L&Q, Hyde Group and East Thames are the latest housing associations to open talks on a merger.
Further amalgamation is expected in the coming months and years.
“The increased borrowing capability should enable housing associations to build at a greater scale”
Income and expenditure at traditional housing associations have been squeezed with reductions to social housing rent, the extension of Right to Buy and lower levels of grant funding expected to deliver fewer affordable housing starts this year.
A study by the Town and Country Planning Association suggests England needs to build 312,000 homes every year for the next five years to meet the needs of a growing population and to compensate for the shortfall of new homes built in recent years.
This translates to 1.5m homes over the next five years.
As a country we cannot just continue to do what we are already doing in the hope of delivering more new homes: we need bigger and bolder solutions, given we currently construct in the region of just 130,000 homes a year.
Consolidation not the only answer
The efficiencies and increased borrowing capability created by mergers should enable housing associations to build at a greater scale, leading to more construction work for contractors.
However, industry consolidation cannot continue to deliver economies of scale indefinitely – we also need to find other ways to build new homes.
In 2001 Places for People took a bold step into the unknown by becoming the first social landlord to build homes for private sale.
We have taken a different approach to allow us to build homes at scale, concentrating on diverging our business to increase and diversify our income streams and enhance our skillset.
This has seen us acquire and integrate a leisure business, a housebuilding arm, contractor Allenbuild and retirement rental specialist Girlings.
Lessons of divergence
Divergence has enabled us to triple our housing pipeline and will see the delivery of 15,000 new homes in the next five years.
“Even large housing providers need to partner with contractors to reach the scale of our ambitions”
Diversification has taught us that we can make a bigger difference if we work collaboratively. To fund and also physically construct the homes, there need to be more partnerships across both public and private sectors. Contractors are central to this conversation.
Larger housing associations – whether achieved through merging or diverging – have bigger balance sheets and can therefore bid for and win bigger deals.
Even large housing providers need to partner with contractors to reach the scale of our ambitions, as evidenced by our joint venture with Balfour Beatty to build 1,500 new homes in the Queen Elizabeth Olympic Park.
Sharing knowledge, resources and exploring new ways of working can help improve our housing market, ensuring it works better for everyone, regardless of their tenure needs or financial circumstances.
While the success of merged housing associations remains to be seen, the desire to do things differently, work together and share best practice should be welcomed and applies to all of us involved in housing delivery.
David Cowans is the chief executive of Places for People