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Campaign Factsheets
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Stock Transfer Briefing
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Rents
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Service Charges
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Transfer is privatisation
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Mergers & Takeovers
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Community Gateway
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Hills and Cave Issues
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Stock Options Appraisals
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House of Commons Council Housing group of MPs first inquiry report
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See Local Material for examples of local newspapers and leaflets against stock transfer...
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Other useful documents
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Shelter
31/07/12
The Smith Institute
23/06/11
Homes and Communities Agency
11/11/10
CLG
18/10/10
DCH
04/07/09
Welsh Assembly Government
30/04/09
Joseph Rowntree Foundation
27/02/09
Joseph Rowntree Foundation
27/02/09
NHF
01/12/08
Housing Corporation
19/11/08
Welsh Assembly Government
01/06/08
Citizens Advice Bureau
21/05/08
Housing Corporation
22/11/07
19/11/07
Government CLG
16/11/07
31/10/07
Shelter
06/07/07
Housing Corporation
01/07/07
Housing Corporation
01/07/07
Housing Corporation
01/07/06
UK Housing Review
06/12/05
UK Housing Review
06/12/05
Basingstoke Council
01/10/05
Shelter Cymru
01/09/05
Tower Hamlets Law Centre
01/06/05
Housing Studies Association Conference
15/04/04
Housing Studies Association Conference
15/04/04
Wrexham Council
01/11/03
L&T Rev
01/01/00
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Councils pushing privatisation always try and make out stock transfer is the best thing since sliced bread. They launch an expensive and glossy
PR Campaign - usually only promoting one side of the argument and often break what most people would think are basic democratic procedures
to try and prevent or make it hard for anyone to put the case against. Don't be bullied and blackmailed. Make sure that there is a full
and balanced debate in your area so that tenants hear both sides of the argument.
We've set out the main arguments against stock transfer below and in our
briefing. Also check the factsheets/publications on the left and press articles on stock transfer to the right...
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Transfer Means Privatisation
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Registered Social Landlords (RSLs or housing associations) are private companies in law and borrow directly from the private market.
"Walker (2000) characterises housing associations as behaving increasingly like private sector organisations 'property-driven' and managing stock as an asset to maximise returns"
Changing Boards: Emerging Tensions, Liz Cairncross, Oxford Brookes University, Spring 2004
(see also DCH summary).
Transfer means privatisation in law and in practice. RSL board members are often paid, executives are on fat-cat salaries, and banks and lenders are in the driving seat.
Many transfer associations set up group structures to get into private housing - market renting, new development and building luxury houses for sale. Transfer gives them all the land our estates are built on - some of it seen as prime development sites.
Transfer plans often include demolition and higher density rebuilding - including new private luxury homes our children won't be able to afford. RSLs may be technically 'Not for Profit' today but they are lobbying for that to change.
"One fifth of transfer RSLs have had to be placed under supervision by the Housing Corporation. 'Such action, which involves the appointment of external experts to the board of the association, is only triggered by poor performance or serious management irregularities"
(One in five transfer landlords needs supervision, Guardian, 25 May 2005).
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Higher rents and service charges
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RSL rents are still much higher than council rents. Councils in England claim that the new government 'rent convergence' formula means that rents will increase by the same amount whether tenants transfer or not. Thanks to new evidence it's now clear the rent convergence formula is worthless.
Service charges are not covered by the formula. The RSL simply has to describe part of the rent as a service charge, known as 'unpooling'. The small print in the offer document shows service charge rates are only guaranteed for a few years, if at all. Some RSLs demand £20 plus a week in service charges on top of rent.
RSLs can raise the rents of any new tenants immediately to the 'target level', creating a two-tier system and an incentive to get existing tenants out.
RSLs can change the valuation method used to calculate the rent. In the words of TPAS: "changing the valuation method and therefore achieving higher 'Target rents' can [drive] a horse and carriage through the rent policy guidance and guarantee as valuation is not a fixed science...
I have spoken with large Housing Associations on this issue and they clearly understand how the Jan 1999 valuation method is the loophole in the government's rent setting policy. It's the great unspoken… They can comply with the Government guidance parameters but also achieve higher rents, sometimes much higher rents." (Email from Tony Bird, TPAS ITA in Brighton, to Anne Kirkham, Department of Communities and Local Government, 09/08/06.
