Stock Condition Surveys

Stock Condition Surveys

Purpose of the Stock Condition Survey Obtaining accurate and robust stock condition/investment information on the stock is an essential part of an options appraisal. Investment in the stock is the single largest area of expenditure in any business plan and hence accurate information is crucial. The primary purpose of the stock condition survey is as follows: To identify the minimum level of expenditure required to bring all properties up to the decent homes standard by 2010 (including the Housing Health and Safety Rating System) and then to maintain them at that standard for the duration of the business plan; The identification of expenditure required to meet the obligations of the Council which may, in some cases, go beyond decency; The identification of expenditure required to meet the aspirational requirements of the tenants and/or expenditure required to ensure sustainability in the assets/properties; The assessment of investment requirements must be over the period of the whole business plan rather than simply a short term view. All Local Authority properties are ageing and, inevitably, expenditure will increase in the future. This needs to be reflected in the business plan, asset management plan and capital strategy. Before you start on a survey of the stock it is important to consider what information you already have in house. Do you have staff with detailed knowledge of the stock? Do you have an existing survey, how recently was it done, is it robust for the purpose you now require it, can it be updated or validated? Do you need a completely new survey? It is important to identify the gaps in your current information. Consideration should be given to what is good and bad about any existing system and what would be your ideal in terms of information. You need to consider if you could populate, or partly populate, a potential survey from existing in house data so that it can be validated at the time of the survey. You also need to think about how you are going to keep any information up to date and how you could include this requirement in any contracts. It is critical that you prepare your in house team by involving them in the process from the outset. Their role in considering the logistics of the data collection and data maintenance will be invaluable.

Who should undertake the survey? There are two options open to the Council; namely undertaking the survey in-house or employing one of the specialist firms of surveyors who undertake this type of work. When considering the options careful consideration should be given to price against quality; the lowest price option may not necessarily be the best value for money in the long term. The issues to be considered with these alternative approaches are as follows: In-House Survey There is no reason why a survey should not be undertaken in-house but all Local Authorities need to be fully aware of the following issues: There are significant resources required to undertake a stock condition survey and this should not be under estimated. Undertaking these surveys is a specialist area and Local Authorities considering embarking on the surveys themselves need to be sure that they have the expertise in-house. Consideration may need to be given to the employment of a specialist to assist in the management of the process where necessary. It is essential that the Local Authority has robust investment information and flexibility is built into the option appraisal process to enable the Local Authority to proceed along any of the alternative options. In these circumstances, the information coming from an independent consultant will be helpful. At the least, it is essential that the in-house information is validated or to a standard capable of being validated should the need arise. In the event of a decision to proceed along the ALMO route, it is crucial that robust decency information is made available. This information will be scrutinised in great detail if an ALMO bid is made. Local authorities should have regard to the ODPM Building Costs Model for more information on what is required. In the event that a Local Authority decides to proceed along the LSVT route, an in-house unvalidated stock survey will not be acceptable for the purposes of the funders/new RSLs. An independent survey will have to be commissioned or in-house survey validated to a standard acceptable to funders. It should therefore be borne in mind that if an in-house survey is undertaken and a decision is made to proceed along the stock transfer route, a further survey may need to be undertaken in the future. It may be therefore worthwhile considering the relative costs of validating existing information vis-a-vis commissioning an independent survey at an early stage. The ODPM Cost Generation Model for LSVT will give further information on the level and format required for an LSVT application. With the above in mind it might be useful to run figures through both the BCM and STM to test how well existing data can be used. This may assist in showing up how authorities should deal with each archetype for each option, what the LSVT valuation is likely to be, how the BCM will steer the authority into considering other resources, etc. It will also help authorities be aware of what is involved in making applications for each of the different options.

If the authority decides to pursue a PFI scheme ODPM does not necessarily expect a completed survey for the area/estate covered by the proposed scheme. Indeed, should the authority be successful in moving to a PFI procurement, ODPM will expect a survey to be jointly commissioned with short listed bidders to inform contract negotiation. However, authorities are expected to outline the main works that they anticipate would need to be carried out based on their best available information. It is therefore essential that authorities present as robust a picture as possible about the condition of their stock. If the Local Authority decides to retain its housing stock there will still be a need to have information in a format that can be updated for Business Planning purposes.

Employment of Specialist Consultants The employment of specialist consultants to undertake the stock condition survey has obvious advantages. They are likely to be able to undertake the survey far quicker since they will have resources dedicated to the task, they will have developed the expertise to undertake the work and they will be able to provide an independent view on the condition of the stock. In addition, they will be able to provide all the necessary warranties in the event that either an ALMO or a stock transfer is chosen as the preferred option. However, where a decision is made to outsource this work great care should be taken in the engagement of external consultants and the following should be borne in mind. If the decision is taken to appoint consultants it is essential that the local authority retains ownership and management of the project. A named in-house team or individual should be tasked with ensuring that staff receive training, systems are compatible, etc. Many Local Authorities have been disappointed with some of the stock condition surveys that have been undertaken. It is therefore absolutely essential that the firm engaged to undertake the work has the necessary knowledge and credentials. Taking up references with other Local Authorities is a crucial part of the procurement process. It is important that you are comparing like for like on referencing. For example, what kind of survey was it, was it to inform an option appraisal or specific to an LSVT proposal? Care needs to be taken to ensure that the correct legal appointment is made and that the surveying firm is committed to providing any necessary warranties to meet the various options that may be considered. All Local Authorities must ensure that the data from the survey, when it is provided, will be on a database that can be used to analyse the survey results and produce the outputs required. Ideally the database should be compatible with the local authoritys existing one. In particular, an assessment of decency is crucial. The survey is only part of the process, albeit an important part. Development of internal reliable processes, databases and trained staff is essential for the ongoing provision of reliable data.

