Housing associations launching in house contacting arms to battle VAT increase
Fears are growing that housing associations are looking to take their repairs and maintenance work back in house in response to the collapses of Rok and Connaught and the rise in VAT.
The concerns come after housing association L&Q became the latest to launch a contracting arm last week. Other housing associations reliant on Connaught or Rok have set up in-house contracting arms, called Direct Labour Organisations (DLOs), using staff made redundant when the firms collapsed.
Analysts say the move to DLOs is being driven by clients worried about maintenance contractors going bust, and by the rise in VAT to 20% in January, which means in-house operations could generate 20% savings.
Chris Durkin, chief executive of Willmott Dixon support services, said: “A number have been forced to go in-house, a number have considered it, and I think some probably will. But they’ve got to do it with their eyes wide open.”
The biggest so far is Liverpool-based association One Vision, which has set up a 100-strong arm, One Vision Housing Property Services, to do maintenance work after its sole contractor, Connaught, collapsed.
Somerset-based housing association Knightstone said in January it was setting up a company to service its 1,800 tenants from ex-Rok employees.
Jeffrey Adams, chief executive of housing contractor United House, said: “Some housing associations are setting up their own building companies. The question is whether they’ll be able to manage them.”
Housing associations are also asking contractors for more proof of financial stability, as well as considering breaking contracts up into smaller parts.
Mike Brogan, director of housing association procurement consortium Procure Plus, said some clients had asked him to find ways of sourcing building and repairs work.