Does size matter?
Kate Davies CBE FRICS
Consultancy to help the property, technology, investor and maintenance sector understand social housing better.
In 1999, as the CE of Servite, I joined a group of Hammersmith-based Housing Associations. Shepherds Bush and Octavia were members. I feel sad that both are folding. However life moves on and the market is brutal. Businesses fail for similar reasons - they offer an out of date product, or cannot make a profit.
Smaller HAs face financial pressures and they "merge", or go out of business. Rescued by bigger, stronger associations at least the resident’s homes and tenancies are protected. Gradually the bigger ones grow, as an almost a natural law in a capitalist economy.
There are 11 water companies in the UK. Seven major supermarkets. 14 major (global) car manufacturers. Six big energy suppliers. Eight banks. In any established industry the market, specifically competition and changing operating conditions, leads to rationalisation.
Set aside your nostalgia and your natural dislike of big, successful companies (for a moment). Ask yourself - does a model of 1500 unique and separate housing associations benefit the resident? If not the resident - who? And what is the downside of having the equivalent of a corner shop as your landlord compared to Tescos? The overheads of boards and committees, senior staff, office premises, separate IT systems, regulation costs, procurement costs etc all add up and weigh heavily on those who desperately want to survive as independent entities.
When large HAs are castigated - correctly - for letting down their residents - the issue of scale becomes controversial. It is easy to say, "Large HA is crap, therefore big HAs are crap", but of course small HAs may also be crap. There is no evidence that size is what makes an HA crap or excellent. Set aside (for a moment) your prejudices and romantic desires.
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If instead of 1500 HAs we thought the residents and society would be better served by, say, 12 HAs - one for Wales, one for the North, one for London, one for older people and so on. All the London HAs would form London HA. The banks would have to support the move and be prevented from making a greedy charge for change. The leadership roles - for the Board and executive - would be advertised with a decent settlement for the redundant. Staff would have their jobs protected but numbers would shrink through natural turnover. Organisational costs and overheads would reduce by at least 20 to 30%.
Tenants would need guarantees and preserved rent levels, but the Regulator of Social Housing (RSH) should demand that performance and service levels must level up to the performance and service levels of the best, as cost savings rapidly crystallised. As overhead cost and waste were eliminated huge HAs could invest more in homes - both upgrading the existing stock and building far more social homes to meet overwhelming need.
OK. This is a fantasy - go back to your comforting certainty that things are fine as they are. Mergers will gradually concentrate things, and good people will continue to do their very best, in challenging circumstances.
To me, with things as they are, it's embarrassing. Poor people live in sub-standards homes, paying more than they need to, waiting longer than they should, tolerating standards of service reminiscent of the 1970s (when ordering a book was an in-person affair, involving a second visit two weeks later to pick up the book compared to a Kindle download or having the book delivered tomorrow).
It's a radical proposal. What do you think?
Deputy editor at Inside Housing, with an editorial focus on sustainability, diversity, affordable housing. Once edited a feminist magazine and a former IBP journo of the year
1 年Unrelated to the contents of the post, but I love this cat statue so much
Chief Executive, Irwell Valley Homes
1 年Imagine a future model of housing where tenants and leaseholders together commissioned the services and investment in their homes and communities from efficient, customer focussed companies who were there to provide modern, excellent services. If the service providers didn’t perform as expected, the commissioning tenants and residents on the managing board would not renew their contracts. The board would focus on both existing residents and also on future residents, using collective assets and lack of expensive overheads to invest in new homes to meet the diverse needs of future generations. The overall model would respect the not for profit, ethical, long-term roots and values of the combined housing association, co-operative, community based and locally grown history. Combing these values with a drive for agile, caring and customer centric services would be seen as the highest accolade. Value for money would be endemic. Respect for the environment, tackling inequality and building trust as standard expectations. After all longterm thinking is the privilege of rental based business plans. That’s the dream I have for our sector! Collaboration for the benefit of customers.
Hi Kate, it depends on the problem(s) you are trying to address. Delivering good service is not necessarily a function of size, but it could be a constraint for both small and large organisations. Without a good evidence based assessment of why organisations are choosing to merge, it is too simplistic to lump it all on unsustainable overheads. There is a school of thought anecdotally, that some of them have bitten off more they can chew. At times sticking to the knitting might be wise. I will be sceptical about the positioning that mergers conquers all. Multiple studies have shown the majority of mergers fail to achieve their expected business case value. It would be interesting to compare actual pre merger promises and post mergers performance in the U.K. housing sector.
NED | Chair | Mentor | Mindfulness and Yoga Teacher
1 年It is an interesting proposal. To follow the supermarket analogy, there is still room for small, independent shops. Many were established to provide for specific needs. I remember travelling 30 miles to get spices and today still prefer to buy these in an Asian store than in a supermarket. Diversity within the housing sector shouldn’t be optional and my concern is gat lack of diversity won’t benefit residents or anyone else. Having said that the pressures on all organisations are enormous so greater collaboration accross the sector and with others such as the private rented sector is a good way forward to improve services, provide better quality housing and support diversity
Consultancy to help the property, technology, investor and maintenance sector understand social housing better.
1 年Imagine supermarkets hadn't been invented (back in 1948) and all we had was an array of corner shops. Some were good, some were terrible, but we had to make do. Some shopkeepers were nice, and some were rude. The range of goods varied but there wasn't much choice. Sometimes the food wasn't very fresh, indeed on occasions so mouldy that made you ill. If you wanted something like firelighters they might offer a box of matches. They sometimes got something in that you wanted but there was a very long wait. You would have given them 7/10 in terms of satisfaction, but you had never been to a Tescos. You had never had the choice of seven different types of tomato, delivered this morning. You had not had the option of getting your groceries delivered, or fast automatic check out. You wouldn't have been introduced to new options. You hadn't got the lowest possible price, with ease of movement and product visibility. Just saying. I may not have the right answer. Maybe we need something less radical? But only two people have suggested alternative ways for the HA sector to really improve its products and services - a payment by results approach for CEO, or start from scratch with a different model focused on service outcomes.