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									ALG Housing Steering Group
Executive Meeting
ALMOs                                                          6
Report by:   Peter O’Kane           Job      Head of Housing

Date:        8th September 2004

Contact      Alice Ellison / Kirsten Firth

Telephone:   020 7934 9829   Emai
             / 9583          l:

Summary:        ALMOs have been a reality for over two years.
                There are a number of issues which need to be
                clarified or addressed by the Office of the
                Deputy Prime Minister (ODPM) including:
                operational flexibilities; financial freedoms and
                flexibilities; and the long term future of ALMOs.
                ODPM has recently indicated that it is in a
                position to begin to address some of these
Recommendation   Members are asked to:
s:               1.   Note that 11 boroughs have either set up
                      ALMOs or are in the process of setting one
                      up (para. 2.1; Appendix 1)
                 2.   Note that no two ALMOs will be the same in
                      terms of devolved functions and structures.
                      Similarly the local authority’s relationship
                      with its ALMO and its perception of the
                      local authority housing role will vary from
                      borough to borough (para 3.1)
                 3.   Note that ODPM has asked the ALG to form a
                      joint group with the LGA of local authority/
                      client side representatives. ODPM propose
                      to use this group as an ad hoc sounding
                      board for the local authority view on ALMO
                      issues (para 3.9).
                 4.   Note that ODPM has written to local
                      authorities and ALMOs in July 2004 to seek
                      help in establishing the scale and scope of
                      operational and procedural responsibilities
                      and activities that it might be sensible for
                      an ALMO to perform by agreement with their
                      parent local authority (para 4.1 – 4.4)
                 5.   Note that Keith Hill will make an
                      announcement in September on the review of
                      the long-term future of ALMOs. The ALG has
                      been invited to nominate a representative to
                      be a member of the review group (para 4.5 –
                      4.7, Appendix 2)
                 S:\HOUSING\Public\ALG Housing Steering Group\2004\Executive
                        Meetings\September 04\Draft reports\Item_6_ALMOs.doc
1.1   Arms length management organisations (ALMOs) have been in
      existence for over two years.

1.2   This report considers the borough role from the perspective
      of local authorities that have established ALMOs.

1.3   It then goes on to outline ODPM plans to consider freedoms
      and flexibilities for ALMOs and the long term future of

2.1   Nine London boroughs have already set up ALMOs. Two more
      ALMOs are due to go live in September 2004. Complete
      details on London boroughs’ progress on stock options can
      be found in Appendix 1.

2.2   Following the Spending Review announcement, the ODPM
      announced in July 2004 new bidding rounds for the three
      available stock options of ALMO, PFI and stock transfer.
      Boroughs can apply for the first round of extra funding
      from October 2004 to January 2005, with a further bidding
      round expected to start in late 2005.

2.3   As of August 2004, around 20 London boroughs may have to
      have their Stock Options Appraisal signed off by the
      Government Office for London. The deadline for sign-off is
      July 2005.

3.1   An ALMO is a wholly council-owned company. No two ALMOs
      will be the same in terms of devolved functions and
      structures. Similarly the local authority’s relationship
      with its ALMO and its perception of its role now that an
      ALMO is managing its stock will vary from borough to

      Relationship with ALMO
3.2   While some local authorities see themselves as the client
      and the ALMO as the contractor in many situations, others
      describe the relationship in a different way. One council
      acknowledged the client / contractor relationship but
      commented that this was managed along partnership lines.
      The degree to which there is a hard or soft
      client/contractor split varies but all boroughs have
      adopted various approached for developing good links
      including joint working groups, regular meetings between
      the ALMO and council housing at several levels, of
      protocols with other council depts, eg social services etc.

3.3   Some local authorities may perceive ALMO interests as being
      more narrowly focussed than council interests. For
      example, while a council is interested in Comprehensive
      Performance Assessment (CPA), ALMOs will focus on Best
      Value inspections and achieving three stars.

3.4   Some authorities have established close working
      relationships with their ALMOs while managing to keep these
      relationships fairly open. One local authority stated that
      it saw its role as working with the ALMO on issues around
      strategy and moving forward as an organisation. The same
      local authority stated that it was supportive of its ALMO
      trying to develop potential flexibilities.

