HAs can generate larger profits by developing for market sale and rent than from any other activity. Inevitably, the profits are greatest in London where house prices are higher. The boards of HAs increasingly gravitate towards construction, and especially in the South East. Driven by government policy, institutions such as the regulatory bodies and the finance houses concerned with the sector, all support this line of travel.
As a result, leading housing associations are losing their integrity as charitable organisations and are becoming indistinguishable from private developers entirely focussed on private rents and sales.
Because of the need for development and finance expertise on the boards of HAs, people from these backgrounds have come to dominate the boards of large associations. The corporate plans they develop inevitably reflect this area of interest. The vicious circle is complete.
Shifting Stock
Analysis of the sector shows that there has been a considerable shift in its stock profile over the last few years. For example, in 2019 the largest percentage growth across categories of housing was in those earmarked for market sale (non-social leasehold), jumping almost 16% (8,500 units) on the previous year (SDR Statistical Release 2018).
The change in profile over a seven years period spanning 2012 and 2019 illustrates a sharp jump in Low Cost Home Ownership (LCHO) units, and a corresponding decline in supported housing (ring-fencing of grants under the Supporting People programme ended in 2009) , (SDR Statistical Release 2018).
Stock profile changes include conversions from one tenure to another. Conversions have only ever been made from social rent (capped at 50% of market rents) to ‘affordable’ rent (capped at 80% market rents) or market rents, and not the in the other direction in (SDR Statistical Release 2018).
What this shows is that HAs are increasingly focussed on building for outright market sale, and that they are gradually converting their rented properties from cheaper to more expensive rent levels.
Property lawyers Savilles captured the rationale behind this trend in May 2019:
The amount housing associations generated from new open market home sales increased 16% (£221 million) to £1.61 billion between 2016/17 and 2017/18, with 37,000 homes for sale contractually committed to be built in the 18 months from December 2018.
Savills, 2019
Savills further comment that “The majority of the increase in turnover from sales is in London-focused housing associations, accounting for £305m (91%) of the increase” .
Such figures have proven irrisistable to the boards of associations and they are developing an insatiable appetite.
As commercial property developers, HAs inevitably seek out new board members with experience of finance, investment and construction. Peabody is a case in point.
Meet the Peabody Board (2020)
According to the Peabody website, the association has a total of 13 members on its board, plus the CEO, as follows:
- Bob Kerslake, the Chair, has a portfolio which includes a role as Chair of London Pension Collective Investment Vehicle.
- The Vice Chair, Iain Peters boasts “30 years experience in the financial services and energy sectors in executive leadership roles”.
- Phillipa Marsden “has over 30 years of experience working in the planning and development field [plus experience working for] several global property advisory firms.”
- Jennifer Daly “is a Chartered Member of the Royal Town Planning Institute … with a strong development and commercial focus”.
- David Hardy “has over 20 years’ corporate finance, M&A, fundraising and deal closure experience spanning infrastructure, PFI and renewable energy projects.”
- Paul Loft had “a 25-year career in retailing, in senior finance and general management roles”.
- Jane Milligan’s background includes service commissioning and procurement.
- Dierdre Moss “has worked in the insurance industry for over twenty five years with FTSE 100 companies.”
- Francis Salway “was Chief Executive of Land Securities, the country’s largest commercial property company”.
- Peter Vernon has “extensive experience of complex real estate transactions and in place making”.
Of the non-resident board members, only one (Helen Edwards) has no obvious ties with commerce, finance, or investment companies. The remaining two members are a tenant and a resident. The profile of the Peabody board is no outlier. It is typical of all large associations.
Lack of democratic accountability to workers and tenants
To help ensure that associations are unchecked in this direction of travel, HAs are moving away from democratic influence by tenants and residents, preferring methods of engagement over which the landlord has control.
Tenant and Resident Associations (TRAs) which are the most democratic of engagement models, are being replaced by Tenant Scrutiny Panels whose members are appointed by the landlord. This is akin to the derecognition of a trade union in favour of an employer appointed staff council – something that many associations seek also seek to do.
The sector needs to be fundamentally and structurally reviewed. Control needs to be ceded to tenants, residents, and workers who are directly impacted by leadership decisions. Ultimately, only democratic accountability can force the change in direction needed.
Sources
https://www.peabody.org.uk/about-us/who-we-are/governance-boards-and-committees/board-members
Wow worrying more power to landlords by cherry picking tenants to sit on scrutiny panels we have this currently via Sutton housing partnership in Sutton Surrey it’s all surveys and all landlord lead surveys in my view can be minipulated u talk to tenants and what they say on the ground and survey outcomes it’s totally conflicts to their surveys outcomes they always come out doing well as questions are often manipulated and there’s no other box so forced to tick a survey that gives mainly positive outcomes in my view ??
There’s certainly a lot to learn about this issue. I like all of the points you made.
“Ultimately, only democratic accountability can force the change in direction needed.” – Wrong. Politicians are the only people with the actual power to force change; and they should be the ones targeted by campaigns to bring about these changes.
The meaning of this phrase “democratic accountability” isn’t even clear. If it’s meant to mean that HAs need to be run by a democracy of the tenants then the accountability will fall on the tenants – and that hardly sounds like something most tenants would welcome. If it’s meant to mean that the executives of HAs must be elected democratically then again, the blame for failures will fall on whoever voted rather than on the executives. The accountability for how HAs are run MUST always fall on the professionals. The problem is that there is currently no accountability at all.
Thanks for your comment and politicians definitely need to get involved. However, they are only ever our political representatives and need to be told what we want as their constituents. We are indeed working on liaison and pressure in the political sphere.
In terms of democratic accountability, tenants need to be able to hold the executives to account and this is now totally absent from most associations. Scrutiny panels for tenants and staff councils are advisory only and have no real power. There are various mechanisms for giving tenants and workers more power to hold the organisation to account, and the relative merits can (and should) be debated. The most direct form of democracy is a housing cooperative, and there are many that have been very successful, but this model doesn’t work for everyone. There are other options though and this needs to be imposed on housing associations because left to themselves, they have shut both workers and tenants out.
Yes. Political involvement is necessary yet only as representatives to empower what people want. Given the harshness of section 21 and high rents, tenants witholding £10 of their rent can give tenants a voice. A partial boycott of rent can represent a protest, a voice of what tenants want.
Some social housing estates have over 1,000 flats and some even more. These need to be maintained and contract workers understandably stressed out forget tools and other items need for maintenance.
Would it not be reasonable for a landlord to support a tenant in a keeping a store of tools as a not-for profit business.
The distance for example from the Clapham Park Estate to the nearest builders merchant is about one mile and a half.
In terms of the nearest major retail food outlet. Apart from Sainsbury Local, the distance is similar with Tescos, Aldi,Sainsbury and M&S are all placed at a similar distance to the builders merchants shops, near Streatham Common Station.
There has been a decimation of children’s centres and sure start centres.
There is a need for very localised nurseries and I note that on a Wandsworth Council estate on Balham Hill a nursery has opened up.
The nearest library is The Tate Library on Streatham Hill. Given busy, death trap roads with lots of incoming roads, for a child up to secondary school age, the distance is inaccessible without parental or support.
A children’s library/centre on one of the flat would be a very good resource.
It is really up to tenant’s groups, residents to empower our politicians with what we want on our estates.