Is Small Beautiful?
One of the perennial questions in the housing association world is “Are smaller associations better than larger ones?” When I first started in the sector a large association was one with over 5,000 homes to rent, now, mainly as a result of mergers there are over 100,000 homes and Places For People, arguably the largest association, manages over 200,000 homes across the UK. Small is also a changing concept, the National Housing Federation (NHF) has two categories: smaller housing with up to 2,000 homes and smallest with up to 250 homes. The Regulator of Social Housing (RSH) currently has a borderline set at 1,000 homes which triggers a higher level of regulation and inspection.
Recent scandals (see previous blog (https://cratus.co.uk/rising-damp) and ombudsman censures have tended to focus on larger associations, however this may be almost inevitable as they own the vast majority of homes and could be the victim of the ‘law of averages’. Also stacked against them is that the post war council properties which have come into the housing association sector are almost exclusively to be found in the ownership of larger associations. These properties were often thrown up as cheaply as possible at the time and have inherent problems making them more prone to leaks, damp, poor insulation, and general poor condition. Much of this housing needs rebuilding, upgrading, or demolishing as it passes its expected lifespan, a post war home is typically 60-70 years old.
In the recently published “The Better Social Housing Review” larger associations are specifically singled out, stating “Larger associations in particular face the risk of being further removed from tenants, who should, ultimately be at the heart of any housing association’s social purpose.” There is a generalised view espoused by many that ‘smaller associations are closer to their tenants’ and that ‘larger associations are more financially robust and have more capacity to respond to a changing environment.’ The government, through the regulator, has tended to believe that often the solution to an association getting into trouble is to organise a takeover, this was particularly true of the old Housing Corporation, the predecessor to Homes England. This culture of acquisition to solve problems has led us to the current situation where we have a sector dominated by a small number of large organisations most of which has at some time in its history been asked to take over and ‘sort out’ a smaller one. I am not aware of any cases where large associations have been split up into a series of small local associations.
We must be honest that over the years many small associations have fallen into financial hardship through mismanagement or worse. Larger associations were often rewarded by the Housing Corporation for ‘sorting the problems out’. It also should not be assumed that small associations are necessarily closer to their tenants. I was aware of one association which decided it wanted to have £10m in the bank for its 50th anniversary and to achieve this stopped spending money on repairs halfway through year 49. The same association once spent more on committee travel allowances to decide not to provide a street light stand (instead to nail a light to a tree) than it would have cost to provide the stand.
Given all this I was interested when some data which compared the performance and satisfaction with associations landed in my inbox. The findings make interesting reading. The sample size is significant as it benchmarks 150 small (below 1,000 homes) associations with the associations included the regulators global accounts of the sector (over 200 associations with more than 1000 homes).
The highlights include: small associations are quicker at letting their homes, have slightly higher rent arrears and are generally quicker at completing repairs. Their management and overhead costs are higher (per property), but their repair costs are lower. They have a significantly lower operating margin, and are building proportionately fewer new homes than the sector as a whole. On customer satisfaction smaller associations have performance which mainly higher and never lower than the larger associations.
In conclusion it appears that the mythology may be generally right. Smaller associations have more satisfied tenants (the overall score is 90% against 82%), are more responsive but they are more expensive to run and build fewer homes. If you want organisations which can generate significant surpluses to invest in new homes, you want large associations, if you want organisations which provide more responsive services you want smaller associations. Of course, averages hide the range of fine detail which takes you beyond these generalisations. The holy grail for larger associations will be how to appear small and local to tenants while leveraging their large surpluses to invest in more and better social housing.
