It is unlikely that widespread waivers will be granted – to do so would undermine the integrity of the whole approach to convergence.

Returning to the more immediate issues, what steps have you taken to ensure that you are 'match fit' in information technology and properly prepared for the transition to the new grant regime next April?

The DTLR has done much to support local authorities in their new information technology requirements, but little has been done so far for providers. The National Housing Federation is seeking funding to push this forward, but so far there appears only limited progress from many suppliers.

Have you discussed what your supplier intends to do, and considered and costed up the impact of what is required?

Time is now running very short to have specified, tested and implemented any changes necessary.

Finally, have you considered what needs to be done to your finance systems before and after next April? You will be dealing with many more funders than just the Housing Corporation. The impact on cash flow is also complex – a loss of cash as we move to a monthly in advance system from one of quarterly in advance – but a potential gain as the support element of the current charges move to a grant basis from transitional housing benefit, and the inevitable arrears.

While the DTLR has put considerable effort into ensuring that all funders have solid mechanisms in place to ensure funders get paid, it would be wise to consider whether any of your funders may be more risky than the average, and therefore a sensible precaution is to implement an emergency line of support, should things not work out as planned.