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The social housing sector – better together?

Posted: 11/06/2021

The past 18 months have seen the world change dramatically. For the UK’s social housing sector, it has presented various challenges and pushed organisations to operate in unanticipated ways.

On the whole, the sector has risen to the challenge and organisations have shared their learning with each other in a more open and transparent way with a shared purpose. The common objective of providing safe and affordable housing for society’s most vulnerable and fixing the housing crisis hasn’t undergone a step change, but the coronavirus crisis has crystallised the importance of working together and the shared responsibility to protect tenants and maintain services.

The economic impact of the pandemic looks set to be long lasting, changing the way social housing providers can and should operate. As social and economic anchors, housing associations have a significant opportunity to consider how they can work together, and with local and national government and other sectors, such as the health and social care sectors, to help communities and the economy recover.

We have already seen a move towards greater collaboration in the sector over the last five years, in the wake of rent cuts and a greater focus on achieving value for money. We anticipate that this will only increase in the next five years and beyond.

NHF Code 2020

The publication of the new NHF Code 2020, which remains the most widely adopted code of governance in the sector, coincided with the shift towards greater collaboration. The code introduced a new requirement for social housing providers to consider, as part of their overall corporate strategy, whether and how active cooperation, collaboration, joint working or partnership could enable them to deliver their social purpose and strategies more effectively and economically.

Conversely, the code includes a specific requirement to ensure that any joint ventures or partnership vehicles support the organisation’s mission and objectives. The arrangements in place must be reviewed annually and formally documented to cover 'accountability, performance, compliance, risk management and governance'. The new code will have the effect of crystallising what is currently best practice within the sector. Several housing associations already operate in this manner and are live to the issues associated with partnership working with external counterparties.

The benefits of collaboration

Collaboration can have various wide-reaching benefits, both direct and indirect, such as:

  • risk-sharing;
  • cost-sharing;
  • cost savings through economies of scale;
  • access to finance and/or land;
  • access to skills and expertise;
  • upskilling of staff;
  • connecting different areas of communities; and
  • increased strategic impact.

Collaboration can also strengthen the resilience of housing association groups, increasing the range of resources available to allow them to adapt more easily to changing circumstances.

There is no 'one size fits all' to collaboration, however. Much will depend on the objectives and desired outcomes of the parties, together with their own constraints and risk appetites. Collaboration models can range from an informal partnering arrangement, right up to full blown legal mergers, with a variety of models in between.

Within the sector, development joint ventures continue to be popular, although we are seeing a growing interest in longer-term partnering models. We anticipate that the impact of the coronavirus crisis on small and medium charities may also offer opportunities for medium and larger housing associations to consider partnering with the third sector, including the potential to establish group structures or share provision of corporate or other services.

Some housing associations are also working together to achieve efficiencies through shared repairs and maintenance services, including using cost-sharing vehicles, and this may grow in light of increasing health and safety requirements (related both to Covid-19 and post-Grenfell) and their associated costs. Other recent initiatives, such as the launch of the Greener Futures Partnership, show how by working together housing associations can seek to tackle significant sector-wide issues.

A note of caution

The Social Housing Regulator has been keen to stress that boards of registered providers of social housing need to understand the potential risks of the ventures they enter into, including in relation to impairment risks, risk of loss of capital and reputational risk.

There will be a variety of issues to consider when looking at potential collaboration. Of these, an understanding of the potential risks and impact on the organisation’s core social housing activities and ability to meet regulatory requirements will be key. This will include an understanding of any potential default triggers under funding agreements.

However, it seems clear that further collaboration, both with others in the sector and more widely, can provide significant benefits for housing associations and their customers and wider stakeholders. If there is one lesson that we can learn from the last few months, it is surely that we can work better together to achieve a common purpose.

Gemma Bell, partner, heads the firm's housing corporate and governance team and will be leading a session on how collaboration can be used to mobilise and anchor communities at the National Housing Federation Housing Governance 2021 Conference on 17 June – further details can be found here.

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Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority.

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