Southern chief executive announces overhaul of service charges

The chief executive of Southern Housing has announced a plan to “completely overhaul” service charges in a bid to keep costs down for residents.

Paul Hackett, writing exclusively for Housing Today, stressed service charges reflect actual costs, including increases in inflation, buildings insurance and building safety regulation, which are often outside of associations’ control.

However he said associations must “think creatively about what more we can do to insulate residents from inflationary pressures and do all in our power to ensure our charges are transparent and offer our residents value for money.”

Hackett said Southern will therefore change the way it calculates service charges from next April.

Rather than estimating future charges on the basis of an uplift from current costs, it will calculate them from scratch using data from its supply chain.

“We expect this will provide a much more accurate estimate of the upcoming year’s charges, meaning residents on variable charges are less likely to be significantly over- or under-charged” said Hackett,

Southern has also established a dedicated team to “better hold managing agents to account” where the latter are responsible for setting service charges, as is often the case for homes provided through section 106 planning agreeemnts.

Hackett said Southern will only take on homes through section 106 where it knows “the managing agent can deliver the high standards of customer service and charging transparency we demand.”

>>See also: Why service charges are rising and how Southern is seeking to keep them down

>>See also:G15 chair writes to Gove to rebut claims of ‘widespread abuse of service charges’ by social landlords in London

>>See also:Government and BSR warn against ‘unacceptably high’ service charges for building safety case reports

The association also has an ambition to shift from section 106 delivery – where the association buys affordable units from a housebuilder that are required as part of the planning approval process – towards direct ‘land-led’ delivery where it has more control over service charges.

Hackett said service charges for tenants in social rented homes have actually risen slower than inflation since 2019 across the housing association sector. However, service charges for leaseholders have risen at double the rate of inflation since 2019, according to figures from The Property Institute.

The G15 group of large housing associations in London, of which Southern is a member, wrote to housing secretary Michael Gove in May to rebut claims from an MP that providers were benefitting from overcharging residents. Fiona Fletcher-Smith, chief executive of L&Q and chair of the G15 pointed out in the letter that associations do not make a profit from service charges.

Southern’s predecessor organisation Optivo was one of several landlords criticised for service charge increases in a BBC article in 2022.