New research on the opportunity for savings in the social housing sector, has revealed that an additional £1.8 billion could be saved by social housing landlords, if those that outsourced their housing maintenance and service management moved to bolder methods of outsourcing and if there was an increased take up across the sector.
The research, which has been compiled by strategy consultants Credo on behalf of repairs and maintenance provider Morrison, found that £25 billion would be spent this year by the 2,141 social landlords that between them manage nearly 5 million homes in the UK. Some £13 billion of this will be spent on housing maintenance and service management.
Currently around 60% of these services are outsourced to the private sector, delivering £1.1 billion of savings to social housing landlords. However, if outsourcing was increased to 95% and more collaborative or transformational models of outsourcing were used, which had a greater the degree of collaboration, risk transfer and longer contracts, then a further £1.8 billion could be saved.
The research found that at present only around 18% of outsourced contracts are collaborative and there is little evidence of transformational models.
Guy Wakeley, Chief Executive of Morrison, said:
"While social housing has remained relatively untouched by cost cutting to date, largely as a result of some expenditure such as reactive maintenance being considered non-discretionary, there remains a considerable need to drive for savings from housing providers.
"The sector has to respond to this demand but it must be done in the right way, squeezing prices is not a sustainable option and will only lead to poor quality services which are likely to fail.
"If instead, outsourcing can be increased and models which offer greater partnership are adopted, outsourced services will increase efficiency, be more cost effective and create jobs. Transformational outsourcing can be positive for the market and bring real change."
There are signs that collaborative contracts are on the increase according to the findings of the research, which found that this type of model formed 40% of the contracts starting in 2011. This suggests that social housing providers having negotiated lower prices are now looking at more collaborative methods to drive further cost savings.