Association sets up non-registered company to deliver affordable homes
Swan to bypass housing regulator
Swan Housing Group is to set up a new non-registered company to avoid regulation and boost its profit-making activities to deliver its affordable homes programme.
The 10,000-home association has received £38.6 million from the Homes and Communities Agency to build 1,500 homes under the £1.8 billion affordable homes programme, including 1,169 homes to let at the government’s ‘affordable rent’ level and 331 for shared ownership. The affordable homes programme allows landlords to charge up to 80 per cent of market rent on new properties and some re-lets.
SHG plans to supplement its £38 million grant with around three times that in cross-subsidy generated from two new profit-making companies: Vivo, which will provide care services; and Hera, a property management arm.
These companies, plus existing development arm Swan New Homes, will come under the management of new non-registered company Swan Social Enterprise Group.
John Synnuck, chief executive of SHG, said the structure will enable the group to become more entrepreneurial, to take development risk without it impacting on the core association, which will remain registered and regulated. ‘Our affordable homes programme bid would probably not have been as ambitious without this structure,’ he said. ‘These are separate companies that enter into contracts themselves, without the housing association acting as guarantor of its assets.’
But Mr Synnuck admitted that if the subsidiaries fail to make enough profit, it would impact on the housing association as the amount of expected cross-subsidy would be reduced.
The move will also allow the group to avoid regulation from the social housing regulator on its profit-making activities, therefore reducing administration, although Vivo will still be regulated by the Care Quality Commission.
Swan hopes Vivo will generate an annual turnover of £5 million after five years and Hera up to £2 million in the same period. Swan New Homes will build up to 900 units for private sale by 2015. Mr Synnuck said SHG’s overall annual turnover will rise from around £140 million to £200 million by 2015.
Sharron Webster, partner at law firm Trowers & Hamlins, said several landlords were looking into similar plans.
Julian Ashby, chair of the new HCA committee which will regulate social landlords from 1 April, said the regulator would be concerned if surpluses leaked from registered associations into non-registered profit-making arms.