The Office of Fair Trading must explain its sudden interest in the housing sector
Casting a beady eye
Like God or a contortionist, the Office of Fair Trading moves in mysterious ways.
As even the most casual reader of Inside Housing would realise, big mergers between housing associations are far from uncommon. Some of the sector’s most powerful players, such as Circle and Affinity Sutton, were created in precisely this way. Up until now, however, the OFT has shown almost no interest in these activities.
As we reveal this week, this could be set to change. The OFT has decided to cast its beady eyes over the merger of 18,000-home Harvest Housing Group and 11,000-home Arena Housing Association, which took place in April. The new Your Housing Group had been given the thumbs up by the housing regulator - the Homes and Communities Agency - and all had been proceeding smoothly.
The OFT, however, had other ideas. It is looking to see if the merger has breached competition guidelines. Mergers can be referred for investigation to the OFT when the organisation being taken over has a turnover of more than £70 million and the resulting merger will create a 25 per cent control of market supply.
On the face of it, Your Housing Group has little to fear. Arena Group had a turnover of £68.1 million and Your Housing Group calculates it has a maximum 20 per cent share of the market, if this is defined as being the local authority areas in which it operates.
The investigation does, however, raise some serious questions for the rest of the sector. Is the OFT’s scrutiny of the Harvest/Arena merger a sign of things to come? Having negotiated their way to a light touch regulatory regime, are housing providers suddenly going to be faced with a wave of time-consuming, costly interventions if they form bigger group structures in a bid to generate economies of scale? What is the OFT’s stance on stock transfers which create dominant housing association landlords in individual areas?
Brian Cronin, chief executive of Your Housing Group, is not alone in scratching his head about the OFT’s actions. For now the OFT is keeping schtum about its approach. It needs to provide clarity as soon as possible to allow associations to get on with the day job.