Friday, 28 November 2014

Inside out

All posts tagged: merger

Does size matter?

Mon, 5 Dec 2011

If the government wants to encourage larger housing associations it must also address stock rationalisation, argues Colin Wiles

One section of the recently published housing strategy caught my attention. On page 25, it states that the economic regulation and value for money regime for housing providers “could result in more sub­ contracting of services, partnership working and mergers”.

Ten years ago I wrote an article for the now defunct “Housing” magazine, called “Dawn of the Monster Age”, which looked at the rapid growth of larger housing associations. It seemed to me then that Thatcher, through the Right to Buy and stock transfer, had sought to break up large monolithic council housing departments, only to replace them with even larger (and less accountable) monolithic housing associations spread across, in some cases, scores of local authority areas. At that time the first 50,000 home landlord was some way off, but ten years on and we await the first 100,000 home landlord in England. Over the past decade growth has continued unchecked and the geography of stock ownership and management is now both stupid and unsustainable. Yet stock rationalisation to deal with this absurdity has been more or less ineffective to date. There have simply been no business or regulatory imperatives in place to make it happen.

Which is not to say that small is always beautiful either. Of 1,500 housing associations nationally, 1,100 own fewer than a thousand homes, mostly located in a specific geographical area. That fits well with the localism agenda and the provision of a responsive local service, but there clearly needs to be a balance between size and efficiency. With two thirds of tenants on housing benefit it means the taxpayer, and other tenants, are paying a disproportionate amount for the overheads and salaries of smaller providers. I know of one housing association where every tenant is paying the equivalent of £4 a week for the chief executive’s salary alone. That is neither rational nor ethical. My gut feeling is that the minimum size for housing associations should be around 2,000 homes. Housing staff and contractors driving hundreds of miles to distant properties makes no economic or environmental sense when an alternative smaller provider may have an office around the corner. If the revised economic regulatory regime aims to force smaller providers to merge it should also aim to force effective stock rationalisation, so that smaller providers can become more viable by taking on the local stock of absentee landlords.

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