The social housing sector is arguably one of the least mature in terms of FS outsourcing. Facilities services outsourcing in the social housing sector grew year on year to 2008, influenced by the buoyant state of the economy, as well as the public sector developments funded. However, the market has declined in recent years, primarily due to the economic downturn and Government spending cuts. In 2011 it is estimated that the FS outsourcing market in the social sector was worth around £8.4bn excluding management costs.
The changing structure of the social housing market and pressures to achieve ‘best value for money’ is impacting on the facilities services provision within the social housing sector. A wide range of approaches are currently being adopted by the Local Authorities (LAs) and Housing Associations (HAs).
The facilities services provision market in the social housing sector has changed significantly in recent years as Connaught and Rok went into administration in 2010, with others following such as Kinetics Group. Social housing providers are now looking for less risk, greater stability and control over operations. There appears to have been a shift in the types of contracts placed, with smaller bundled packages being placed and often involving more than one contractor.
The vast majority of LAs and HAs retain the overall management of the housing stocks but sub-contract out at least some of the work to external contractors. ‘Bundled’ contracts (the delivery of multiple services under a single contract) account for around a third of the housing expenditure in both the Local Authorities and Housing Associations sectors. Total facilities service contracts remain a very small proportion of contracts placed, with individual & in-house delivery being the preferred option (as shown in the above chart).
Work activities that are often bundled include responsive repairs and planned maintenance; whilst (within our definitions) home improvement contracts are generally placed as individual contracts. The latter, in recent years, have been carried out under the Decent Homes Programme, which is reaching its final stages with just 13% of Local Authorities and under 3% of Housing Association dwellings being non-decent. Current expenditure (routine and planned maintenance) accounts for the largest expenditure on social housing, although trade sources have indicated that there has been a reduction in the level of planned maintenance in recent years.
Government spending cuts has seen many FS providers operating in the social housing sector seek to reduce their exposure to capital expenditure in favour of day-to-day maintenance work. The report provides a detailed analysis of expenditure and facilities services provision within the social housing sector, broken down into the Local Authorities / ALMOs and Housing Associations /registered providers sectors.