3.5   Another local authority commented that having gone down the
      ALMO road voluntarily, the ALMOs is very much a partner of
      the local authority. While the local authority sets a
      broad outline for what it wants to happen, it takes into
      account the view of the ALMO as a professional
      organisation. For example, the local authority would not
      set future performance indicator targets or set budgets
      without reference to its ALMO.

3.6   Local authorities are still regarded as being responsible
      for performance measured through best value performance
      indicators (BVPIs) and HRA accounts etc. This may lead to
      a greater monitoring role for some local authorities than
      originally anticipated. Other local authorities envisage
      that monitoring the ALMO will have a small impact on their

      Operational roles
3.7   Local authorities with ALMOs retain a number of operational
      roles. Typically these will include: homelessness,
      allocations, environmental health, private sector, housing
      advice and housing benefit.

      Strategic role.
3.8   One local authority that has recently established an ALMO
      and has strengthened its strategic role by putting in place
      a small team of strategic and support staff which did not
      previously exist in the same way. Another local authority
      that already had a well-developed strategic role commented
      that it does not see its strategic role as having changed
      except that in terms of service to tenants, they have an
      additional partner and a contract to monitor.

3.9   In one borough the council strategic housing team handles
      Housing Benefit as well as strategy, the ALMO is contracted
      to produce BVPIs and a substantial element of the HRA
      remains with the council. The council accountant is still
      doing the accounts for the ALMO although there are plans
      for the ALMO to recruit their own accountant. In another
      monthly finance meetings are held to be important as the
      council retains housing funding although all finance is
      handled within the ALMO.

     ODPM ad hoc sounding board
3.10 The ALG has been approached by ODPM and asked to form a
     joint group with the LGA of local authority representatives
     from councils which have set up an ALMO. ODPM propose to
     use this group as an ad hoc sounding board for the local
     authority / client side view on ALMO related issues.


      Operational flexibilities
4.1   While ALMO staff were used to performing a number of
      procedural and operational functions as employees of the
      local authority, the ALMO does not necessarily have the
      statutory authority to carry out these functions (see
      paragraph 4.3).

4.2   ODPM wrote to local authorities and ALMOs at the end of
      July to seek help in establishing the scale and scope of
      operational and procedural responsibilities and activities
      that it might be sensible for an ALMO to perform by
      agreement with their parent local authority.

4.3   Areas of difficulty identified by ODPM included:
       Anti social behaviour orders (ASBOs). ALMOs are not
         listed in current legislation as one of the bodies able
         to apply for ASBOs.
       Court proceedings. A number of ALMOs have highlighted
         difficulties caused by their staff and/or solicitors not
         being granted audiences in Court as advocate for
         purposes of rent arrears cases, eviction notices etc.
       Leaseholder issues. Some ALMOs have reported
         difficulties in carrying out duties relating to
         leaseholders, e.g. consulting leaseholders on service
         charges or bringing leaseholder forfeiture proceedings.
       Environmental issues.
       Financial Services Authority (FSA) regulations.

4.4   ODPM state in their letter that were they to enable ALMOs
      to conduct some of the functions that have so far been
      highlighted, secondary legislation or changes to primary
      legislation or Court Rules may be required. In order to
      support such action, ODPM state they would need much
      stronger evidence than they have currently about why these
      changes are necessary and the level of support they would

      ODPM review of ALMOs
4.5   ODPM have written to ALG stating that Keith Hill, Minister
      for Housing and Planning, has recently agreed the terms of
      reference for a proposed review of the long-term future of
      ALMOs. A review group, chaired by Neil McDonald, ODPM
      Director of Housing, will take stock of what ALMOs are
      delivering, consider how to resolve barriers to effective
      operation and the role of ALMOs in the long term future of
      social housing. The Review Group will provide
      recommendations for consultation by the end of the year.
      Keith Hill plans to make an announcement about the review
      in September, once group members have been chosen. A copy
      of the letter from ODPM and terms of reference for the
      review are attached at Appendix 2.

4.6   The ALG has been invited to nominate one representative to
      be a member of this group.

4.7   The group will also include three ALMO Chief Executives
      (nominated by the National Federation of ALMOs) and three
      local authority representatives (nominated by the LGA). One
      of the local authority representatives will be from a
      London borough.

