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Mega merger takeover

Posted by
21 Nov 2016
Due to the tough financial climate social housing providers currently face, housing associations are being forced to think smarter to address the issues that lie ahead of them. As a result, many smaller organisations are now turning to pooling their assets and resources with larger housing associations in order to secure their financial future.

Proposed Merger

Over the last few months, there have been many proposed mergers including:
  • L&Q, Hyde Group, and East Thames Housing – Plans to merge the association were announced in early April, a move which would lead to the creation of one of the largest Housing Association’s to date, owning in surplus of 135,000 properties.
  • Affinity Sutton and Circle Housing - Announced in December 2015, the consolidation of Affinity Sutton and Circle Housing would lead to a 127,000 home organisation.
  • Sovereign Housing Association and Spectrum Housing Group - More recently Sovereign Housing Association and Spectrum Housing Group announced they were considering merging, leading to the amalgamation of a 56,000 home organisation.

Benefits

Mergers are viewed to be able to deliver key benefits that organisations are unable to deliver alone. These include:

  • Operating at a lower cost – The intended efficiency gains associated with mergers is thought to enable them to operate at a lower cost without compromising quality of service.
  • Building of a greater number of affordable homes – The associated greater financial strength will increase the number of affordable homes that can be built between the organisations.
  • Subsidised rents for tenants – Greater financial efficiency associated with mergers has also been proposed to lead to subsidised rents for tenants
  • Strategic benefit – Mergers are thought to help strengthen social landlords ability to influence and inform direction in their given region

Challenges

Although merger plans are backed by good intentions, some remain sceptical for a number of reasons:  

  • Negligible value to tenants – It was proposed that tenants would benefit substantially from decreases in rent as a consequence of merger efficiencies, however this is yet to be evidenced.
  • Staffing cuts – Proposals to increase efficiency with regards to any industry always brings concerns for job security.
  • Resource intensive and time consuming – Merger plans need to encompass a balance between leadership styles and culture. It has been criticised that this complex process may detract attention from an organisations social mission. In fact, many mega mergers have collapsed due to conflicts of interest, most recently Sanctuary and Housing and Care 21 scrapped their plans to form a 120,000 home group.
  • Large geographical areas covered by landlords – Chief executive of South Yorkshire Housing Association Tony Stacey believes it’s easier for landlords with a community focus and strong local connections to be a better landlord.

It’s common knowledge that Social Housing providers are facing vast amounts of pressure to demonstrate efficiency and secure their financial futures. It’s being viewed that combining strengths to create a new type of Housing Association is the resolution. However, is there safety in numbers? Does bigger always mean better? I would love to hear your thoughts on whether mergers could really be the solution to a growing housing crisis. Leave your thoughts in the comments below.

Alternatively, if you’re looking for a new role or need assistance with your recruitment needs, please give us a call on 01332 542580 or email Bethan.hall@sellickpartnership.co.uk. Contact Us
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