Approach to ROC
Overall, when looking at all submissions used to calculate Annex A, the ROC per resident per week came out between 6-13% of the overall per bed per week cost. The average at 10%.
LGA Senior Advisor guidance to ROC states:
“I have been suggesting that a return of between 5% and 6% on freehold value. DHSC quote 5.5% yield from a Knight Frank report from 2021. Their most recent report for 2022 suggests that yields have tightened to 3%. For LHA the rates are available online for each council area. The LHA covers the local private sector rental value, rental values cover both the costs of maintaining properties and fixtures and fittings as well the return on capital or loan. As a result the median value for repairs and maintenance plus fixtures and fittings should be deducted from the local LHA rate.”
Not all homes completed the ROC % field, some chose to enter this value a value per resident per week (shown on the right). For those that did complete this field, the average value was 4% and Median 5% for Hounslow 1 home did not fill in this field at all.
For the London LA’s Peopletoo are working with, the average ROC% is 4.76%, median 5.6%.
Hounslow has reviewed submissions and guidance around benchmarks available and believes an overall profit of 10% to encompass both ROO & ROC is a reasonable profit to enable sustainability in the market for current and future provision.
This would differ from the costings listed in Annex A. As the IESE tool did not allow for such changes to be modelled, this rate is not reflected in the rates and would need to be modelled separately.