See further extracts).
In Scotland and Wales the old 5- year 'rent guarantees' are still used instead of a convergence formula. But these don't work either. In Scotland, rent rises in transfer RSLs are now running higher [4%] than the Scottish average RSL [3.8%]. Scottish Borders had the highest increase - 5.5%, despite a promise of inflation plus 1%. (figures from Communities Scotland)
And what happens at the end of the 5-year rent guarantee? Research in the
DCH pamphlet shows that 16 of the 20 fastest increasing housing association rents between 1997 to 2005 were in housing transfer districts. The rents for Ten-Sixty-Six, the transfer RSL in Hastings, rocketed after the end of the five year period, up 10% in one year (between 2003/2004, Housing Corporation figures)
A report from a Basingstoke councillor illustrates many of these issues.
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Less Security
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On transfer tenants lose our special 'secure' tenancy and get an 'assured' tenancy.
Secure tenants are "protected by arguably the most generous charter of rights available in the residential sector. That security is lost on transfer." (Large Scale Voluntary Transfer: not all honey and roses', Jan Luba QC, (2000) 4 L.& T. Rev. 6)
There are differences in law between the two types of tenancy. A promise by the new landlord not to use certain powers is not the same as the statutory rights 'secure' tenants have in law.
"If the council wants to evict you, they must prove both the ground for possession (e.g. rent arrears, anti-social behaviour) AND that it would be 'reasonable' to evict you…. A RSL can seek to evict you without the court having to consider 'reasonableness' in 8 out of 17 grounds for possession. For example if you are more than 8 weeks in arrears of rent on the day of the court hearing, the court will have to make a possession order even if the arrears are not your fault. (Ground 8)." (Stock Transfer: Essential Reading Before You Choose, Tower Hamlets Law Centre)
Councils claim that the new landlord will write additional rights into the new assured tenancy contract which will make it the equivalent of a secure tenancy. The Law Centre say: "If an RSL wants to ignore the promises they have made in a tenancy agreement, and rely instead on the weaker rights set out in law, they may be able to do so. In a leading court case a judge found that a housing association were entitled to override the promise they had made to always give notice before issuing proceedings, because this was allowed by statute."
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Mergers and Takeovers
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We're told transfer will be to a locally-based organisation. But this doesn't last long. There is a high risk the new landlord will get into financial trouble and be taken over, or will expand and diversify into a huge business empire. Smaller associations tend to become part of a group structure. Bigger RSLs pay their senior managers more! The last two years have seen over 100 full scale mergers, with nearly 70 more becoming subsidiaries within a larger group. (Inside Housing, 10 Feb 2006)
"There is a merger mania just now that is being fuelled by the Housing Corporation saying future development cash will be concentrated on fewer and fewer associations." (Talks aim to create joint biggest housing association, Derek Joseph, Managing Director, Tribal HCH consultancy Society Guardian, 9 May 2005)
Tenants don't get a vote on takeovers or mergers. And the take-over RSL is under no legal obligation to keep promises made at the time of transfer:
"The mortgagee exclusion clause… means that if the RSL gets into financial difficulties and as a result the funder takes control and transfers to another RSL, the "new" RSL is not bound by any of the promises made to the tenants." (Housing Today, 21 January 2005)
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Wasted Money and Broken Promises
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According to the National Audit Office, it costs £1300 per home more to improve homes after transfer than it would cost if councils were given the money to do the work themselves.
(Improving Social Housing Through Transfer, 2003 and
DCH Synopsis of Report)
Councils, as public bodies, are able to borrow money at a lower rate of interest than housing associations. The 'management costs' of housing associations are also higher - in other words they pay fat-cat salaries to senior executives, and spend a fortune on new office buildings and glossy self-promotion. Someone has to pay for this.
The report by the Council Housing Group of MPs details broken promises. If promises are broken, there is little tenants can do, because offer document promises are a contract between the RSL and the council, not with the individual tenant.
