Portfolio Management in the Social Rented Sector: Valuation, Risk Analysis and Strategy Development

The financial aspects of social housing management are becoming more important for housing associations in Western Europe, due to changes in their economic and institutional context. As part of a trend towards the privatisation and decentralisation of public services, housing associations are becoming more self-reliant. Government financial support is decreasing and parts of the housing market are changing in response to low demand. To ensure that housing associations run an economic, efficient and financially sound business, knowledge of the financial performance of their stock is becoming more important for their investment policy. In the Netherlands, these general changes in housing policy, management and market have been a prominent feature of the last decade, and have resulted in a variety of responses under the general heading of asset and portfolio management. This paper describes methods for valuation, risk analysis and portfolio management for housing associations. The paper sets out the context within which Dutch housing associations operate. Existing methods for valuation and risk analysis are evaluated for their applicability to social landlords. These methods are placed within the business planning process to show how the methods can be used to inform asset management strategy. Finally the paper reflects on the implications for practice in social housing management.