Are We Heading For a New Normal?
This morning saw the breaking of a potentially enormous piece of news with the announcement of merger discussions between three of the members of the G15 of London Housing Associations. London & Quadrant, Hyde Group and East Thames are each major players within the housing sector. According to Inside Housing, the merger would result in a 135,000 home portfolio covering geography across the South East, creating the largest housing association ever seen in the UK.
This merger announcement is the second in the last year that would lead to one organisation managing over 120,000 homes. The first being Circle Housing’s merger discussions with Affinity Sutton. It also suggests the start of a trend, the potential for us to see a series of mega-mergers and acquisitions that will see the social housing sector transform into something that will look very different.
I first began working in the housing sector in 2005, at a time when a number of mergers were going through. Many of the G15 members of today were created around that time including Circle, Affinity Sutton, Genesis, Family Mosaic, A2Dominion, L&Q and Amicus Horizon. The mergers at the time took the definition of a large housing association from 10,000 to 20,000 homes up to 30,000+. The organisations have taken time to consolidate, to modernise and gain efficiencies. The Genesis that I work with today is completely different to the one I began working with 11 years ago.
It’s my belief that this change was necessary, and that the benefits seen are good. They have allowed Housing Associations to step up and help fill the gap created when councils stopped developing new homes. This next round of mergers will further increase the development capacity of these organisations, 100,000 homes in ten years are projected from L&Q/Hyde/East Thames alone. If they can deliver then this would be an enormous boost in tackling a chronic housing shortage.
As with all change there are questions. Can the new organisation deliver not just homes, but large amounts of affordable homes? Can they retain close relationships with their customers, and avoid becoming faceless corporations? Will they be able to keep up momentum whilst they go through a painful period of amalgamation that will probably mean cultural and process changes on a huge scale?
The outcome of this merger will likely trigger a big response. If it is successful then competitors will need to follow suit. The likely result is that 30,000+ homes will no longer qualify a housing association as large. How large exactly the new normal will need to be is the question? Will this round just be a precursor to another even larger round of mergers? Will the result be similar to the banking sector, where a handful of large groups will dominate the market?
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