Parliament's Public Accounts Committee found only a 3% increase in tenants satisfied with the condition of their home (81% from 78% before transfer) - even after improvements had taken place (but often before rent guarantees ran out). Only 85% of tenants considered that housing services were at least as good as before transfer; while satisfaction with the quality of repairs went down (63% against 68%). (Improving Social Housing Through Transfer, 2003 and
DCH Synopsis of Report)
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More Homelessness
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Stock transfer means more homeless. Where councils have transferred their houses "homeless applicants spend longer in temporary accommodation, have fewer long term housing options and in some cases are unable to access affordable housing at all." Of 75,000 families looking for homes after transfer 43% were told that there was no home available for them. 'Out of stock: Stock transfer, Homelessness and Access to Housing' Shelter, 2001
"Our own investigations into the position of the homeless in stock transfer areas have revealed that many applicants have found it more difficult to access permanent accommodation since the transfer… 20.1% of allocations by large-scale voluntary
transfer housing associations are to homeless families. This compares favourably to housing associations not involved in stock transfer (9.4%), but it is less than the 34% by local authorities." Housing Today, 29 April 2005
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Transfer: less power for tenants
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Don't be fooled by the idea of 'community ownership'. A 'Community Gateway' or 'Community Mutual' is just an RSL with a fancy wrapper. The key thing about any RSL is the fact that they borrow money from the banks and are accountable to them.
Wild claims are made that making tenants 'shareholders' will empower us but there's no basis for these. Tenant 'shareholders' in a community mutual or gateway organisation won't even have the right to elect the whole board.
As tenants of a local council we elect our landlord. If we don't like the way they run our housing we can vote them out every four years at the ballot box. This direct democratic relationship is lost after transfer, PFI or ALMO.
Promises of tenants on the board is a con. The role of tenant board members is "primarily symbolic, providing a fig leaf to cover the unpalatable fact that the real power lies elsewhere." Cairncross 2004
Tenants on boards are bound by company law and, even if elected, will not be able to represent the tenants who elected them.
'At the time of transfer, tenants are often led to believe that they will have an explicit role in representing the interest of their fellow tenants on the board. This is not compatible with the accepted principle that dictates that as a board member they have to work for the interest of the organisation.' (Housing: Improving services through resident involvement, Audit Commission, June 2004).
It's outrageous that the government is trying to hijack the ideas of the co-operative movement to support privatisation; as a recent report on Community Mutuals in Wales has shown, transfer RSLs and genuine co-operatives have almost nothing in common.
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Scotland and Wales
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The situation in Scotland and Wales differs slightly in the details, although the broad principles of opposing privatisation and campaigning for direct investment are the same. For more details, ask for a copy of our new Scotland and Wales broadsheets |
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Below is an older version of the 'Case against transfer' article which contains additional useful references.
When time allows we will try and edit them down to one summary...
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Introduction
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Transfer threatens tenants' rights. The transfer of council housing to a Registered Social Landlord (a housing association or similar company) means higher rents, more evictions, a less democratic housing service, and big pay rises for senior managers. Most importantly, it means that our homes will be privatised - transferred into the private sector where banks and building societies are in control, into a consumerist and market-driven world.
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More Evictions, Higher Rents and Worse Services
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Council tenants' secure tenancies are replaced with less secure 'assured' tenancies, making eviction easier. 16.5 percent of RSL evictions involved the use of automatic powers under controversial 'Ground 8' (which cannot be used against council tenants) according to a National Housing Federation survey of 116 RSLs. Evictions by RSLs (Registered Social Landlords) have risen by 36 percent.
Figures from Communities Scotland show the number of housing association evictions has risen by 64 per cent in two years to stand at 522 in the year 2000 to 2001. That equates to 3.7 in every 1,000 tenancies, compared to what Shelter says is 2 in every 1,000 for councils. (Inside Housing 19 Feb 03)
RSL rents are higher than councils - 17 per cent on average, and the gap is growing despite attempts to close it. Other service charges push up costs, as tenants are forced to pay for the higher cost of borrowing and repairs. The RSL only makes rent guarantees for five years after transfer - not long; and as many as 17% of RSLs break the guarantees anyway.
One third of RSL tenants' homes will not reach a decent standard by 2010. Transfer RSLs have housing management costs a full 39 percent higher than local authorities. Their chief executives receive fat-cat salaries.
