Public housing asset management through the private sector's perspective : applying private sector principles within the public sector

Abstract

The success of a project is recognized through the satisfaction of both private and public sector clients. Whilst clients in the private sector form part of several different entities all working individually, those in the public sector are acting as one body, having just a few major clients carrying out important decision making. Thus it is more possible for the public sector to generate the necessary 'driving force' and become the 'best practice clients'. Public housing authorities are becoming increasingly concerned with operating more efficiently, accessing alternate sources of capital, and implementing alternative asset plans. This is due to the need for deregulation and reduction of Government expenditure as well as the need for modernization, major rehabilitation, or redevelopment of public housing developments. A significant response is to look to the private sector as a model. Asset management is a private sector process within which an agent of the property owner supervises the operation and monitors the performance of assets as well as creates and implements asset plans. Whereas preserving and adding to the value of real estate assets with respect to the owner's financial objectives is the goal of private asset management, a Public Housing Authority's mission is to provide safe, decent and sanitary housing units at affordable cost to low income families without feeling the need to manage Its assets in the most efficient way or seeking additional sources of revenue, other than state aid. The aim of the study is to adopt this private sector principle and analyse realistic options to raise revenue and reduce costs but maintaining quality of service at the Public Housing Authority in Malta through appropriate asset management plans. Analysing ulterior sources of revenue is necessary for the Authority to be self-sustainable and ensure perpetual survival of Its services. The study analyses the current operation and the performance of public assets within the Malta Housing Authority and identifies the opportunities as well as the challenges the public asset manager is most likely to deal with when adopting the appropriate Public Asset Management Plan. In order to achieve its aim, data collection was necessary i.e. document analysis, statistics and observations of the Malta Housing Authority. Further to this, this study employs reviewing the general position of social housing in Europe, whereby a number of case studies were identified and considered. Separate sets of interviews were carried out amongst different participants within different working scenarios. These included Housing Authority employees, government officials, independent professionals as well as active players in the private sector. Although some of the options highlighted through this study entail difficult and controversial decisions, none jeopardize the affordable nature of the public housing, and if they are enacted could potentially provide additional revenue and savings. The study proceeds to actually take one particular option and calculate how much income this option can actually produce. This option refers to the trading of public vacant properties with the private sector. The authority owns a number of vacant properties which ended up unoccupied for various reasons. These premises are either reallocated or else left vacant, becoming a liability to the state. It is being suggested that a number of these vacant units of a certain strategic value can be easily marketed to buyers in the private sector. Currently there is no framework in place to introduce such an activity. A property valuation appraisal have been undertaken for a number of public vacant properties owned by the Malta Housing Authority. Such properties are easily transferable because they are unoccupied. Analysing the marketable potential of such units is a way of assessing an alternative asset strategy. These valuations therefore represent the income that could be generated from the sale of the property. A study of the current local market situation was also carried in order to understand the actual market value as well as the potential of the public assets. The study concludes that there are significant opportunities and challenges that the government might be required to manage if it applies public housing asset management framework appropriately. Such opportunities address the need to increase local government portfolio, the need of mixed communities, the need to provide funding, the need of varying forms of public/ private partnerships to improve and modify the existing stock to meet rising aspirations and the need for up to date information on the public assets for decision makers in local government. On the other hand, there are also challenges. These challenges is that locally there is no clear legal and institutional framework to support the public housing asset management application, non-profit principle of public assets, cross jurisdictions and applications in public asset management, the complexity of public organization objectives, and data availability required for managing public housing property. Findings from this study will provide useful input for the policy makers to develop a public housing asset management framework by examining public services and mission requirements, creating investment management strategies, and aligning asset decisions making with community and organisational needs.