      Financial freedoms and flexibilities
4.8   The National Federation of ALMOs will be working with the
      Chartered Institute of Housing (CIH) and HouseMark in the
      autumn to identify practical mechanisms to recommend to
      ODPM which will work within the broad framework of public
      borrowing rules. This work is likely to consider
      mechanisms such as prudential borrowing, debt restructuring
      and the use of right to buy receipts.

      Partnering in procurement
4.9   The Comprehensive Spending Review 2004 announced the
      introduction of new partnering arrangements to improve
      social housing procurement. ODPM proposes to roll out a
      national network of local collective purchasing consortia.

4.10 London’s ALMOs are interested in setting up a purchasing
     consortium, which would aim to lower costs for repairs and
     capital expenditure by purchasing in bulk.

5.1   Across London as a whole, local authority tenants include a
      greater proportion of BME groups, vulnerable people and
      other disadvantaged groups than the general population.
      Decisions on procurement of services and housing investment
      whether made by councils or ALMOs should take this into
                                                      APPENDIX 1
London boroughs’ action on stock options
Update – July 2004

Stock transfer
Three London boroughs have transferred all their stock (Bexley,
Bromley and Richmond).

Kingston recently received a no vote on a whole stock LSVT

The smaller transfers of estates or trickle transfers form part
of many authorities’ “mix and match” approach to securing
funding for investment. The 2003/04 transfer programme,
confirmed in July 2003, includes 11 partial stock transfers in
London in addition to the Kingston whole stock transfer.

The 2004-5 programme of stock transfers includes LB Lambeth and
LB Tower Hamlets (17 partial LSVTs).

A new gap funding scheme was announced in May 2004 which will
make LSVT possible for some authorities whose housing stock has
a negative value, bridging the gap with annual payments to the
transfer housing association over 10 years. ODPM will consult
on details of this scheme.

Private Finance Initiative (PFI)
There are three Round 1 Pathfinder PFI schemes in London
(Islington, Newham, Camden), one of which (Islington) has
recently completed negotiations and signed contracts.

There are three Round 2 PFI schemes (Lewisham, Newham,
Islington). The numbers of homes covered by PFI schemes are
relatively small, with the Islington street property scheme of
5,000 units being by far the largest.

Brent has a non-HRA PFI scheme.

There are 3 successful London PFI schemes in Round 3 (HRA PFI
and non HRA PFI), announced May 2004, out of the 6 expressions
of interest. The schemes are in Islington, Lambeth and Croydon.

Nine London boroughs have already set up ALMOs:
 Brent - partial (Brent Housing Partnership - Round 2)
 Barnet (Barnet Homes - Round 3)
 Hammersmith & Fulham (Hammersmith & Fulham Housing Management
   Services – Round 4)
 Hillingdon (Hillingdon Homes - Round 2)
   Hounslow (Hounslow Homes - Round 1)
   Islington (Homes for Islington – Round 3)
   K&C (Kensington & Chelsea TMO - Round 2)
   Waltham Forest (Ascham Homes – Round 2 initially but may have
    to reapply for Round 5 following a best value inspection.
    Ascham Homes are due to be reinspected in 2005)
   Westminster (CityWest Homes - Round 1)

Two more ALMOs are due to go live in September 2004:
 Harrow (Round 3 - Spire Community Homes)
 Ealing (Ealing Homes –Round 4)

Future rounds of ALMO / PFI /LSVT
ODPM announced on 20 July that ODPM will soon open new bidding
rounds for councils who need extra resources to make their homes
decent. A single invitation to submit bids will be sent to
local authorities in early October 2004. They will have until
the end of January 2005 to submit their initial bids. A further
bidding round is expected to start in late 2005.

Boroughs which may have to have a Stock Option Appraisal signed
off by GOL.

Barking & Dagenham
Corporation of London
Tower Hamlets
Waltham Forest?
                                                               APPENDIX 2

                                      Mike Wilkinson
                                      Decent Homes Division
                                      Zone 2/J4
                                      Eland House
                                      Bressenden Place
                                      SW1E 5DU

                                      Direct line: 020 7944 3712
Dear Mr Pilgrim                       GTN: 3533
                                      e-mail :

                                      Web site:

                                      5 August 2004


Keith Hill, Minster for Housing and Planning, has recently
agreed the attached Terms of Reference and other details for a
proposed Review of the long term future of Arms Length
Management Organisations (ALMOs). In framing these we have been
keen to explore the opportunities available to ALMOs as they
approach their first key objective of bringing all the stock
they manage up to the Decent Homes standard. We have also been
mindful of the need to focus on realistic and practicable issues
to guide the Review and the subsequent consultation exercise to
conclusions that are likely to be compatible with ALMOs' status
in the public sector.