"A housing association boss, who was given a one-off payment of £65,000 by his employers to move house, has become what is thought to be Britain's highest paid public service chief executive. David Bennett, managing director of Sanctuary Housing, one of Britain's biggest housing associations, received a total pay package of £213,000 last year." (Guardian 27.8.03)
On the other hand, ordinary workers lose out after housing privatisation. Many RSLs are anti-union or have very limited recognition agreements with unions. Dissatisfied staff leads to worse services for tenants.
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Privatisation and the Market
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RSLs are classified under law as private companies. "Large Scale Voluntary Transfer is a private-sector landlord in legal terms" (Gwynneth Taylor, then Head of Housing at the Local Government Association, 2002). A recent attempt to classify them as public companies under European law lead to outrage from RSLs, the Housing Corporation and the British government. RSLs borrow directly from private lenders at higher costs than councils. They function increasingly like businesses, with mergers, takeovers and lenders in the driving seat. The biggest run more homes than most councils, and are keen to become 'for profit' landlords. Acton Homes has already transferred the 'security' of some tenants' homes to the Prudential!
The Housing Corporation, watchdog over Registered Social Landlords, actively encourages mergers and takeovers (Rationalisation and Restructuring, Housing Corporation Nov 2002).
John Belcher, chief executive of £185.8 million turnover Anchor Trust, says 'We're a business and all our divisions are expected to make a surplus' (Guardian 8.1.03) They make it at our expense.
David Cowans, chief executive of Britain's largest housing association, Places for People group (turnover £164.5 million) says he would consider converting to a plc (Inside Housing 20.12.02)
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Less Democracy, Less Tenant Participation, Less Choice
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Direct accountability of council landlords is lost. Transfer landlords often cross council boundaries and cannot be held to account locally, affecting services to the homeless, joint waiting lists and nomination rights. Politicians say housing privatisation offers 'choice' to tenants. In reality a few big money-makers are dominating ever-more of the growth industry around housing privatisation. Many tenants who accepted transfer to a local housing association set up especially to manage their homes suddenly find themselves (without warning, and without a ballot) the tenants of a completely different landlord who manages stock all over the country and has no interest in their local concerns at all.
Very few RSLs have effective tenants' associations. Some have tenants on the board but they are not legally allowed to act as representatives of other tenants. The Housing Corporation now allows board members to be paid, making them more like the directors of commercial, profit-making companies. A study by Liz Cairncross for the Housing Corporation found that RSL boards are "increasingly dominated by professionals", leaving tenant board members "marginalised".
(See
Changing Boards: Emerging Tensions report and
DCH summary
for more details on tenants' involvement in boards).
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Expensive Waste of Public Money
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Transfer wastes public money and diverts funds from where they are most needed.
The National Audit Office produced a report on stock transfer in which it criticised the high cost of improving homes after transfer - £1,300 per home more than the cost under local authority management. The Commons Public Accounts Committee also looked into the value of stock transfer (March 2003) and concluded "The additional cost of transfer is likely to be larger than the £1300 per home calculated by the Office"… transfer has "led to the undervaluation of the homes transferred so far, resulting in a greater contribution from the taxpayer than was necessary to deal with, for example, the backlog of repair." The PAC report is also sceptical about the government's justification of the extra cost of stock transfer, arguing "achievement of aims such as greater tenant choice, participation and increased tenants satisfaction are less clear."
Select Committee Final Report,
Summary of Report. Also
DCH Synopsis of Report and
DCH Evidence to original National Audit Office inqury.
"The government's policy of transferring council homes to housing associations is costing the taxpayer billions of pounds and delivering questionable benefits, MPs said today… faulty assumptions in the complex calculation of how transfers are valued has meant that the government has underestimated the price of the policy to the taxpayer, the committee warned." (Guardian 24.7.03)
Government argues that stock transfer brings in extra money from the private sector, but in reality it's just an accounting fiddle. It makes government spending invisible by moving the borrowing out of the public sector and "off-balance sheet". The costs may be hidden, but they're still there. The government spends millions of pounds subsidising transfer. It budgeted £800m last year to write off debts left after the housing stock had been sold. It has handed over billions to housing associations to take on "negative value" estates. The high interest levels charged by banks and building societies have to be paid from somewhere. Tenants pay - through higher rents; and the taxpayer pays - through higher housing benefit (£240 million a year higher, according to UNISON's calculations).And what has all this achieved?
