Concentration of general needs housing stock rises

Elsewhere, Clarion (which was formed out of the 2016 merger between Circle Housing and Affinity Sutton) was the largest RP within this group by far, with 90,687 general needs units.

These are spread across 159 local authority areas, with an average of 570 general needs units per local authority area, which represents 0.6 per cent of its total general needs stock.

Clarion has a comparatively high level of local authority areas that it operates within, compared with the other RPs on the list. It has set out plans to dispose of about one per cent of its stock each year, totalling roughly 10,000 homes over a decade.

It was topped only by Sanctuary, which operates in 192 local authority areas and has an average of 268 general needs units per local authority area, and Places for People (PfP), which operates in 220 local authority areas with 231 average general needs units.

Commenting on its disposal and growth programme in its most recent accounts, PfP said it would look to increase the profitability of its assets, through “targeted disposals and reinvestment in new assets”.

It added: “And where there is a good strategic fit, we will identify and pursue potential mergers and acquisitions to boost our asset base and geographic reach.”

When looking at the HAs with the highest and lowest averages of general needs stock per local authority area in this size band, Midlands provider Stonewater came last with 189 general needs units per local authority area, representing 0.8 per cent of its general needs total.

It was followed by PfP with 231 units, representing 0.5 per cent of its general needs total, and Paragon Asra Housing with 232 units, representing 1.4 per cent of its general needs stock.

5,000-9,999 general needs units

Moat has been the largest RP in the next size band down since 2015, with 9,764 general needs units.

Overall, the data shows that the organisation has been steadily decreasing its local authority areas, while increasing its average number of general needs units within those areas. Steve Nunn, the group’s executive director of development and new business, says this is the result of the group’s stock rationalisation strategy, which is “pretty much through”.

“We’ve had an active programme in outlying areas of our geography to generate a receipt to reinvest in our core areas,” he explains.

Looking at the most recent statistics for Moat, more than half of the group’s general needs units (4,902) are within seven local authority areas, the largest of which was Maldon with 1,348.

Five of its local authority areas have less than five general needs units, including Worthing with three units; Eastbourne with two units; and Adur, Enfield and Lewes, which each have one unit.

This was down on last year, when the HA had eight areas with less than five units, again demonstrating the organisation’s consolidation.

Mr Nunn says that, looking ahead, the group has developed a model to rank the performance of its assets as part of the group’s active asset management. “We rank all of our assets in terms of net present value (NPV) and then we determine which assets aren’t working as well for the business. So, if we’re spending more on that asset in terms of what we are receiving in rent, then there’s an issue that we need to delve into in a bit more detail.”

This may include assessing issues around geography, but it could also be to do with the building’s design or energy efficiency, he says.

“So, it could be that an asset works in NPV terms but they’re old properties or not thermally efficient, so we’d then have to think about what we do with that asset.

“In the extreme, that could mean we dispose of it or it could be that we look to inject some additional investment to do significant work to the asset or even change the tenure if that might make it work more effectively, but we do this in consultation with our core local authorities and, if necessary, with the regulator.”

Elsewhere in the disposals market, the sector has a growth in interest from new entrants eyeing stock.

As Savills’ Ms Madjitey notes: “We’re seeing more bids from new entrants that are keen to enter the market, who have different business models. Some are keen to grow via new build or buying Section 106, although some of them are looking at existing stock.”

This change has brought with it a number of challenges for traditional HAs. Moat, for example, made the headlines in November after receiving a governance downgrade from G1 to G2, following the sale of 26 homes for older people to a for-profit provider of social housing.

The regulator said the decision to sell the homes had been made “solely on financial criteria”. A Moat spokesperson at the time said: “Moat still retains the highest financial rating of V1 and we are already having positive discussions with the regulator about what we need to do in order to return to a G1 governance rating.”

The judgement came at a time when the regulator was scrutinising for-profit providers and equity-based and lease-based deals more closely. A number have been downgraded over financial viability issues or for poor governance that affected tenants.

On working with non-traditional RPs in the future, Mr Nunn says the experience will shape the group’s future disposal decisions. “When you are looking at non-traditional housing association stock disposal, there needs to be a heightened level of due diligence that you need to take. You need to satisfy yourselves that that stock is going to someone who is going to manage it effectively and they’re financially stable enough to be able to do that,” he says.

More generally, he adds: “[HAs] need to be mindful of who they are disposing the stock to. It can’t always be through a financial lens; you’ve got to think about who the recipient is and how they are going to manage those properties if they’re going to be custodians of those properties in the long term and how you’re going to ensure there’s no leakage of social assets and social value out of the sector.”

On this, Savills’ Ms Madjitey says it is important that boards have oversight and “own the decision” to sell to new entrants, which chimes with Mr Nunn’s comments – he adds that the experience fed into the group’s asset model, too.

Looking at the list, the top five HAs with the highest average of general needs units per local authority area were: Salix Homes (7,809), Halton Housing (6,816), Freebridge Community Housing (6,179), Trafford Housing Trust (6,102) and Weaver Vale Housing Trust (5,879). All five operated within one local authority area only.

In contrast, Thames Valley Housing (TVH) – which is now part of Metropolitan Thames Valley following a merger with Metropolitan – had the lowest average per local authority area with 190 general needs units. However, this had increased on last year when the group had an average of 187 general needs units, which suggests that TVH is consolidating its presence.

2,500-4,999 general needs units

There has been some interesting activity within the smallest general needs size band of between 2,500-4,999 units, with the overall number of RPs in this list declining to 45 this year, from 61 in 2015.

Victory Housing Trust is now the largest RP in this group, with 4,970 general needs units. This is partly because many of the RPs that sat at the top of this list over the past four years – such as NSAH (Alliance Homes), Soha, Rooftop and Saffron – have all moved up into the larger size bracket of between 5,000 and 9,999 general needs units. But it is also because Victory has seen a
sizeable 12 per cent increase in its total number of general needs units on last year, when it had 4,432. This correlates with the group’s development plans, which include a goal to have 1,600 more homes by March 2022.

Victory is also on track for further expansion, with plans to merge with Flagship Housing Group (which sits in the largest general needs unit size band in this report).

The group announced the merger on 2 January. Victory will join Flagship as a subsidiary. The new organisation plans to build 10,000 homes and save more than £38m in its first decade. It also plans to spend £524m on maintaining and improving its existing stock. Victory’s merger is emblematic of what is taking place in the market today, particularly among smaller RPs.

According to Aruna Sarwar, solicitor at Devonshires, whose clients include a number of small RPs in London, smaller organisations are increasingly looking at ways to become more attractive for potential mergers.

She says: “For the smaller organisations, it’s really a fight for survival because larger RPs are becoming extremely large and it’s either join up or be taken over. Mergers in the sector such as Notting Hill Genesis or [Peabody and] Family Mosaic basically mean that all of their departments are looking at their stock and looking to dispose of things that don’t fit in with the general scope of the direction the new RP is going in – and I’m seeing this a lot with the smaller RPs, which are fighting for their market share.”

She adds: “They are not just acquiring stock but are looking to dispose of it because they want to make themselves more streamlined and attractive to potential mergers. They want to make sure they’ve got the right assets, so getting rid of the stock that isn’t performing as well or perhaps falls outside an area where the larger RP is looking to grow could make themselves more of an attractive proposition.”

Elsewhere in this list, the HA with the largest local authority count was Hastoe, with 70. Its average number of general needs units per local authority area was 59, which represents 1.4 per cent of its total stock.

In contrast, Victory had an average of 710 units per local authority area, which represented 14.3 per cent of its total stock.