Councils are taking control of housing delivery through mergers and housing companies

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As three Dorset councils plan to merge and others set up companies and joint ventures, Matt Carroll and Graham Hishmurgh looks at what this all means for housing delivery.

The case for increasing capacity within local authority budgets through mergers and delivery of housing vehicles appears strong and there is increasing interest among local authorities in exploring these options. Having worked with a number of local authorities on housing options; on setting up and supporting local housing companies; and across the pond on housing association mergers and partnerships, we think there are some significant advantages for these arrangements.

We have been fortunate to support the likes of Basildon, Thurrock and Medway at various stages of the journey in considering and establishing wholly owned local housing companies. We set up one of the very first, Red Door Ventures in Newham, which is now an established commercial residential developer with a pipeline in excess of 500 homes. Sempra Homes, Basildon’s wholly owned company, is now well on the way to delivering 580 new, affordable homes for local residents, providing a return to the council and addressing pressures on wider council budgets such as homelessness and social care.

This ability of councils to take control over housing delivery – including the right types of housing, infrastructure, amenity and pace of delivery as well as financial returns – should not be underestimated, with projections by The Smith Institute suggesting councils could build up to 15,000 new homes by 2022 – an important contribution to new housing supply.

The current housing market and political climate provide the ideal conditions to progress with this brave new world in housing delivery. Similarly, good mergers can bring economies of scale, pooled expertise, and efficiencies.

There are, though, some real challenges that should not be underestimated for both. It takes time and effort to set up a housing company and to deliver the benefits of merger. It takes specialist development skills and also project management skills, as well as a required understanding of local politics. Development can be a risk-associated, time-consuming process – and interestingly local authority planning departments, with their quasi-judicial role, don’t necessarily make it any easier for a housing company to build than a private sector or housing association developer.

On mergers, to be successful there needs to be a clear and compelling business case that delivers both financially and locally. It requires constant attention to realise the benefits post-merger. For local authorities, centrally procured services must be seen to deliver at a very local level. Mergers and joint working are subject to the politics of the joining parties. The tri-borough shared services arrangement in London between Hammersmith and Fulham, Kensington and Chelsea and Westminster City Council was never able to deliver on its promises, once there was a change of administration in one of the authorities.

Perhaps most importantly, for mergers to deliver they require compromise on decision-making, though they should never mean compromise on vision.

The Dorset councils’ proposed merger may signal a new trend in local government. The lessons from housing association mergers would be well worth learning.

This article was also featured on Inside Housing.