Getting service charges right on mixed-tenure and mixed-use estates
Louise Bell MRICS, Director of Mixed Use at SAY, reflects on what affordable housing providers told us about service charge accuracy, transparency and value for money.
At our recent mixed-tenure roundtable, co-hosted with Andrew Cowan of Turnstones, we brought together affordable housing providers and local authorities for a conversation about service charges, operational management and the future of housing management.
Three themes emerged repeatedly, which I think are worth sharing more widely. You cannot explain a service charge you do not understand. Affordability is not the same as the lowest cost. And residents deserve clear, honest information about what they are paying for and why.
You can’t explain what you don’t understand
For leaseholders and shared owners, the service charge is often the part of homeownership that causes the most frustration. In my experience, much of that frustration starts long before the bill arrives.
On mixed-tenure schemes, a Registered Provider is frequently passing on costs it did not set. Charges may originate from a developer’s managing agent or a wider estate manager, sometimes with no direct contractual relationship with the RP at all. If the RP does not have the budgets, supporting information and explanations behind those figures, it cannot properly scrutinise them and it certainly can’t explain them to residents with confidence.
Several providers at the table described how they have strengthened their approach. They check agents’ budgets and expenditure before charges reach residents. They track discrepancies so that accuracy is measured rather than assumed. They ask senior colleagues to review the largest increases each year and explain them.
One point was made firmly: outsourcing management to a third party does not mean outsourcing accountability. Accuracy comes first. Transparency only has value when the numbers behind it are right.
Fixed costs and flexible costs
One of the most useful parts of the conversation was about separating the costs that are largely fixed from those residents can shape.
Some costs are non-negotiable. Plant and building systems carry statutory and manufacturer maintenance requirements. Lifts need regular thorough examinations, fire safety systems need testing, and water systems need managing for legionella risk. Building safety obligations and insurance sit in the same category. The landlord’s role is to procure services effectively, plan ahead and make sure residents understand why these costs exist. While these obligations cannot be compromised, providers should continue to challenge costs through effective procurement, forward planning and contract management, ensuring residents understand why these services are necessary.
Other costs are genuinely flexible. Staffing, cleaning frequency, landscaping and concierge services can all be set at different levels depending on what residents want and are prepared to pay for. Where contractual arrangements permit, this provides an opportunity for meaningful resident engagement in determining service levels and associated costs.
Some providers already offer tiered service levels for cleaning and grounds maintenance, set building by building. Others involve residents directly in managing agent tenders and consistently find that service quality matters more to residents than the headline cost.
Affordability is not the same as the lowest cost
There was broad agreement that the sector has, at times, prioritised reducing costs over maintaining service quality. Stripping services out to make a scheme look affordable, particularly at the point of sale for shared ownership, can backfire. Residents notice when a building feels less cared for, and low-cost services that people genuinely valued are often among the first to go.
Residents want well-maintained homes and estates, alongside confidence that they are receiving value for money. Many are willing to pay for a good service when they understand what it is and can see the benefit.
That changes the question. Rather than asking how low a charge can go, providers can ask what level of service residents value, and what it costs to deliver it well.
Making service charges easy to understand
Transparency is not about sending residents more paperwork. It is about clarity. A few practical approaches came up during the discussion:
Present service charges in a clear, itemised format like a utility bill. Separate essential costs, such as compliance, safety and insurance, from discretionary services like cleaning and gardening, so residents can see what is fixed and what is a choice.
Show the management fee on its own. Many residents assume the whole service charge goes to the managing agent.
Engage residents early. Where appropriate, consult residents before committing to significant expenditure, explaining the options, anticipated costs and any statutory obligations.
Explain significant movements. When a charge rises or falls sharply, say why.
Be realistic at the point of sale. Shared owners should receive estimates that reflect the likely cost of running the building, not a figure suppressed to support affordability.
While these principles are straightforward, delivering them consistently depends on the right information, the right expertise and clear ownership within the organisation. Service charge teams tend to work best when they understand the nuances of homeownership, not just the numbers.
Three questions for providers
For RPs and local authorities managing mixed-tenure estates, I would suggest starting with three questions:
Do you have the information you need to understand and challenge every cost you pass on, including those from estate managers you do not appoint?
Can you clearly distinguish fixed costs from those residents can influence, and do residents have a say in the latter?
Could a leaseholder or shared owner read your service charge statement and understand what they are paying for, and why?
If the answer to any of these is no, that is the place to start.
Thank you to everyone who joined us, and to Andrew Cowan for co-hosting. At SAY, we work with Registered Providers, local authorities, developers and investors on operating models, service charge reviews and managing agent oversight across mixed-tenure schemes. If you would like to talk through any of the themes here, please get in touch.
Frequently asked questions
What is the difference between fixed and flexible service charge costs?
Flexible costs, such as staffing, cleaning frequency, landscaping and concierge services, may offer greater scope for adjusting service levels in consultation with residents, subject to contractual and operational requirements.
Why are service charges on mixed-tenure estates harder to explain?
Charges are often passed through from a developer’s managing agent or a wider estate manager, sometimes with no direct contract with the Registered Provider. Without clear budgets and supporting information from those parties, the provider cannot properly scrutinise or explain the costs.
How can housing providers make service charges more transparent?
Separate essential costs from discretionary services, show the management fee on its own, explain significant increases, engage residents early on significant expenditure and give shared owners realistic estimates at the point of sale.
Does a lower service charge mean better value for residents?
Not necessarily. Residents often value a well-kept home and estate, and many will pay for services they understand and can see the benefit of. Removing valued services to reduce the headline cost can undermine satisfaction and trust.