Empty Homes Network

The report prepared by Lancashire County Council's Internal Audit Team into the Rossendale/PLACE Empty Homes Project reveals an extraordinary number of flaws in basic processes of management and procurement associated with the HCA-funded scheme. Background Problems with the Empty Homes Project emerged in spectacular style when the private sector contractor with responsibilty for nearly all aspects of delivery went into liquidation in February 2015, leaving Rossendale with numerous half-completed, unoccupied and in some cases untenantable properties to deal with. The financial liabilities of the Council are still uncertain but look to run to several hundreds of thousand pounds. The "Empty Homes Project" was fronted by Rossendale on behalf of the PLACE consortium of five Pennine Lancashire councils. These are councils (the other four being Hyndburn, Pendle, Burnley, and Blackburn with Darwen) with some of the most challenging empty homes issues in the country. The consortium also included at least two housing associations; but it was Rossendale Borough Council that took easily the lion's share of the burden of delivery on behalf of all the five councils and the consortium as a whole. It seems that the liability of the other four councils is the subject of some ongoing discussion, but reading between the lines, the evidence offered in the report seems to suggest that Rossendale failed to create any contractual obligations that it can fall back on and will have to bear any financial losses itself. The Empty Homes Programme The hugely ambitious bid for HCA Empty Homes Programme funding was the second largest in the country behind that of the Greater Manchester Consortium, reflecting in part the extent of the empty homes issue in this part of the country. The first round bid was for £4.8million, representing 474 units in a mixture of Purchase and Repair and leased properties. The bid was subsequently rejigged to include a Revolving Loan component, apparently dreamt up by AAAW Ltd. Whatever teething problems may have existed, they did not diminish Rossendale's appetite, as a later, Round 2 bid was also successful. However, this seems subsequently to have been subsumed back into the under-performing Round 1 bid - as were several other Round 2 bids elsewhere: at least it does not feature in the details of the HCA programme as it stood at 31st March 2014 in a list obtained by EHN in July of that year. What went wrong The report provides a summary of the issues uncovered, which reads as follows:

No assessment was made of the risks and appropriate controls in taking up the funding stream from the HCA and operating the programme within the council and across Pennine Lancashire.
Normal management controls, expected procedures and statutory requirements were over-looked or over-ridden almost entirely.
Other than the decision to act as accountable body for the funding, no decisions at all relating to this programme were made by elected members and no information was provided to them.
Insufficient input was sought from the council's legal and financial statutory officers who were therefore only tangentially involved in and aware of the programme, and insufficient attention was given to detailed financial and legal matters.
There was inadequate understanding of the funding programme and the way it was operated by the council's contractor.
The way the programme was implemented and its targets were achieved changed significantly over time.
The contractor was poorly commissioned and inadequately procured by the council. An inadequately skilled contractor was appointed who failed to deliver the council's unspecified requirements, but who instead incurred considerable liabilities on the council's behalf.
The contractor's work was not directed effectively and was inadequately monitored by the council, and payments have been made in ways that were not agreed and not transparent, for work that does not appear to have been done, or completed to adequate standards.
All the warning signs regarding the design of the funding stream and its operation in practice, including a number of external experts' advice and guidance, were ignored.
There was inadequate supervision of a single council officer who was effectively made responsible for the management of the entire programme and given the scope to act in whatever way they felt was appropriate.
The officer involved appears to have acted with good intentions, but with poor direction and inappropriate objectives that over-rode the council's other broader objectives.

The full report (accessible from here) goes on to document the failings in gruelling detail - though there is probably more to come, as disciplinary and police investigations are continuing. To pick some practical examples:

The single private sector contractor, AAAW Ltd, chosen by Rossendale to deliver the leasing component of the massive 474-home project is described in the report as having "no effective expertise in property renovation and management".
The initial leases were entered into directly by AAAW Ltd. even though they were not a registered provider and were thus clearly unable to meet HCA grant requirements.
Subsequently, Rossendale took on the leases, but AAAW Ltd issued tenancies in their own name despite having no interest in the properties.

