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Why we want to shrink our geographic coverage
The housing association sector’s evolution has not delivered the optimal pattern of stock holdings, argues Matthew Bailes, as he sets out an alternative vision for the future
The size and shape of housing associations has been a hot topic for as long as I have been involved in the sector.
The debate has usually focused exclusively on scale – expressed in terms of the number of ‘units’ owned and managed – and has often produced more heat than light, perhaps because the available evidence is not conclusive. As far as one can tell from the data, size doesn’t really matter – it’s what you do with it that counts.
Absent a single right answer, it is important that the leaders of housing organisations proactively consider future organisational size and shape, rather than simply assuming that they have arrived at the perfect point.
We have been thinking about this at Paradigm for some time – and we have reached some important conclusions.
There is a lot of unmet housing need in the high-value areas we serve. It was therefore obvious to us that we should be trying to build as many new affordable homes as we could within the boundaries of financial prudence.
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Clearly, development leads inexorably to growth, but there are good reasons to think that growth will facilitate future development. Our aim is to deliver high-quality homes on commercially sound terms, which should over time build more financial capacity – particularly if we can realise economies of scale (for example in terms of management costs).
This in turn should allow us to take on more development. We also think increased scale can help us take on a broader range of development activities. Complex land-led development requires investment in skills and processes – the sort of investment that can only really be sustained by a large development programme.
I think it likely that we will increasingly view strategic asset management in a similar light. Financial strength and specialist professional skills will be needed to meet the growing challenges of building safety, decarbonisation and regeneration.
“We decided some time ago that instead of expanding the geographic coverage of our business, we wanted to shrink it. We wanted to be larger and more local”
However, in the past Paradigm’s pursuit of growth led us to into new areas. By the time I arrived we had just over 13,000 homes in 34 different local authorities.
This meant we were spread quite thinly, and that did not help us with core areas of the business such as housing management and day-to-day repairs. It added to costs (for example in terms of travel time for repairs operatives) and made it harder to deal with some practical housing management issues (like management moves).
It also made it more difficult to build relationships with local authorities and third sector partners, and therefore support our residents and the wider communities in which they live.
As a result, we decided some time ago that instead of expanding the geographic coverage of our business, we wanted to shrink it. We wanted to be larger and more local.
This did, of course, involve an important choice of where to focus. In our case the choice was reasonably straightforward. The majority of our stock is in the Home Counties of Buckinghamshire, Bedfordshire and Hertfordshire, but we also had some stock in London.
There are many great things about London, but it is also a different and in many ways more challenging environment than our Home Counties heartland, not least from a development perspective. For Paradigm it made sense to focus on the areas we knew best.
Fortunately for us we found a partner in Guinness that had gone through a similar process, and we concluded that it wanted to consolidate its presence in London but was less focused on some of our core Home Counties territory. As a result, a win-win deal was possible.
The ensuing negotiations, due diligence and implementation process involved a significant investment in time and capacity.
“Our London stock is now largely limited to suburban areas around the M25, plus a homelessness prevention scheme we are rather proud of in Walthamstow”
The result was a deal that involved more than 1,100 homes moving to Guinness and more than 1,300 homes coming to Paradigm. It means that we have substantially strengthened our presence in parts of Buckinghamshire, Bedfordshire and Hertfordshire and brought into our full ownership an estate in Milton Keynes where both organisations had homes.
Our London stock is now largely limited to suburban areas around the M25, plus a homelessness prevention scheme we are rather proud of in Walthamstow.
It wasn’t always straightforward, but we are very pleased we persevered. If a suitable opportunity became available we would do it again, especially now we have the added advantage of considerable experience in this space.
Clearly a focus on a tighter geography won’t be the right answer for everyone. For example, for specialist providers the drivers may be very different.
But I think it is also fair to say that the sector’s evolution has not delivered the optimal pattern of stock holdings. I hope and expect that stock swaps, sales/acquisitions and perhaps some management partnerships will be an increasing part of our collective future.
Matthew Bailes, chief executive, Paradigm
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