As you will see, we propose that this exercise should be
overseen by a Review Group, chaired by Neil McDonald, ODPM
Director of Housing. Keith Hill plans to make an announcement
about the Review in September, once the Group members have been

We want the Group to be representative of a cross-section of
stakeholders and so would like the Association of London
Government to be represented. We are therefore inviting you to
nominate one representative to be a member of the Group. So
that we can convene the first meeting of the Review Group in
September, please could you let me have your nomination, with
the agreement of the individual concerned, by the end of August.

Yours sincerely

Mike Wilkinson

ALMOs were introduced in 2001 as one of the options for local
authorities to secure additional resources to deliver the decent
homes target. ALMOs are companies set up by local authorities
to manage and improve their housing stock, and qualify for
funding from ODPM if they are assessed as "good" or "excellent"
by the Housing Inspectorate of the Audit Commission. Tenants
must support the setting up of ALMOs and play a major role in
their operation, notably by having one third of the places on
ALMO Boards, alongside Council representatives and independent

The first ALMOs have been up and running since 2002 and there
are currently 20 in receipt of funding. Proposals for a
further 29 have been accepted onto the programme, and more are
expected to join in 2005 and 2006.

ALMOs are effective delivery vehicles of decent homes and wider
services to tenants. As with any new type of organisation their
early operation has identified a number of possible barriers
that reduce effective operation. Some ALMOs will soon have
completed their programme of works to deliver decent homes and
need to put plans in place that will ensure they continue an
effective service to tenants and maintain the stock in good

ODPM and the National Federation of ALMOs have concluded that it
would be appropriate to take stock of what ALMOs are delivering,
to resolve barriers to effective operation and consider their
role in the long term future of social housing. The ODPM is
therefore setting up a Review Group to consider these issues and
provide recommendation for consultation by the end of the year.

Terms of Reference

The Review Group will draw up proposals for consultation on:

-   how ALMOs can maintain their services to tenants in the long
-   a regulatory framework for ALMOs

Under these headings the following issues will be considered:

Maintaining a service to tenants
- how to ensure the sustainability of the improvements carried
   out by the ALMO, the continued provision of a high quality
   service to tenants and on-going tenant involvement.
-   options for increased freedoms and flexibilities for ALMOs
    including financial freedoms and operational functions,
    looking at the legal, financial and policy implications but
    within public expenditure constraints.
-   the options for ALMOs after they have achieved decent homes,
    ranging from ALMOs taking on ownership of the stock to
    management reverting back to the local authority.
-   how the provision in the Housing Bill that would enable ALMOs
    to receive funding from the Housing Corporation could work in
-   the financial framework for ALMOs when ODPM additional funding
    has ended.
-   the effect of Right to Buy on ALMO stock profile and future

Regulatory framework
- whether the long term existence of an ALMO is predicated on
   sustaining high performance.
- the appropriate framework for dealing with ALMOs whose
   performance falls below 2* rating.
- the role of the parent local authority and the inspection
   regime in performance assessment.
- measures to assist failing ALMOs.

Key outcomes

The Review Group will produce a paper for consultation covering:
- clear options for ALMOs after they have achieved the decent
   homes target
- proposed financial and operational freedoms and flexibilities
   for ALMOs
- a proposed regulatory framework

Review Group Membership

The group will be chaired by Neil McDonald.

Membership will be made up of:
- 3 ALMO Chief Executives (nominated by the NFA)
- 3 local authority representatives (nominated by the LGA)
- 1 NFA representative
- 1 LGA representative
- 1 ALG representative
- 1 Housing Inspectorate representative
- 1 TPAS representative
- 1 CIH representative
- 1 Housing Corporation representative
- 1 Treasury representative
- ODPM representatives

The Review Group will be appointed during August and meet for
the first time in September. Four monthly meetings will then be
held, leading up to the publication of a paper for consultation
in the New Year.

The Group will be supported by a Secretariat which we hope will
be led by a secondee nominated by the NFA, assisted by staff in
the ALMO Branch of ODPM's Decent Homes Division.

Decent Homes Division
August 2004

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