Social climbers

Housing associations – or registered social landlords as they are also known – have a varied history. Some trace their roots back to 19th-century philanthropy, others were born out of their local communities and many simply from the transfer of local authority housing stock.

They are all funded by government grants, regulated by the Housing Corporation and encouraged by successive government policies to provide housing for those in need. Although the sector is still regarded as a social movement, the emergence of super housing associations raises doubts as to whether housing associations can be maintained in their present form.

The Housing Corporation claims there are some 1,900 such organisations managing more than two million houses for five million people. These figures belie the enormous diversity of the sector. Take a simple comparison. According to the Housing Corporation website, Places for People Homes owns and manages 43,000 homes. Bexley Churches Housing Association is quoted on the same basis as having 134 homes. This difference in size, with all its implications, has to be recognised against a background of change driven by a government that has set challenging targets for the provision of housing and has elevated the importance of social housing to that of education and the NHS.

Although most housing associations rely on external private funding from financial institutions, often secured against the properties they own, this is a more complex and important issue for the bigger institutions and they must pay heed to their funders’ requirements. Lending into the sector so far is estimated at £35bn with more to follow. Conversely, the smaller and the vast majority of housing associations, although reliant on funding, see Housing Corporation grants as a fundamental requirement to continue to provide housing.

There are other changes on the horizon. The Housing and Regeneration Bill 2008 currently passing through Parliament contains a number of provisions that will affect social housing. The bill contains provisions to merge the housing and regeneration functions of the Housing Corporation and English Partnerships in a New Homes and Communities Agency. The expected change will be to invest in infrastructure, support the regeneration and delivery of new social and affordable private housing and deliver a strategic approach to regeneration. No one really knows how this will affect housing associations in practice but it may favour the larger providers to the detriment of the smaller ones, with larger projects going to those that have the capacity, expertise and the necessary funding.

The bill also proposes the establishment of a new regulator of social housing, the Office for Tenants and Social Landlords. The role of the new regulator will be to improve the level of service that social tenants receive and ensure they have more choice and influence in matters central to their everyday lives.

However, the sector has concerns that this will challenge the independence of housing association boards and will result in them becoming public bodies with public expenditure constraints on them, therefore jeopardising their ability to obtain private finance and continue with strategies that have been successful in recent years. This could result in super housing associations leaving the sector, with a rump of smaller organisations remaining.

There are also internal pressures. On the face of it housing associations are all constitutionally similar – either industrial and provident societies, companies limited by guarantee, or trusts – and they have similar objectives, namely to meet the needs of those who cannot acquire housing on the open market. The big organisations set up subsidiaries to carry out functions that often cannot be carried out by the parent body, particularly where it has charitable objects. These larger organisations have to put time and effort into fitting a square peg into a round hole, while the smaller organisations have more simplified objectives that do not require such contortions. In these circumstances will the super housing associations feel the need to evolve into something else, where the restraints are not so severe?Finally, the internal ethos of small and large housing associations should not be overlooked. Larger and more ambitious organisations now have the financial muscle to compete with the larger housebuilders for prestigious development sites. They offer a wide range of services from the traditional role of housing providers to financial services and want to be big players in the house-building market. Contrast this with the smaller providers that concentrate on local and regional communities and development, and you have a recipe for a division at some time in the future.

Adrian Stanley is a real estate partner and Clive Gardner a senior associate at Eversheds