Big is beautiful – and more efficient. That’s the mantra that seems to be driving the housing association world at the moment. Egged on by the Government in the shape of the increasingly desperate Housing Minister Brandon Lewis, we have had some huge merger announcements in the recent past: Genesis and Thames Valley, Circle and Affinity Sutton, and now the biggest of them all with L&Q, Hyde, and East Thames joining forces to form a body with 135,000 homes.
The claims for the benefits of the merger are grand, under the headline ‘Stronger Together‘ (which I’ve seen somewhere else recently). There are planned savings of £50 million a year (through combining back office functions and IT, refinancing and better procurement deals) as well as a target of building 100,000 homes over a decade, making it the fourth biggest housebuilder in the country (the top 3 all being private companies). We do not know how much work has been done to test these estimates; achieving savings on this scale is easy on paper and a lot harder in practice. Small organisations can be as efficient as big ones; reorganisations eat up huge resources (ask the NHS) and frequently lead to managers taking their eyes off the ball. Managerial hubris is common in mergers; empire buiding which is not soundly based frequently fails.
But if the savings are there to be made, and the new organisation can deliver more homes that the existing three, why did this announcement still make me feel uncomfortable?
First, the organisation does not yet have a name but we do know who the top dogs are to be. The three existing chief executives become the top managers in the new organisation, with David Montague of L&Q taking the CEO role. He’s always struck me as being exceptionally good at the job (more than I say about some other HA CEOs), which gives me more confidence that the claims for the new organisation will be delivered, and he normally has interesting things to say about housing policy. So this isn’t personal. But it makes me scratchy when the top jobs are stitched up before an announcement on the principle of the merger is made.
This applies not only at employee level but also at Board level. The ‘Chair Designate’ is L&Q’s existing chair, Aubrey Adams, a former chief executive of global estate agent Savills and a non-executive director of British Land. The Deputy will be Mark Sebba, the current chair of Hyde, a former chief executive of a luxury tailors as well as being involved in investment banking.
It all feels nice and cosy, but it also makes it look more like an L&Q takeover.
My second misgiving is about the social purpose of the new organisation. The PR tries to make it feel good. David Montague says: “Our plans will allow us to tackle the housing crisis head on, driving greater efficiency, building more homes, creating beautiful new places and sustainable, independent communities. At the heart of our united mission will be the continued provision of affordable homes for those in need.”
Yet the new building programme, with the target of 100,000 over ten years, will comprise 25,000 new homes for first time buyers, 25,000 new homes for (unaffordable) ‘affordable rent’, with the remaining 50,000 new homes for market rent and sale. There is not one word about aiming to build any at all for social rent, and so claims that they intend to help low income families sound just a little hollow. It looks like another step on the road to losing the sector’s social purpose, and it is nothing short of outrageous to claim that ‘Half of these new homes will be for people on lower incomes’. They will not be, and I do hope Sadiq Khan will take them to task when he becomes mayor.
Thirdly, where are the tenants? They scarcely get a mention in the merger announcement although there are some vague promises about consultation on the detail. Yet the strength of the mergees is based on the rents that tenants have paid in the past and these organisations belong to them as much as anyone else.
Tenants do get a mention in an article by the Deputy CEO-designate published on the same day as the merger announcement. It got my hackles up. With so many things that she could have written about, Elaine Bailey, formerly a senior executive at Serco, ‘set out a vision for the new giant organisation’ by saying she would tackle the ‘dependency culture’.
In a piece entitled ‘Knuckle Down’ she says: “We have been responsible and are partly to blame for the dependency culture we have created”. Her particular beef is that tenants do not take enough ‘personal responsibility in respecting their homes and making an effort to help themselves’. This is stereotyping and condescension rolled into one, turning tenants’ most common complaint – the quality of the repairs service they pay for through their rent – on its head. You would think that the new Deputy CEO-designate would emphasise how the merger provides a great opportunity to review and improve services and offer tenants better value for money. By choosing to use Iain Duncan Smith’s favourite phrase, yet another £200K a year boss looks down her nose at people who are struggling to get by. I bet they even keep coal in the bath.
Dependency Culture: By choosing to use Iain Duncan Smith’s favourite phrase, yet another £200K a year boss looks down her nose at people who are struggling to get by. I bet they even keep coal in the bath.
We are left to speculate about the name of the new organisation. LH & Q? Jekyll and Hyde? Perhaps just ‘Big’. Suggestions in the comments box below please!