Value for Money

Updated March 2020 View full section

Value for Money is one of the Regulator of Social Housing (RSH) Economic Standards, published in April 2018, outlining key expectations of housing associations in demonstrating and achieving value for money and in publishing their performance in annual statutory accounts.

However, value for money should be considered as the catalyst for continuous business improvement, rather than a means of achieving regulatory compliance. The purpose of this chapter is to establish the importance of value for money for housing associations and to outline best practice which should help maximise benefits whilst minimising risk and ensuring regulatory compliance.

Value for money is a judgement of how a business utilises its assets to generate value and achieve its objectives, with assets not only referring to housing properties and other tangible assets but also other valuable resources including people. Boards need to take responsibility for the value for money agenda which covers the whole business including constitutional and governance arrangements; the services that are provided; and how efficiently and effectively they are delivered.

The latest Value for Money Standard focuses on how housing associations optimise value for money in delivering their strategic objectives. There is a clear expectation that housing associations must have a robust approach to decision-making and a rigorous appraisal of potential options for improving performance. The required outcomes extracted from the Standard are set out below:

Registered providers must:

  • clearly articulate their strategic objectives
  • have an approach agreed by their board to achieving value for money in meeting these objectives and demonstrate their delivery of value for money 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

In common with all the Regulatory Standards, the role of the board is emphasised – with an expectation that housing associations should consider potential value for money gains and that boards must demonstrate full consideration of costs and benefits of alternative delivery structures.

Measurement of performance against strategic objectives is key. Housing associations are expected to identify targets for achieving value for money in delivering strategic objectives. The RSH has identified financial metrics that are extracted from the annual accounts regulatory return (FVA). Smaller housing associations that are not required to submit the FVA will need to calculate them based on the definitions provided by the RSH. However, housing associations are not expected to limit their performance metrics to those identified by the RSH, which may not fully reflect an association’s strategic objectives.

There is no specific requirement for a separate value for money strategy, although housing associations are expected to be clear about their approach – which may form part of corporate strategic planning and be expressed in the corporate plan (or equivalent).

Further guidance on value for money is included in the Value for Money Code of Practice published alongside the Value for Money Standard in April 2018. The Code of Practice provides further detail and guidance on meeting the RSH expectations with a clear emphasis on use of assets, understanding cost and ensuring that returns from non-social housing activities are commensurate with risk.

The following section considers possible approaches housing associations may take in formulating and delivering a value for money strategy that meets the expectations of the RSH and other stakeholders.

Overall approach

The RSH expects:

“a robust approach to achieving value for money – this must include a robust approach to decision making and a rigorous appraisal of potential options for improving performance”

The housing association is expected to have an approach to value for money that is embedded within business objectives and activities, underpinning every business decision. This will form part of the ‘golden thread’ linking the board’s strategic plans with operational activities.

Role of the board


“regular and appropriate consideration by the board of potential value for money gains – this must include full consideration of costs and benefits of alternative commercial, organisational and delivery structures”


  • Clarity and communication of strategic objectives that set the stage for business activities.
  • Alternative ways of delivering strategic objectives, for example alternative structures.
  • How the Board assesses value for money gains, including robust measurement of social value where appropriate.
  • How well the Board understands the trade-offs between investment in new development (say) and investment in community or discretionary estate regeneration work where there may no direct financial gain and therefore alternative means of assessment may need to be examined.
  • Frequency of review of investment and asset management strategies, having regard to external influences particularly in times of economic and political change.
  • Frequency of review of business and financial model; and stress-testing.
  • Cost-sharing vehicles.

Value for money across the wider business


“consideration of value for money 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”


  • How well the association segments and appraises expenditure against income streams.
  • Whether further efficiencies can be secured by closing off activities which do not generate surpluses or which do not contribute to the delivery of the strategic objectives.
  • Whether better allocation of resources (money, staff, property) could be made to improve overall financial performance.
  • Trade-offs between customer service and cost of service within each business segment or income stream.

Monitoring performance


“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”


  • Identification of key performance targets and frequency of review. There is an expectation that associations will use the Sector Scorecard VfM metrics (see Metrics below) and the board will also identify targets and performance measures specifically relevant for their business strategy.
  • There is a strong expectation for the board to take ownership of the targets and performance measures, and monitor them regularly.
  • Benchmarking performance against other housing associations with similar characteristics/size. Information sources will include HouseMark and other benchmarking clubs; and the Global Accounts of private registered providers, published annually by the RSH.
  • Trends: demonstrating improvement or explaining why anticipated improvements have not been realised (for example slowdown in market sales impacting development targets) and consequent proposed action.


The RSH published a technical note covering Value for Money metrics (April 2019) are intended to permit meaningful comparison across the housing sector whilst minimising the regulatory burden on housing associations. The metrics and their definitions are set out below.