'stock transfer' has taken place generally in the least deprived local authority areas (Source: Hansard, written answers, 4 July 2002, col 563W)
The number of new homes built in Britain over the last five years is lower than at any time since the second world war. 'The biggest loss of new homes is in the social sector…caused by the ending of the local authority housebuilding programmes'
(Roof magazine July/August 2003)
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1. Rents Up
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Councils trying to persuade their tenants to accept transfer used to make rent guarantees which lasted for five years. But new research done for the House of Commons Council Housing Group shows that despite these guarantees, fifteen of the 20 fastest-increasing housing association rents between 1997 and 2004 were in districts which have undergone large scale housing transfer.
For example, in Vale of the White Horse (where there was a large-scale transfer in 1995) rents increased by 47% between 1997 and 2004. In 1996 3,000 homes were transferred from the borough of Wyre, in Lancashire, where there has been an average rent rise of 56% over the same period. In Tunbridge Wells, Kent, where council housing was transferred in 1992, the increase was 43%.
These are all way above the average RSL rise in England of 24%. Information from 'RSLs rent by district from 1997'
http://www.odpm.gov.uk/stellent/groups/odpm_housing/documents/page/odpm_house_609389.xls
The five-year rent guarantee did not work. The National Audit Office found that 17% of transfer associations had broken rent guarantees.
The Government's new "rent convergence" policy now replaces the five-year rent guarantee. This is intended to limit increases to inflation plus 0.5% a year. But the five-year guarantees didn't stop rents rising. Why should we believe their promises now?
On top of this, the new rent formula does not cover service charges. This means that if an RSL calls part of the rent a 'service charge', there are no restrictions on those charges.
(See Guiness example in East London).
Two tenant board members of Canalside Housing, a transfer association in Hackney, were dismissed from the board for speaking out against rent hikes and the breaking of promises:
"after the stock transfer vote happened, we were both elected as tenant representatives on to the board that was meant to be running the stock transfer company. What happened was, after a couple of years they began to have financial problems, and so they decided a number of things that were breaking promises that they had made. First of all they decided to increase rent by £10 a week for new tenants. They also took 47 homes that had been left empty and decided to turn them into a key-worker scheme that had rents £50 a week higher than the original rent. And these changes were made at secret meetings, and then the board was allowed to comment on them. We came out against those decisions and for our troubles were suspended from the board." Nick Strauss, former tenant board member of Canalside Housing, Hackney; oral evidence to MPs enquiry 8.3.05)
There are real pressures on RSLs to make the Business Plan stack up. In Brighton in the run up to the (failed) transfer ballot the
ITA, council and government were
caught out colluding to try and
find a solution.
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2. Security Lost
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After transfer tenants have to exchange their 'secure' tenancy for an 'assured' tenancy.
"Most tenants of local authorities enjoy security of tenure as secure tenants, protected by arguably the most generous charter of rights available in the residential sector. That security is lost on transfer."
(Large Scale Voluntary Transfer: not all honey and roses', Jan Luba QC, (2000) 4 L.& T. Rev. 6)
There are a number of differences in law between the two tenancies.
"If the council wants to evict you, they must prove both the ground for possession (e.g. rent arrears, anti-social behaviour) AND that it would be 'reasonable' to evict you…. A RSL can seek to evict you without the court having to consider 'reasonableness' in 8 out of 17 grounds for possession. For example if you are more than 8 weeks in arrears of rent on the day of the court hearing, the court will have to make a possession order even if the arrears are not your fault. (Ground 8)."
(Stock Transfer: Essential Reading Before You Choose, Tower Hamlets Law Centre)
Councils claim that the new landlord will write additional rights into the new assured tenancy contract which will make it the equivalent of a secure tenancy. Of promises written into RSL tenancy agreements the Law Centre say:
"RSLs are likely to honour the agreements they have made. However, if an RSL wants to ignore the promises they have made in a tenancy agreement, and rely instead on the weaker rights set out in law, they may be able to do so. In a leading court case a judge found that a housing association were entitled to override the promise they had made to always give notice before issuing proceedings, because this was allowed by statute."
In addition, there is no guarantee that new tenants moving in after transfer will be given these extra contractual rights. "This may lead to two classes of tenants living side by side on the same estate."
