Download Housing Association Sector Restruturing

Housing and Community Safety Select Committee
Review of Registered Social Landlords
Housing Association Sector Restructuring
The Housing Corporation Centre for Research and Market Intelligence has produced
a study of the recent changes in the Housing Association sector, entitled ‘Sector
Study 61: Sector Restructuring’. The following is a summary of the document.
The key findings of the research include:
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Combined with the impact of new developments and the influx of new stock
transfer landlords, internal restructuring 2002-07 has resulted in a 50%
increase in typical housing association size (from 800 to 1200 dwellings),
although the proportion of stock owned by the largest 20 associations
increased by only 26-29% in same period.
Sector restructuring appears to have entered a new phase in recent years
with a growing emphasis on group consolidation (eg. streamlining of
structures to reduce costs and/or enhance efficiency) as opposed to group
establishment.
Thanks to group consolidations and to 27 ‘super group’ transactions (two or
more separate groups entering into a collaboration), the overall number of
groups existent in 2007 was slightly reduced on the 2002 number.
The Housing Association sector has grown from 475,000 dwellings in 1986 to
942000 in 1996, and 1,850,000 in 2006. Stock transfer from local authorities has
accounted for a large proportion of this. Alongside these, the existing sector has
been subject to substantial re-structuring activity which has largely involved the
agglomeration of previously autonomous organisations, including the rise of
‘supergroups’ with ownership portfolios exceeding those of all but a handful of local
authorities.
The past decade has seen the emergence of group structures; this is where
identifiable HAs ally with one another in ‘parent and registered subsidiary’
relationships. Not all group structures involve more than one landlord, but for those
that do, there is often some functional integration between group members. A group
parent body may provide subsidiary HAs with human resource, finance, or
development services.
Most constitutional changes require the approval of the Housing Corporation, apart
from where internal group structures are established that don’t include the
establishment of new social landlord subsidiaries. For example, an RSL may create
subsidiary bodies to undertake care home management or social enterprises. The
Research paper only covers the type of changes which require Housing Corporation
approval; of these, there were 329 ‘change transactions’ between 2002 and 2007.
The majority of these involved landlord agglomeration (where two or more HAs join to
make a larger group), with the remainder mostly group consolidation, or internal
group set-ups.
The three main types of group have been identified as follows:
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Original groups – one stock owning group member linked with subsidiary
organisations tasked with non-landlord functions eg construction;
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Mixed groups – a stock-holding housing association parent and one or more
stock owning HAs amongst the group subsidiaries;
Umbrella parent groups – a non-asset owning parent agency with ultimate
control over group subsidiaries including at least one stock-owning HA.
Out of 150 group formations in 2007, 7 were of the original type, 89 are of ‘mixed’,
and 54 have umbrella parents. The ‘umbrella groups’ tend to be very large in terms
of stock holdings; half of umbrella parent groups controlled more than 10,000
dwellings. Recent changes in the sector have seen an increase in group
consolidation, as compared to group establishment. There is also a trend suggesting
that all types of restructuring may be slowing (the failure rate of proposals has also
been estimated as 30%).
During the 2002-07 period, RSLs created by stock transfer, and non-asset holding
parent companies, stand out as particularly active in making changes. There is also
a higher rate of structural changes amongst the larger organisations.
Earlier research has identified some of the reasons as to why associations consider
forming groups, and these include having aspirations to:
 Increase their scale of activity;
 Spread corporate overheads across larger stock numbers;
 Access specialist skills and services;
 Increase influence;
 Secure more favourable terms from suppliers and funders.
The background to these changes includes the trend towards concentrating public
funding for social housing towards a reducing number of recipient agencies. Some
agglomerations have also taken place due to the need to ‘rescue’ associations with
financial and governance problems. Submissions to the Housing Corporation for
approval, can be classified under financial efficiency; business/administrative
efficiency; positioning for the future; improved service delivery. The Housing
Corporation itself has set out criteria that applications would be considered against
and these are: evidence of improved services to tenants and others; evidence of
significant and measurable efficiency savings; arrangements to monitor outcomes
against intended savings; and simple, clear and straightforward governance
structures.
For those seeking to form a new group (as opposed to mergers, etc), financial
efficiencies was seen as a key factor. It was anticipated that these would be
achieved through group parent bodies providing corporate, development and
financial services to all group members; this could bring tax advantages, reduced
management costs, savings from office rationalisation, IT savings etc. Group
expansion was seen to be particularly attractive in terms of business/administrative
savings. The capacity for larger organisations to provide specialist services of direct
benefit to tenants is also often cited. For many associations, admin savings were as
important as financial ones, and for the larger groups, financial efficiencies were not
particularly significant on their own.
Nationally, the stock transfer sub-sector has remained generally identifiable, although
there has been a high rate of change activity. By 2007, half of all transfer landlords
were operating as group subsidiary bodies. For some this represents a continuation
of their original status, though 40% of those set up as independent entities have set
up or joined groups. However, the majority of transfer landlords remain totally
autonomous, and less than one in eight have ceased to operate as separate entities.
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