Reinvestment %

An efficiency measurement that looks at the investment in properties (existing stock plus new supply) as a percentage of the value of total properties held

(Development of new properties + newly built properties acquired + works to existing properties + capitalised interest +schemes completed) / (tangible fixed assets: housing properties at cost or valuation). Extracted from housing properties note to financial statements.


New supply delivered %

A measurement of effectiveness that looks at both social and non-social housing units developed or acquired during the year as a proportion of total units owned at the year-end

Social housing units:

Total social housing units developed or newly built units acquired in-year (owned) / Total social housing units owned at year-end

Note: ‘social housing units’ include: social rent general needs (excluding Affordable Rent), Affordable Rent general needs, social rent supported housing and housing for older people (excluding Affordable Rent), Affordable Rent supported housing and housing for older people, Low Cost Home Ownership, care homes, other social housing units, social leasehold (all owned properties)

Non-social housing units:

Total non-social housing units developed or newly built units acquired in-year (owned) / Total social and non-social housing units owned at year-end

Note: ‘non-social housing units’ include: non-social housing rental units owned, non-social leasehold units owned, new outright sale units developed or acquired


Gearing %

An efficiency measure that assesses the degree of dependence on debt finance and may be viewed as a key indicator of appetite for growth (or capacity for growth)

(Short-term loans + long-term loans – cash and cash equivalents + amounts owed to group undertakings + finance lease obligations) / tangible fixed assets: housing properties at cost or valuation)


Interest Cover % (EBITDA MRI)

An efficiency measure that is a key indicator for liquidity and investment capacity. By excluding the charges for depreciation and amortisation but including capitalised major repairs, the measure avoids distortions stemming from these charges.

(Operating surplus/(deficit) (overall) – gain/(loss) on disposal of fixed assets (where included in arriving at operating surplus/(deficit)) – amortised government grant + interest receivable - capitalised major repairs expenditure for the period + total depreciation charge for the period) / (interest capitalised + interest payable and financing costs)


Headline social housing cost per unit

An economy measure that focuses on social housing cost per unit – with most information extracted from the detailed income and expenditure note in the financial statements

(Management cost + service charge costs + routine maintenance costs + planned maintenance costs + major repairs expenditure + capitalised major repairs expenditure + other social housing letting costs + development services + community/neighbourhood services + other social housing activities: other + other social housing activities: charges for support services) / Total social housing units owned and/or managed at period end

Note: ‘social housing units’ include: social rent general needs (excluding Affordable Rent), Affordable Rent general needs, social rent supported housing and housing for older people (excluding Affordable Rent), Affordable Rent supported housing and housing for older people, Low Cost Home Ownership, care homes, other social housing units


Operating Margin %

A measure of efficiency, however the guidance notes that in assessing this ratio it is important that consideration is given to a provider’s purpose and objectives (including social objectives) and specialist providers which tend to have lower margins than a raw average.

Social housing lettings:

Operating surplus/(deficit) from social housing lettings (which must EXCLUDE gain/(loss) on disposal of housing properties) / Turnover from social housing lettings


Operating surplus/(deficit) (overall) (EXCLUDING gain/(loss) on disposal of housing properties) / Turnover (overall)


Return on capital employed (ROCE) %

An efficiency measure to assess investment of capital resources.

(Operating surplus/(deficit) (overall) (INCLUDING gain/(loss) on disposal of housing properties) + share of operating surplus/(deficit) in joint ventures or associates) / Total assets less current liabilities

Housing associations are expected to report their performance using these metrics as defined: the RSH has confirmed that the value for money measures set out by the regulator must not be adjusted but should be reported on the precise basis set out in the technical note.

The VfM Technical Note is updated annually to reflect changes to the FVA template. Publication of the Technical Note will usually be at the same time as release of the template.

The Value for Money Standard requires housing associations (registered providers) to publish evidence within their statutory accounts each year to enable stakeholders to understand:

  • The provider’s performance against its own value for money targets and any metrics set out by the regulator, and how that performance compares to peers
  • The provider’s measurable plans to address any areas of under-performance, including clearly stating any areas where improvements would not be appropriate and the rationale for this

Usually housing associations will publish reports within the strategic report or board report as part of the audited statutory accounts.

Where the organisation prepares group accounts, the reporting should be at group level, taking into account all areas of the organisational structure. This will be particularly relevant for more complex group structures that may include unregistered subsidiaries or joint ventures. The board is expected to be clear about the benefits delivered from the more complex arrangements, including those from non-social housing activities.

The RSH is clear that the best reports present:

  • Clear strategic objectives and measurable targets, aligned with the strategic objectives.
  • Historic performance against the targets, explaining the reasons where targets are not achieved, together with plans to address this underperformance.
  • Clear future targets and plans for achieving them, including how they will be measured and assessed.
  • It would be useful to reference the features of good and bad reporting identified by the RSH review of the VfM reporting in the 2019 stat accounts. This is included in this publication.