News & Views

Housing Association mega mergers have been gathering pace for a while now.Since the merger talks of social housing landlords L&Q, Hyde Group & East Thames to create the fourth largest house builder, questions have been raised as to whether mega mergers will mean the loss of social purpose in housing.The L&Q, Hyde Group & East Thames merger will have a turnover of £1.1bn, a book value of more than £30bn and own 135,000 homes, more than 5% of the English housing association sector’s stock. And they’ve pledged to build 100,000 new homes, 35,000 more than they could have achieved alone.We’ve also just witnessed a breakdown in talks between Sanctuary and Housing and Care 21. When it was all looking so good their differences in the end could not be resolved, causing the withdrawal of one party, and culture was the reason reported.Social purpose and culture; two strong drivers, difficult to negotiate and hard to compromise on. 

The ratio of input to outputBut is bigger better? The impetus for such mergers comes from new Government legislation around, welfare reform, extended Right-to-Buy, rent cuts and a requirement to build more homes. To fund this housing associations need efficiency savings that can be gained from their back office, IT and procurement functions. Mergers of this scale can deliver savings in millions. But as with all enterprise it needs to regenerate and this has not really happened since the move away from council housing in the 80’s.Being larger is not about being better but being able to be more productive with greater output, and larger organisations believe they can increase their capacity. Being larger can improve borrowing capacity too and large scale build-to-rent projects need access to funds.Housing Associations are increasingly dependent on profits from mixed housing sales; shared ownership, housing fixed assets, right to buy (RTB) or right to acquire, and open market sales. This enterprise based income represents more than a third of their surplus.If newly merged organisations are focused on house building and income maximisation, then it’s easy to see how social mission and culture could get lost?Without doubt social housing has been left high and dry by Government policy and it must find and fund its own way through, not just to survive, but also to thrive, remembering that surplus in the non-profit organisation goes on to fund more homes for more people.   

Resource, people and moneyIn the L&Q, Hyde Group & East Thames merger they will set aside £250m for community investment projects and £5m a year to create an academy scheme which will offer training and career development for staff and residents, no lacking of social mission here.To regenerate the new organisation will need skilled labour and new talent to deliver the promised output.Change is both challenging and uncomfortable and is resisted because it can hurt. It is also very difficult to do solely with the existing workforce, a diverse mix of skills and experience is required who on the one hand can challenge the status quo and on the other can understand the context of change within the organisation, and this is where culture can be a stumbling block.Experience from outside of the industry can add impetus to new ways of doing things but it needs a strong leader with a vision to navigate a way through the road blocks. A growing organisation is a great attraction for talent and if organisations continue to do what they’ve always done, in the way that they’ve always done it they will move no further forwards.Last year L&Q, the largest of the three newly merged associations, had a surplus of circa £200m yet they invested £217m in new build for lettings, £184m in new build for sales and £57m in improving existing stock. Clearly a strong social mission here.   

Who holds the powerThe biggest challenge facing housing associations is cultural change in accepting that tweaking around the edges is unlikely to deliver what the government wants, the economy needs and communities rely upon. Their power lies within themselves, better to be in than out and better together even if the ‘cultural fit’ isn’t at the start a smooth cog in the gears of the newly formed organisation…this can be worked on over time but it’s not a reason to pull the plug. 

Social Housing was attacked on all fronts in 2015 through government pledges that were set to rock the sector and change it forever.A combination of strikes made social housing the favourite political punch bag.But as Star Wars Battlefront was getting ready for its big launch later in the year, social housing gameplay, showed that it does have resilience, making its political manoeuvre, coming out fighting. Despite inevitable change that will take place across the sector, there is still plenty to get excited about.  So how will the force awaken in 2016? Here is Morgan Hunt’s compendium of 8 social housing win themes for 2016:

Extension of Right-to-buyA watershed moment for the social housing sector but what the politicians didn’t dwell on is that RTB isn’t a new initiative, a vote winner maybe, but not a new innovation. RTB was introduced in the 1980’s yet turned out to be one of the biggest housing debates of 2015.Last year the Government made homeownership its priority, shifting all government, affordable housing, capital funding, into products such as Starter Homes and shared ownership, yet many thought this not the slam dunk expected. Concerns still prevail around market distortion and of allowing the poorest to buy.The heroes of the day, the National Housing Federation (NHF), helped broker an agreement that made RTB look a bit more manageable than originally perceived, to give housing associations more leeway to manage their stock and their responsibilities. We accept that not everyone sees NHF as knights in shining armour, but if the deal allows housing associations to be in more control of their futures, protect jobs and housing for the vulnerable, which it does, then this has to be seen as a good thing. This is why we’ve flipped RTB into a win theme for 2016.

