Service and savings: the ALMO model

Eamon McGoldrick and Tracey Lees discuss the benefits of arm’s length management organisations in housing with Peter Cheney.

Arm’s length management organisations (ALMOs) were introduced in England’s housing sector in 2002 alongside the Decent Homes programme. As Managing Director of the National Federation of ALMOs, Eamon McGoldrick is satisfied that the model offers a practical example of how housing providers can improve customer satisfaction and deliver financial savings as budgets decrease.

England has 3.9 million social housing units, mostly owned and managed by housing associations (2.2 million). The remaining 1.7 million are council-owned, with 1 million directly managed by councils and 700,000 managed by ALMOs.

ALMOs are “council-owned companies that primarily deliver housing services.” He continues: “It’s a very simple model whereby the council delegates to the ALMO responsibility for all management, maintenance, asset management and the running of the housing services under a contract.”

The core income comes from the annual management fee paid by the council to the ALMO. Generally, a third of the organisation’s board is made up of council representatives (usually elected members), a third are independent members drawn from financial and legal backgrounds, and a third are tenants.

McGoldrick explains: “They have all the responsibilities of company directors and it’s wonderful to see them round the table overseeing things such as procurement of contracts, appointments of senior staff, signing off on the business plan, signing off on budgets.” Tenant board members can directly challenge managers on why services are not improving year-on-year.

Under the Decent Homes standard, councils could set up ALMOs to help bring the quality of stock up to a good or excellent rating – after which they would be given more capacity to borrow. That investment has been achieved but, as a testament to the “significant” benefits that they bring, 47 of the ALMOs are still in place.

ALMOs have a strong focus on providing high quality housing services, in keeping with their original intention, and promoting tenant involvement and empowerment. They also give councils the freedom to “forget about the dripping taps” and focus on more strategic issues.

The organisations can also be flexible vehicles for delivering other services. Stockport Homes, in Greater Manchester, now delivers facilities management for the 78 schools in the council area.

ALMOs are generally more flexible than councils as they are not bound by recess schedules and have a “very strong” focus on value for money i.e. with councils almost always demanding “more for less” when reviewing the management fee. Some ALMOs also manage services for housing associations and private landlords.

“Sharing and learning generally is something I think we do really well in the ALMO sector,” he adds. That open relationship began at the start of the process and is not always found among councils or housing associations, where commercial and political competition is a barrier.

“For some councils, it is a real alternative to privatisation or outsourcing,” McGoldrick notes. “Politically, they just find it very difficult to let go a crucial service – such as housing management – with vulnerable tenants.”

Barnet Homes was set up in 2004 and completed its £180 million Decent Homes programme seven years later. The council and the ALMO were keen to see what else could be achieved and set up a local authority trading company – the Barnet Group – in 2012.

It carries out the following functions:

• the social housing activity of Barnet Homes;

• the housing options service for homelessness and temporary accommodation (transferred from the council);

• Your Choice Barnet (offering specialist care and support to 245 adults with physical and learning disabilities); and

• a new build programme which began in February 2014 (the first social housing in Barnet for over 25 years).

“You have to earn your spurs,” Chief Executive Tracey Lees says of the relationship with the council. “Once you’ve demonstrated to them what you can do, then they bite off and agree a little bit more.”

Barnet Homes mainly works in Barnet but its care and support services are also “very popular” with neighbouring boroughs, who provide extra income for that work. The group has a turnover of £53 million, manages 15,000 properties and employs 500 staff.

“We do run the housing and the adult social care as though it is a business,” Lees adds. “It’s a social business, it’s a people business. We care about people but we do run it as a business. We’re not ashamed to talk about making surpluses.”

It focuses on recruiting talented employees and also runs apprenticeships for a range of roles, including surveyors and housing officers. “We have a very strong desire to be best in class,” she remarks, “not just the best in the ALMO sector but actually as a social landlord in London.”

Barnet’s tenant satisfaction (81 per cent) ranks very highly for the capital and has delivered 25 per cent savings to council’s housing revenue account since its inception. The adult social care and housing options services were very expensive when transferred but have become more efficient (saving £3 million) whilst maintaining good standards.

“My experience of the ALMO sector,” McGoldrick tells agendaNi, “is you save an awful lot of time and energy and you don’t fall down as many holes because someone else tells you how their journey went.” He sees a value in organisations being under “healthy pressure” to deliver and thinks that the sector could be “a little bit more brave” by presenting itself as an alternative to outsourcing.

McGoldrick comments: “There’s still a lot of politics. An ALMO may be doing well but a council may choose to close it down for political reasons.” He would therefore like to see more legal protection for ALMOs which are performing well.

Lees sees a successful partnership between an ALMO and local authority as very important: “There needs to be some mutual understanding of objectives. There needs to be trust and respect.” It’s also important to emphasise to tenants and the board that the additional services are “not to the detriment of the housing.”

In her view, the ALMO model also “busts the myth” that less money means poorer public services: “We have to look very carefully at what we are spending money on and we have had to talk to the people receiving our services about what their priorities are.”