Reading through the catalogue of errors documented in the report, it as though the captain of the Titanic, on spotting an iceberg on the distant horizon, altered course to head straight towards it, having first made sure to ring up "Full Speed" and deck the ship from stem to stern with celebratory bunting. The reference to "captain" may have some echoes in the real world as the report identifies a shadowy but potentially important role for the previous Chief Executive Helen Lockwood: "We understand that the former Chief Executive took a close interest in the programme and strongly supported it. However we have been told that she often worked directly with the Health and Housing Manager and bypassed the Head of Health, Housing and Regeneration. Nor does she appear to have involved or informed the Management Team. ... Whatever the former Chief Executive's involvement, nor did she did [sic] act effectively to check the action being taken. The authors of the report do note, however, that the former Chief Executive had not been interviewed; and she in turn has objected that she has not been contacted. In a statement reported in the Rossendale Free Press, she states "Let me be clear that I was as disappointed as anyone when AAAW went into liquidation, but it’s also important to know some key facts about this investigation. Since leaving Rossendale for a new post last January I have been given absolutely no opportunity to make any comments on this. Indeed, despite making direct contact and offers on numerous occasions, I have been asked no questions, nor even requested to clarify any facts. “The report has been completed without a single word of evidence from myself despite my efforts to engage. “It’s also important to know that I’ve not even been given the courtesy of being able to see the report at any time – even after somebody deliberately leaked a segment to the media. “To get to the truth, which is surely what motivates any fair investigation, it’s clear that evidence should be sought and considered from all the individuals involved. “The fact that has not happened raises pretty serious questions about the validity of an investigation which also fails to address the roles of other significant individuals.” In terms of practical delivery on the ground, the two key players were the Health and Housing Manager and the Director of AAAW Ltd, Clive Thomasson. Both had previously worked together at another local authority. Both were members of the Empty Homes Network. No doubt many empty homes practitioners may feel twinges of vicarious guilt - who, after all, is perfect? Perhaps, there but for the grace of God go you or I. Comments and lessons Competence The evidence in the report suggests that the two principal players identified above were a long way out of their depth with this scheme. The strong evidence is that they did not possess the skills needed for the work involved. As regards the private sector contractor, there cannot be much room for compassion: they offered, for profit, a commercial service which they seem – on the evidence given - to have been in no way fitted to deliver. As regards our colleague working within the Council, the position is very different. It should have been obvious to the senior tiers of management whether or not she had the skills and depth of experience to manage a £5million pound programme of works and lettings involving nearly 500 empty home, with the range of property-, finance-, and law-related issues this would necessarily entail. Were those skills actually in evidence when she took responsibility for this project or was she an enthusiastic person with a solid track record - established over a good number of years, but in very different contexts and at a much more junior level - who was conveniently at hand to task with delivery? Was she in any way trained for or supported in her role? Was the almost complete absence of proper management oversight and guidance somehow her own fault or was she tacitly encouraged to operate in a bubble - possibly by the previous Chief Executive, no less - in order to achieve delivery? It is to be hoped that she will be seen more as the victim than the perpetrator here should such factors emerge as significant. Local authorities as delivery agencies The capability of local authorities to deliver effective empty homes strategies has been well demonstrated, in Kent and Leeds, in Wales and Scotland, in Plymouth and Exeter, in Sussex, Birmingham, Carlisle, Amber Valley, Reading, Rochdale, Peterborough, Lewisham… of course the list is far too long to pursue. But this does not justify smug assumptions about the capability of local authorities across the board or, for example, that the elaborate and widely-criticized contractual arrangements put in place by the Homes and Communities Agency were, in their totality, superfluous. The Rossendale experience (and lesser difficulties with delivery experienced elsewhere) provide a cautionary tale. In the case of the Empty Homes Programme, there is considerable anecdotal evidence of local authorities not knowing what they were bidding for, ignoring clear messages in the documentation, lacking essential expertise and resources, and not understanding their local markets. For EHN, which has always regarded the local authority empty