Rebuilding the sectorIn the midst of the political firepower, social housing base command was getting on with the job and last year, despite a fall in their housing association grants, they managed to increase the level of completions which rose by 53% in 2015 over the previous year.New housing stock gives the chance for housing association’s to own and manage more cost efficient homes, to generate their own money, which they did by investing 84 pence in every pound from their own finances.Breaking news just one week into the New Year the Government announced that 100 of the country’s most run-down, sink housing estates will be replaced with government and private sector money.Old housing stock is costly to maintain but new development, funded from RTB, at housing association discretion has to be a win theme for the sector longer term.

Welfare reformRemoval of housing support for 18-21 year olds and lowering of the benefit cap is no doubt a tricky business for all housing associations.The National Living Wage also impacts the cost of delivering care contracts on behalf of local authorities and contracts will need to be renegotiated. Welfare Reform represents an uncomfortable set of hard choices for social institutions to make.The burning platform for change forces going back to basics, re writing the rule book and thinking outside the box in terms products delivered. Housing associations are in the unenviable position of determining who gets and who doesn’t and Welform Reform has exacerbated the decision criteria. None-the-less there is much misconception about social housing tenants and people on housing benefit, and the impact of reform is felt more keenly with housing associations than with any other social care agency.But in the end we believe that social housing will garner its creativity for this to be a win theme long term, albeit that it will need to think hard about delivering services under different models.

Rent cutsHousing associations will have to cut social housing rents by 1 per cent each year for the next four years from April 2016 to help reduce the country’s housing benefit bill. The reversal of the rental formula, which currently allows housing associations to raise rents in line with the consumer prices index (CPI) plus 1 per cent, forms a significant part of the investment profile. This impacts long term loans which may need review and overhaul.Rent cuts a win theme, are we serious?Yes we are.  Interest rates are still at an all-time low and investors are still keen to invest. More affordable rents will mean less arrears and more certainty on income and are thus more prudent. Also under different housing provision models, the rent will be only part of the income generated. 

EfficiencyEfficiency is about getting more out of using less resource and we see this win theme from more than one perspective:

Devolution as we’ve seen in Greater Manchester is giving local control of housing investment to get home building kick started from additional money. Although this could be a double edged sword as borrowing caps may need to be removed, efficiencies can be made from pooled local housing funds. Local control of knowing where and how to invest makes the Treasury a tad nervous but a total of 34 bids from England regions have already been submitted.

Efficiencies can also be gained through innovation in house building factories or from modular building schemes to churn out hundreds of homes. The Government through InnovateUK is currently investing in supply chain research to see how this could come to fruition.

Delivery modelsThis is our favourite win theme; there is more than one kind of housing provision model.The deregulation package announced by Brandon Lewis which includes removing the constitutional consents regime could be the springboard that enables housing associations to be more flexible in their delivery models.  Under this proposal housing associations will no longer need permission from the regulator before they make certain kinds of changes including mergers, restructuring, winding up and dissolution.The idea is to give more flexibility to housing associations to manage their own funds in order to build more affordable homes and help more people into ownership while ensuring that the historical grant is reinvested in housing.Hybrid housing delivery, working with the private sector could bridge the housing gap. Private sector landlords have also been the brunt of political attack – housing associations could be a lifeline for them too. Global Institutional investors have promised and are being courted for millions in UK social housing equity funding – an exciting time for housing.

Asset managementMore efficiently run DLO could make big contributions in managing and preserving stock. To insource or outsource can transform the cost of social housing's biggest expense. But like all decisions, it needs to be made in context of all other inputs yet this has great potential under our win themes.

Talent managementLast, but not least of our win themes - managing talent.Talent is a construct that Morgan Hunt is passionate about. There is no single definition, it means different things to different organisations and is made up of skills, knowledge and ability. Since this amalgam is unique to each organisation there are many approaches to talent management and many contexts for the definition but managing your talent and ensuring that you recruit the best does matter.It matters that housing associations can define what talents they are missing in order to reach their full potential, and it matters that they have a plan of how and where they might find and accommodate for the range of skills and knowledge required in a changing housing landscape. In this article, ‘Social Housing, gameplay battlefront 2015’, Morgan Hunt has taken the ‘cup half full approach’ in its chosen win themes because change needs fresh thinking, doing things differently with helicopter insight, courage to do the right things and the talent to carry it out.For more information on managing your social housing talent email us.