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3. Public Housing Not Private Profit
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Councils claim that transfer is 'nothing to do with privatisation' because RSLs are 'non-profit making' organisations. But because RSLs borrow on the private market, transfer means that banks make a profit out of what used to be a public service. Housing associations behave like any other private company - increasingly commercialised, they are under pressure to make surpluses and many of them are aggressively expanding into the private marketplace.
"housing associations, and particularly stock transfer associations, are increasingly consumerist in their practice and their language. … Walker (2000) characterises housing associations as behaving increasingly like private sector organisations 'property-driven' and managing stock as an asset to maximise returns"
Changing Boards: Emerging Tensions, Liz Cairncross, Oxford Brookes University, Spring 2004)
Many transfer associations, not long after they are formed, set up a group structure of their own, so they can enter the world of private housing - market renting, new development and selling luxury houses (see box). With board members now being paid in many RSLs, fat-cat salaries for senior executives, and banks and lenders in the driving seat, it is easy to see why transfer is the privatisation of our homes.
Sunderland Housing Group, which was formed to take the transfer of Sunderland's housing in 2001, set up a profit-making subsidiary called Emperor Properties, which builds new homes for sale on the private market. The amount of affordable housing in Sunderland is being massively reduced, and widespread demolition in the name of 'regeneration' has devastated the city, as the recent MPs enquiry heard. In the lead up to transfer, SHG claimed they would build 4,000 new affordable homes in five years. They say they have actually built 26. At the same time landlord management costs in Sunderland have shot up. While homelessness grows, SHG has built itself new headquarters called Emperor House, and former housing director Peter Walls has seen his salary double to over £140,000 since he became chief executive.
Councils claim that the new landlord will write additional rights into the new assured tenancy contract which will make it the equivalent of a secure tenancy. Of promises written into RSL tenancy agreements the Law Centre say:
"RSLs are likely to honour the agreements they have made. However, if an RSL wants to ignore the promises they have made in a tenancy agreement, and rely instead on the weaker rights set out in law, they may be able to do so. In a leading court case a judge found that a housing association were entitled to override the promise they had made to always give notice before issuing proceedings, because this was allowed by statute."
In addition, there is no guarantee that new tenants moving in after transfer will be given these extra contractual rights. "This may lead to two classes of tenants living side by side on the same estate."
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4. Democracy and Tenants Power Become Unaccountable Boards
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As tenants of a local council we get to elect our landlord. If we don't like the way they run our housing we can vote them out every four years at the ballot box. But this direct democratic relationship is lost after transfer, PFI or ALMO.
"I as a Ward Councillor have tremendous problems dealing with case problem issues with housing associations. They don't respond to councillors, they don't think you're important, so getting something done for a tenant on an RSL is very difficult. With my local authority it's not a problem." (Cllr Graham Harvey, Labour Group Leader and Spokesman on Housing, Portsmouth City Council, oral evidence to MPs enquiry, 12/05/04)
The strong tradition of independent tenants organisation among council tenants is not replicated with RSLs. The government claims that housing associations and ALMOs are more accountable because they have tenants on the boards. But recent research for the Housing Corporation shows the role of tenant board members is "primarily symbolic, providing a fig leaf to cover the unpalatable fact that the real power lies elsewhere." (Changing Boards: Emerging Tensions, Liz Cairncross, Oxford Brookes University, Spring 2004)
Tenants on boards are bound by company law and, even if they have been elected, will not be able to represent the tenants who elected them. 'At the time of transfer, tenants are often led to believe that they will have an explicit role in representing the interest of their fellow tenants on the board. This is not compatible with the accepted principle that dictates that as a board member they have to work for the interest of the organisation.'
(Audit Commission Housing: Improving services through resident involvement, Audit Commission, June 2004.
See also DCH Synopsis of Report)
"As you are aware I have declined to continue as one of the Council's nominated Board members after the changes in governance come into force, as I have no confidence in the Boards management of the Association.
"RSLs are likely to honour the agreements they have made. However, if an RSL wants to ignore the promises they have made in a tenancy agreement, and rely instead on the weaker rights set out in law, they may be able to do so. In a leading court case a judge found that a housing association were entitled to override the promise they had made to always give notice before issuing proceedings, because this was allowed by statute."