homes strategy as the sine qua non for effective and consistent action to tackle empty homes, it justifies our equally strong belief that central government leadership, or as a minimum the kind of external review offered by the Audit Commission, is needed to raise standards across the board and avoid a postcode lottery. It is practitioners themselves who suffer through the complacency of local authorities, through unrealistic expectations, inadequate support and training and insufficient resources. The HCA From another angle, whilst the HCA contracts, unduly complex though they may have been, will presumably have protected the HCA's money, it is of interest that there was nothing in their monitoring regime to prevent or mitigate the debacle. As the report points out, the criteria for drawing down HCA grant did not include a requirement that the properties be occupied. Had such a criterion been in place, with realistic timescales applied to the time between acquisition and occupation, issues with the Rossendale programme might have been caught a good deal earlier. As it is, in September 2015, three years after contracts were signed and six months after the programme of refurbishment was supposedly completed, just 152 out of 359 leased properties were occupied: 207, then, were still vacant. That is a rather astonishing result for an "Empty Homes Programme". It is not discussed in the current report whether the HCA might proceed with an independent regulatory investigation given Rossendale’s status as a Registered Provider and Investment Partner; by the normal standards applied to Private Registered Providers, one would think such investigations would be obligatory. Further useful experience may come to light should this happen. Housing associations Many local authority practitioners have expressed frustration about the lack of appetite amongst housing associations for empty homes work. Housing association partners have sometimes not been forthcoming or, if they have engaged—honourable exceptions aside—have been seen to drag their heels when it comes to actual delivery. As regards appetite, these frustrations are understandable if not entirely justifiable: they reflect the way that most housing associations have morphed into large organisations that are no longer well adapted (as they once often were) to dealing with scattered street properties. They have become, it might be said, like local authorities themselves. In the case of the Rossendale scheme, the report notes that the two housing association members of the consortium were criticised for being unduly cautious in their approach. But the report records one housing association Chief Executive as attempting on several occasions to draw the council’s attention to the issues with the scheme—including such key aspects as the likely demand for the refurbished homes. This was a key piece of input that was consciously ignored. The lesson here is that housing associations certainly do have an important reservoir of expertise: local authority practitioners need the ability to discriminate between feeble excuses and helpful advice. Empty homes practitioners The Empty Homes Network includes numerous skilled practitioners whose expertise, had it been called upon, could have prevented this unhappy saga from unfolding. EHN members (including the author) did offer presentations at regional HCA workshops designed to facilitate delivery of the programme as a whole. Reviewing a typical EHN presentation, most of the key messages were there, but there were some unhelpful ones too, such as “failure is not an option” (actually it was an option as far as reducing the size of a contract went). There was also a lack of attention to demand for the refurbished properties as opposed to securing a supply from landlords, reflecting a southern orientation. Higher management too is characterised as more of an obstacle than a help (though if this is construed as “disengagement” the criticism in the case of Rossendale would be a fair one). These reservations aside, however, the centrality of effective procurement, the need to review the progress of delivery on the ground, the value of drawing on proven models including the use of standard legal documentation were all rightly emphasised: had any one of these been taken seriously the outcome in this case would have been very different. It bears repeating that these suggestions include key building blocks in any effective national empty homes initiative. Addtionally, there was a local, PLACE Empty Homes Group, but this seems not to have been involved on a day-to-day basis. The audit report gives scant regard to this body, or to any role it might have played (this is true for the PLACE partnership structure as a whole). Once Rossendale volunteered for the lead role, and in the absence of any requests for help and any obvious risks to partners, it was perhaps natural that Rossendale was just left to get on with it. The problem going forwards will be to establish how peer support and expertise could have been levered in, or might be levered in on future occasions, at the points in the process and at the level of detail where it could play a positive role. In conclusion, this report leaves anyone with an interest in tackling empty homes with plenty to reflect on.