Procurement for Housing (PfH) is a national procurement organisation dedicated to the needs of the social housing sector. It is a member organisation that collectively manages over 75% of the UK’s social housing stock.  Morgan Hunt works with housing associations to help them recruit social housing talent. Part of this collaboration involves working in partnership with them to plan and resource their skills requirements.  Welfare reform has been one of the biggest social shakeups in Britain since the war and deserves some time analysing the impact this will have on the workforce. Follow for thefull article in PfH. Whichever side of the welfare reform fence you’re on, one thing that most will agree with is that it’s going to get hotter, tougher and messier and looks set to consume a lot more airtime and media coverage. Iain Duncan Smith took on a big challenge, without any strong background in social welfare. To his credit he has stuck with it even if at times he appears to be carrying an increasingly furrowed brow of late.  Few could argue with the logic; one payment which combines six working-age benefits and credits for many different life needs that was expected to make efficiencies across a whole spectrum of separate departments and functions. The reform has been batted around parliament, incessantly debated, and while the top level logic makes sense, the devil is in the detail.  Housing is an integral element in the welfare mix. For a start there is a housing shortage and the rent is the most expensive component of the welfare payment, messing with the payment system, messes with the family budget too. Most people in tight situations will struggle with competing priorities, and PfH members will be juggling with a range of challenges, including rent payment, that they will need to support tenants in. The job of housing association just doesn’t stop there. They provide a whole range of services for vulnerable people who live in their homes. These are often people who have a range of social issues, who need direction and support from their housing association that includes not just the rent payment, but for other budget areas too.  Empowering people in the management of their own household budget lies at the heart of Government reform. This is a thread that runs through all reform programmes. Under the new system the general rule implies that payment goes directly to the tenant and no longer the landlord.  Other complications in housing reform include ‘under occupancy’ and ‘personal independence’ and when the overall payment is squeezed to the barest minimum there is likely to be a consequence. 

The change is radical. Some say that it has to be in order to make a difference. But as with all change programmes the detail is not certain. Certainty only comes with experience; having done it before, practical contact with observation and fact, knowledge and skills acquired in the process. In light of the whole welfare system changing, technically speaking no one is an expert. New skills are required to deal with the fallout. Worth noting is the independent review of the Universal Credit that is due in April. A rubber stamp on this will be the final calling card for housing associations to re-assess their strategies, services, workforce requirements, and associated skill base. Find out more information on the new skills requirements.Morgan Hunt offer a consultative service to help you and your organisation find the kind of social housing skills that will ensure the continuity of your mission. For more information contact the housing team or call 0207 419 8900.

The real point about diversity

Why quota and targets will consistently fail organisations

Many companies place diversity statements on their websites, issue statements in their HR packs, in annual reports and have processes and procedures in place to help them achieve their pledges. But a large number fail to meet diversity targets despite their well-meaning efforts. The numbers simply don’t stack up in many organisations.There are many brands of diversityRegardless of scale or dominant ethnic group in organisations the challenge on the diversity mix is the same. Even our own public sector has been accused of favouring those with previous public sector experience, reminiscent of ‘closed-shops’ and private sector the same.Public services need representation across all diversity groups and the Metropolitan Police has just announced that they missed their targets with the proportion of new ethnic minority recruits failing to achieve quotas despite a concerted drive to improve on the percentages.So what is the point about Diversity and why do targets fail?There was a chart topping song released in the 60’s, Melting Pot by Blue Mink -   the Lyrics of which had a vision of a beautiful dream but although well intended for its time missed the diversity point and that point continues to be missed today.Diversity has nothing to do with quota, or blending people but everything to do with embracing all perspectives and Myers Briggs’s description of ‘celebrating differences’ is an excellent way of articulating all difference into the work place. Difference in cognitive functions creates misunderstandings in perceptions, attitude, behaviour, preference and decisions, and hairline cracks in any of these can result in huge chasms if people don’t understand each other.In the commercial setting, logically, why would enterprise not want to create services or products that appeal to all types, and in public service, why would they not want to deliver with unfettered communication and ease.Diversity has to be seen as a positive thing, that helps the business and not just seen as a target. It’s a core value that says ‘we need the opinions and inputs every type of person before we can make any progress’.  As a recruiter Morgan Hunt is often restricted by tight job briefs where a requirement for specific industry experience can override aptitude and diversity.The problem with targets is that they are numeric without attachment or accountability for the products or services delivered and this is why they will always fail. Diversity should be sponsored by HR but owned by innovators, investors, front line workers and executive teams, the very people who are accountable for converting raw resources into deliverables and wealth, which is not often the case.HR cannot manage diversity; it’s not something that you manage, it’s a living, breathing, thinking, feeling part of what wealth creation is all about.The point about diversity is for positive outcomes taking into account a full and rounded dimension of all perspective and companies will not be able to thrive without it.Morgan Hunt works with public sector organisations and understands the diversity issue. For more information on Morgan Hunt jobs and our diversity workshops email.