PI's: Major & Cyclical Works Cost
Value for Money: Major & Cyclical Works Cost
CPP 03: Cost per property – Major and cyclical works
Rationale, Definition & Worked Example
Below you can find information regarding the rationale, definition and formula for this performance indicator. This includes a worked example to demonstrate how this indicator should be calculated.
Rationale
The key to successful benchmarking of these measures is allocating your costs in a consistent way. Cost allocation varies significantly between housing providers, meaning cost per property measures within financial statements are not comparable.
Organisations wishing to benchmark these high level cost per property measures need to ensure they are closely following the definitions.
However, responsibility for ensuring data accuracy of these measures falls to the housing provider.
The purpose of this exercise is effectively to split your total operating costs into five distinct areas:
However, the fifth category (other) includes items that are not benchmarkable (as they will vary depending on your operational portfolio) and as such are merely set aside for the purposes of this benchmarking exercise.
We are effectively benchmarking the costs of your core landlord functions that every landlord needs to carry out.
The exercise splits costs by tenure type to provide additional granularity and accuracy. For the purpose of these measures (and ease of data collation) we do not apply this split. Ie you need not be concerned by tenure type. Simply divide all costs into the five categories and divide them by all units in management.
Organisations wishing to benchmark these high level cost per property measures need to ensure they are closely following the definitions.
However, responsibility for ensuring data accuracy of these measures falls to the housing provider.
The purpose of this exercise is effectively to split your total operating costs into five distinct areas:
- Housing management
- Responsive repairs and void works
- Major works and cyclical maintenance
- Overheads
- Other
However, the fifth category (other) includes items that are not benchmarkable (as they will vary depending on your operational portfolio) and as such are merely set aside for the purposes of this benchmarking exercise.
We are effectively benchmarking the costs of your core landlord functions that every landlord needs to carry out.
Employee and non-pay costs
Your non-pay costs should generally be fairly straightforward to allocate to the above five categories, using the guidance below. Your employee costs may be more difficult. We would expect the majority of employees to fall wholly into one of the above five categories. However, some staff (particularly in smaller housing providers) may carry out functions that cut across two or more of the categories. In this instance, the cost of these staff should be apportioned between the five categories based on the time they spend carrying out each role. For example, a call-handler taking calls relating to both arrears and repairs will need to have their cost split between housing management and responsive repairs and void works.Units and turnover
To scale your costs for benchmarking purposes, we divide them by the number of units in management.The exercise splits costs by tenure type to provide additional granularity and accuracy. For the purpose of these measures (and ease of data collation) we do not apply this split. Ie you need not be concerned by tenure type. Simply divide all costs into the five categories and divide them by all units in management.
Definition
This is the total direct costs relating to major works and cyclical maintenance (both management and service provision) divided by the number of units in management.
It includes capital spend on major works.
The numerator must include:
It includes capital spend on major works.
The numerator must include:
- Total cost of all staff directly engaged in the delivery of major works and cyclical maintenance, both in management (client side) and service provision (contractor side) if applicable, and include their national insurance, pensions and on-costs.
- All non-pay costs relating to major works and cyclical maintenance, including capital spend
- Major works and cyclical maintenance refers to planned maintenance (as opposed to reactive) and includes servicing of gas appliances and lifts, as well as window cleaning and replacement programmes.
- Include planned maintenance of communal areas.
Major works and cyclical maintenance direct staff includes:
- DLO staff, and any other staff carrying out major works and cyclical maintenance
- Staff involved in management of major works and cyclical maintenance, which may be contractor management.
- Staff involved in stock condition surveys and pre and post inspections.
- Staff involved in aids and adaptations programme management
- Directors and heads of major works and cyclical maintenance functions and their PAs (note if they also look after responsive repairs and void works, only a proportion of their costs relating to major and cyclical should be counted)
- All staff engaged in housing management as detailed under direct cost per property of housing management
- All staff engaged in management or delivery of responsive repairs and void works as detailed under direct cost per property of responsive repairs and void works.
- The chief executive and all staff involved in overhead / back-office functions, as detailed under overheads as a percentage of turnover
- All estate services contractor-side staff, such as caretakers, concierges, groundsmen, cleaners etc.
- All care and support staff
- All staff carrying out wider-role functions, such as community investment, financial inclusion, regeneration etc.
Major works and cyclical maintenance non-pay costs include:
- DLO costs
- Payments to contractors
- Aids and adaptations
- Professional fees (architects clerk of works etc)
- Compensation payments for disturbance
- Decanting costs
- Contract preparation costs
- Stock condition survey costs
- Expenses relating to resident consultation around major works and cyclical maintenance
- Capital spend on major works – note this excludes capital spend on development. Be careful! If your capital spend includes an element of capitalised staff costs, be sure not to double count if you have already included the staffing costs in the employee costs section.
- Any capital spend relating to development, IT or anything that is not major works.
- All housing management costs as detailed under direct cost per property of housing management
- All responsive repairs and void works costs as detailed under direct cost per property of responsive repairs and void works
- All overhead / back-office costs as detailed in overheads as a percentage of adjusted turnover
- Estate services (contractor side) costs
- Costs relating to care and support
- Other costs eligible for service charge
- All costs relating to wider role type activities (such as area regeneration, financial inclusion, employment and training)
- Reconciling items such as
- One off redundancy costs
- One-off pension deficit funding
- Loan fees and financing arrangements
- Charges for bad debts
- Charitable donations
- Depreciation of housing stock
- Impairment
- Cost of sales
- And any other costs that are not part of your ongoing operating expenses.
Formula
Total direct major works and cyclical maintenance costs ÷ Total number of units in management
Where:
A = Total direct major works and cyclical maintenance costs
B = Total number of units in management
CPP 03 = A ÷ B
Worked Example
Total major works and cyclical maintenance costs = £1,500,000
Total number of units = 1,000
Calculation:
£1,500,000 ÷ 1,000 = £1,500