For-Profit Registered Providers of Social Housing – What’s Next

The range and diversity of organisations providing social housing continues to expand. We have seen at first hand from our consultancy work just how varied in size, complexity, business model and ethos providers can be.

This might come as a surprise to many given the recent spate of high-profile mergers of some of the larger traditional organisations. In fact, many outsiders might have assumed that structural changes in the sector were encouraging a general trend towards fewer, larger, similarly sized providers with broadly comparable models. This is neither correct, nor would it necessarily be a good thing if it were.

First the ‘bigger is better’ assumption is unproven. Previous research by CiOH and others has confirmed that there is no correlation between size and quality or efficiency. Indeed, the worry is that with additional mergers there could be a ‘regression to the mean;’ that is, a convergence to a safe middle ground of ‘average’ which is neither good for the sector generally or for residents specifically.

Fortunately, our experience leads us to conclude that this is far from what is happening.

While the large-scale mergers may continue and lead to some consolidation, we expect to see additional new entrants continue to challenge traditional approaches. From our work with both new entrants and the best aspiring providers who are currently seeking registration, we are seeing different ideas on funding, ownership structures and service operating models, including from within the ranks of for-profit providers.

With diversity comes innovation and this can only be for the benefit of a sector that is at times regarded as very cautious in embracing change and innovation.

Of course, innovation creates risk and nervousness, and in a sector providing much needed homes to families in need, this caution can be understood. But the beauty of social housing is that it has a strong and effective regulator that provides a counter-balance to those risks. Safety comes from the fact that all providers – whatever their model – must comply with the same standards. Every organisation however they go about funding, developing, owning and managing their stock all have to comply with the same set of standards. They might be regulated in a slightly different way according to their size and perceived risk profile but the essential requirements are the same.

The best organisations, whether they be the largest traditional housing associations in the sector or the new breed of registered providers understand this and innovate within the rules.

We think this is important and this is also where Altair’s expertise is valued by our clients. Whatever the proposed business model or funding structure we can assess and advise on the degree to which it will fit (or not!) the Regulator’s requirements.

So what is coming next?

Well in terms of profit making providers we predict more Investment Funds to create their own vehicles for social housing. Unlike the household names (Blackstone, L&G) that are already major players, you can expect to see some smaller funds entering the market.

Also, in an interesting new feature we predict a number of smaller developers coming forward with new Registered Providers in order to retain the section 106 schemes they would have traditionally sold; especially if part of their developments comprise other tenures in which the developer or investor plans to retain an interest, for example private rented housing.

We watch with interest.

For more information on our service offer to For-Profit Providers please click here.