The high level of remuneration to be paid to the Board members (£4,000/yr) and £10,000/yr for the Chairman was justified to tenants in newsletters on the basis that Board members currently work 7 hours each week for KHA, however this is not borne out by my own experience, which suggests that 5 hours a month would be a more realistic figure. Having queried the 7 hours claim made to tenants at the Shareholders meeting, I now find myself accused by you in recent e-mail's of undermining the board. If I am aware that decisions are being made using misleading or incorrect information, which in my opinion is clearly the case here, I have a duty to the Association and its beneficiaries, to point that out.
What is of more concern to me is that at the same shareholders meeting, Independent Board members who are also shareholders, having already voted as Board members to pay themselves, then voted as shareholders to pay themselves. …This would appear to be a clear conflict of interest…
I see little evidence to suggest the Board is influencing the direction of the Association, merely responding to proposals from the Senior Management Team…the most depressing aspect of Board meetings is the predictable response from most other members. Throughout my time on the Board it has become obvious that the Board is not receptive to ideas from non-housing professionals, the phrase, "that's not the way things are done in the housing sector", could be the Association's motto…
As I pointed out at a recent meeting, tenants in my own ward have become so disillusioned with KHA's poor performance that they have now refused to attend tenant meetings… I believe my own time will be better spent supporting them to achieve a change in KHA's attitude, rather than in wasting any more time at Board level"
(Councillor Ian Tilbury, letter of resignation from the board of Kingfisher HA, 4th June 2005)
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5. Loss of Localism
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"There is a merger mania just now that is being fuelled by the Housing Corporation saying future development cash will be concentrated on fewer and fewer associations." Talks aim to create joint biggest housing association, Derek Joseph, Managing Director, Tribal HCH (Society Guardian, 09/05/05)
Housing associations, like all private companies, are under pressure to expand and grow. There have been 35 full scale mergers over the past two years, with more becoming a subsidiary within a larger group, and many of these affect transferred tenants (see box).
Research has shown that 60% of all English transfer landlords in existence in 2001 were part of group structures. (Maturing Assets: the Evolution of Stock Transfer Housing Associations, Pawson and Fancy, 2003)
There is a big risk that a merger or takeover after transfer will put an end to that local, accountable organisation that tenants were promised. A significant number of associations get into financial trouble (one fifth of transfer associations have had to be placed under supervision) and many of those have to be taken over to survive. There are also huge pressures on associations to get bigger in order to increase their efficiency and compete in the private marketplace.
"We can compete with some of the bigger house builders. In order to buy into a supply line you do need some volume. The bigger the partnership the greater the volume you can get." Steve Coleman, Development director, Genesis Housing Group (Inside Housing, 05 Aug 2004)
Anglia Group recently merged with Circle 33. Their Chief Executive told Inside Housing "that the creation of the new organisation would assist
"Put a couple of housing association chief execs together and the chances are the talk will soon turn to mergers. 'Are you thinking about it?' and 'Who are you talking to?' are the big questions on everyone's lips. This week's Harrogate conference has been dominated by the topic. But is the merger mania sweeping the association sector really a good thing? …now questions are starting to be asked about whether mergers are really in associations' - and their tenants' - best interest, or whether they are fuelled instead by a rush for growth, chief executives' self-interest or simply a fear of being left behind." (Inside Housing, 24th June 2005)
When RSLs get taken over or merge tenants do not get any say in the matter - there is no right to a ballot when transferring from one housing association landlord to another. Not only do tenants who were promised a local organisation responsive to local needs lose out. Worse still, the take-over RSL is under no legal obligation to keep promises made at the time of transfer:
"the mortgagee exclusion clause… means that if the RSL gets into financial difficulties and as a result the funder takes control and transfers to another RSL, the "new" RSL is not bound by any of the promises made to the tenants." (Housing Today, 21/01/05)
"Tenants definitely won't be told that the company they eventually get could be totally different from the one they vote for. In 1993 East Cambridgeshire council tenants voted for what they were told would be a cosy little 'local housing company' called Hereward, just to run their 4,000 homes. Now, since April 1st this year, Hereward has joined the huge, 34,000-home Sanctuary Housing Association to become its east region subsidiary." (from a letter in the 'Cambridgeshire Times' 20/05/05)
"Amicus and Horizon housing groups have revealed merger talks are underway in a move that would create one of the largest landlords in the country.…The announcement is the latest in a string of proposed deals as housing associations increasingly look to join forces as part of the drive for efficiency in the sector." (Inside Housing, 14/04/05) Tenants who transferred from Hastings, Swale and Rother councils will all be affected by this merger.