The Survey Design Much has been written on how stock condition surveys should be designed, and particular reference should be made to 'Collecting, managing and using housing stock information' (DETR, August 2000). The main lesson learnt from surveys that have been unsuccessful is that far too much detail has been collected and very often much of this information is never used or updated. Focusing on the material cost items in order to modernise the properties and to make them decent is the key to the success of the exercise. Information on the age of components as well as the state of repair will be important so that potentially non-decent homes can be identified as well as currently non-decent homes. In the event that a decision is made to undertake an in-house survey and the necessary skills are not available in house, a specialist can be employed to assist with the survey design/set up stages. The Sampling Process It is important to ensure that the results of the survey can be analysed to produce all the outputs required. The following are some of the issues that need to be considered: In the event that the stock is to be retained, it is important to fully understand the implications on the investment programme. The survey must clearly report that, firstly, the properties can be made decent in a retention scenario and, secondly, what other works could be completed in addition to decency, both in the short and long term. In a retention scenario, many Local Authorities may be financially constrained and the ability to prioritise works where it is most needed will be particularly important. The likely effect of changes in the management and maintenance allowances should be considered especially where these may reduce in real terms. Where an option for extra investment is not chosen a higher sample survey is likely to be required, together with accurate forecasting of when critical components are likely to fail after 2010. In the case of an ALMO, the production of very robust information on decency is crucial since this information would form the whole basis of an ALMO bid. This information needs to be detailed and the survey must be able to produce the necessary outputs to inform such a bid (refer to ODPM Building Costs Model for more details). There is very specific information required in the event of a PFI. Much of this information revolves around the need to bring the properties up to the output specification standard. Whilst this information would not be available at the beginning of an option appraisal process, it is important that the survey design clearly recognises the standards to be adopted for component replacements. In addition, PFI projects have, up until now, generally involved smaller pockets of properties/estates and it is important that the survey can produce the outputs that are accurate down to this level. This again will necessitate a higher sample. A stock transfer is likely to involve an investment programme that goes beyond both the Councils current obligations and also decency. Most importantly, a transfer is likely to attempt to address the aspirations of the tenants and these need to be understood and clearly costed within the survey. It is essential that at the option appraisal stage sufficient information is collected to allow authorities to properly assess the suitability of each option or indeed a mix of options. Hence it is important that information can be disaggregated, etc.

It is inappropriate in this guidance note to state what sample should be required because clearly this will vary depending on the size of stock, the type of properties and the variation within them. However, we would suggest that in general, a minimum 10% sample will be required and often, a sample of nearer 20% / 25% will be appropriate. Non-Traditional Properties Many Local Authorities will have within their stock properties constructed using non-traditional methods. There are a whole host of different types of these properties and the issues associated with them vary accordingly. The most problematic types of non-traditional properties are the PRC (Pre Fabricated Reinforced Concrete Properties) which are designated defective and are unlikely to have a long term life without significant structural works undertaken. It is important that the short and long term liability of these properties are fully understood and costed within the business plan/option appraisal. In the event that this information is not already available within the Local Authority, consideration should be given to the engagement of specialist engineers to assess the condition and long term life. Often this work can be carried out as a supplementary part of the stock condition survey. The sample size for this piece of work will be dependent on how many types you have and what the issues are. It may need to be higher than the sample size for the traditional stock. Usually Local Authorities have detailed records of works they have undertaken to non traditional properties in the recent past. It is important to note that often these works do not address decent homes issues. Building Costs The stock condition survey will identify programmes of work required to meet the various standards set out by the Local Authorities. These programmes need to be costed and this costing is generally undertaken by means of applying a schedule of rates. It is important that the unit rates adopted reflect the local market and what can be achieved by adopting the Egan principles of partnering and the contemporary procurement methodologies. It may be appropriate to seek specialist advice in this area because the levels of costs adopted can have a significant impact on the option appraisal process. Benchmarking in your area can also be useful. High Rise Properties Some Local Authorities will have properties of high rise construction. As with the non-traditional properties, these blocks are potentially significant liabilities in the long term in terms of repair work to the structure and also replacement of the central electrical and mechanical plant. If good information is not available already, consideration should be given to commissioning surveys so that the liability of these blocks is fully understood. Again, the opportune time to undertake this work is as part of the stock condition survey process. Many of the issues raised in the nontraditional properties section will also be relevant to high rise properties. It is important to note that if an ALMO is considered several expensive components, for example lifts, do not relate to the decent homes criteria.

Costs Relating to Leaseholder Units and the Scope for Re-charging As more Options Appraisals are now needed on stock that has a higher proportion of leasehold in flatted blocks, it is essential that those costs attributable to the leasehold units are easily identifiable, and existing leases checked to establish how much of this work can be re-charged to the leaseholders. Costs of work that must be undertaken to the block, but cannot be re-charged will have to be met from other sources. ALMO funds are exclusively for tenanted units, and in the case of an LSVT, costs that cannot be recovered will affect the valuation. Once estimates of future works are available as part of the SCS, then this information should be given to the Right to Buy team, so that all S125 notices in response to RTB applications may reflect costs of future works. Without this information, scope for recovery will be limited. The General Environment In some cases work required to the general environment surrounding the properties is as important as the work to the properties themselves. Whilst this environmental work may not contribute to decency it may be essential in the context of sustainability. It is essential that all necessary work is reflected within the business plan and the opportunity should be taken as part of the stock condition survey exercise to identify the need for this work e.g. additional external lighting for security, improved fencing, off-road car parking etc.