2018 Value For Money Standard for Registered Providers of Social Housing

21 May 2018

The Regulator of Social Housing has issued a new Value for Money Standard (VfM) and a supporting Code of Practice that applies to all private registered providers of social housing (RPs) and which came into effect on 1 April 2018.


RPs should follow the specific reporting requirements set out in this new Standard in their 2017/18 statutory accounts (i.e. audited accounts which are due for submission by 30 September 2018). They no longer need to publish a VfM self-assessment within the statutory accounts.

The reporting requirements in the Standard are very specific however RPs are free to report outside of the accounts in any way they see fit if they consider this increases transparency with stakeholders; this could include, for example, VfM strategy reports or Annual Tenant reports.

We understand that the regulator recognises that the approach to reporting under the new Standard will evolve over time and that providers will wish to review their own strategic objectives and targets in the light of the revised requirements.

Whilst boards should seek to assure themselves that their 2017/18 Accounts are based upon the requirements of the new Standard, rather than the previous one, we expect the regulator to have some appreciation that reporting for the 2017/18 period will be a learning experience.

Reporting should be at group level so the regulator expects details of group performance to be provided within the accounts as a minimum. RPs should also report on different activities and types of assets that are appropriate to their business priorities.

The VFM Standard

RPs must:

  • clearly articulate their strategic objectives
  • have an approach agreed by their board to achieving VfM in meeting these objectives and demonstrate their delivery of VfM to stakeholders
  • through their strategic objectives, articulate their strategy for delivering homes that meet a range of needs
  • ensure that optimal benefit is derived from resources and assets and optimise economy, efficiency and effectiveness in the delivery of their strategic objectives.

RPs must demonstrate:

  • a robust approach to achieving VfM – this must include a robust approach to decision making and a rigorous appraisal of potential options for improving performance
  • regular and appropriate consideration by the board of potential VfM gains – this must include full consideration of costs and benefits of alternative commercial, organisational and delivery structures
  • consideration of VfM across their whole business and where they invest in non-social housing activity they should consider whether this generates returns
  • commensurate to the risk involved and justification where this is not the case that they have appropriate targets in place for measuring performance in achieving value for money in delivering their strategic objectives, and that they regularly monitor and report their performance against these targets.

RPs must annually publish evidence in the statutory accounts to enable stakeholders to understand the provider’s:

  • performance against its own VfM targets and any metrics set out by the regulator and how that performance compares to peers
  • measurable plans to address any areas of underperformance, including clearly stating any areas where improvements would not be appropriate and the rationale for this.

The Code of Practice

The Code is designed to amplify the requirements in the VfM Standard to help RPs understand what the regulator is looking for when seeking assurance on compliance with the Standard. It is the Standard rather than the Code that the regulator will enforce against.

RPs are free to comply with the requirements of the Standard in any way that they consider appropriate.

RPs are required to publish reporting on the following aspects of VfM in their statutory accounts in a way that is clear, concise and appropriate to their stakeholders:

  • the metrics defined by the regulator (see below)
  • at a group level, taking into account all areas of the organisational structure
  • different activities and types of assets that are appropriate to their business priorities
  • RPs who undertake a range of different activities are expected to report on those
  • activities separately to their social housing activity
  • actual performance, previous year’s performance, future forecasts and targets against forecasts in relation to strategic objectives
  • any additional measurements that they consider would aid understanding of their performance (e.g. costs and outcomes for supported housing and other specialist areas of the business). Explanation of underlying factors influencing performance must be factual, concise, and easily identifiable.

RPs are also free to report outside of the accounts in any way they see fit if they consider this increases transparency with stakeholders.

VFM Metrics

RPs are expected to report their performance against 7 metrics in their annual accounts. Where a provider’s reported data is affected by a factor particular to that organisation they should clarify this in the commentary accompanying the publication of their data.


1 – Reinvestment %

Considers the investment in properties (existing stock as well as new supply) as a percentage of the value of total properties held.

2 – New supply delivered %

Sets out the number of new social housing and non-social housing units that have been acquired or developed in the year as a proportion of total social housing units and non-social housing units owned at period end. RPs will report on two new supply delivered ratios:

A. New supply delivered (Social housing units)

B. New supply delivered (Non-social housing units)

3 – Gearing %

Assesses how much of the adjusted assets are made up of debt and the degree of dependence on debt finance. It is often a key indicator of a RP’s appetite for growth.

4 – Earnings Before Interest, Tax, Depreciation, Amortisation, Major Repairs Included (EBITDA MRI) Interest Cover %

A key indicator for liquidity and investment capacity.

It seeks to measure the level of surplus that a RP generates compared to interest payable; the measure avoids any distortions stemming from the depreciation charge.

5 – Headline social housing cost per unit

The headline social housing cost per unit as defined by the regulator.

6 – Operating Margin %

Demonstrates the profitability of operating assets before exceptional expenses are taken into account. Increasing margins are one way to improve the financial efficiency of a business. RPs will report on two Operating Margin ratios:

A. Operating Margin (social housing lettings only)

B. Operating Margin (overall)

7 – Return on capital employed (ROCE) %

This metric compares the operating surplus to total assets less current liabilities and is a common measure in the commercial sector to assess the efficient investment of capital resources. The ROCE metric would support RPs with a wide range of capital investment programmes.

The ‘Value for Money metrics technical note’ (April 2018) sets out the elements