Merger talks are underway between Liverpool-based Riverside Group and London-based English Churches HA to create England's joint largest association with 52,000 properties, operating in 200 council areas. This will affect ex-council tenants all over the north west who will see their landlord become so big even a regional identity is lost.
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6. Poor Performance
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More than one in five large scale transfer associations has had to be placed under supervision by the Housing Corporation. 'Such action, which involves the appointment of external experts to the board of the association, is only triggered by poor performance or serious management irregularities,' (Guardian 25/05/05)
Despite the millions of pounds spent on housing after transfer, the Public Accounts Committee found that there was only a slight increase in tenant satisfaction. They found there was only a 3% increase in tenants satisfied with the condition of their home (81% from 78% before transfer). Only 85% of tenants considered that housing services were at least as good as before transfer; while satisfaction with the quality of repairs went down (63% against 68%). (Improving Social Housing Through Transfer, 2003 and
DCH Synopsis of Report)
Tenants have very little redress if transfer RSLs break promises, because offer document promises are a contract between the RSL and the council, not with the individual tenant.
"the question that tenants need to be asking is whether these promises are legally enforceable.… the RSL, backed by the funder, will try to limit the RSL's obligations to "reasonable efforts" to keep the promises. And what reasonable efforts are, particularly for a charitable RSL, depends on the context at the time delivery is required." (Housing Today, 21/01/05)
"We were promised a community centre… and refurbishment of the children's play areas (the money for it was ring-fenced) five years ago when we transferred. We are still awaiting work on that to start as they are trying to force us to have something else built that we don't want… [they] want to build a new area office… plus flats for shared ownership which we don't want built…they are already doing away with one children's playground and garages and replacing them with another 16 new properties." (Fred Hunt, Secretary, Minerva Estate TRA, Tower Hamlets; written evidence, 12/03/05)
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7. We need joined-up thinking not a separate housing service!
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The government claims that forcing councils to separate overall strategic housing responsibilities, with separate companies (whether an RSL, ALMO or PFI consortium) taking on day to day management and maintenance, leads to better services. But they have never shown any evidence to support this.
A study by Heriott-Watt University did research into the effects of separation after transfer to housing associations. Alistair McIntosh, from the Housing Quality Network who commissioned the report, said "There doesn't appear to be a lot of empirical evidence suggesting that the only correct route is to make a split between the strategic enabling function and the landlord function. It's been carried on without any research or rationality underpinning it." (Inside Housing 11 January 2002).
The select committee which oversees the Office of the Deputy Prime Minister found:
"the committee heard evidence to suggest that there is no clear positive correlation between a separation of the two tasks and excellence in either strategic management or stock management…The Audit Commission indicated that the issue is not as straightforward as the Government would have us believe… The Chartered Institute of Housing (CIH) came to much the same conclusion arguing that there is no theoretical or practical reason why Local Authorities cannot handle both the strategic management of housing policy as well as managing a portfolio of social housing at ground level… The Committee is not convinced that ALMOs and stock transfer RSLs necessarily lead to better tenant participation and satisfaction. There is no reason to suggest that the same results and management innovations could not be achieved under Council management, given equal resources."
(ODPM Select Committee Report on Decent Homes 7 May 2004)
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Councils claim that after stock transfer our homes will be owned by a not-for-profit, locally-based organisation which will be responsive to tenants' needs and local concerns. But the direction in which most transfer organisations are going is a very different one. Registered Social Landlords (housing associations) are increasingly operating as multi-million pound businesses, characterised by mergers, takeovers, and expansionism, all of which mean one thing to tenants - you vote for transfer to one landlord and you end up the tenant of another. There are considerable pressures on associations to expand and link up; and the costs of both mergers and attempted mergers which fall through are high. Many transfer associations fail and look to takeovers to survive.
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Local companies responsive to local needs?
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Housing associations began as small organisations, funded by charitable donations, set up to meet a particular need, or provide for a particular group within society; and many of them have done a lot of good work over the years. But since the Tories stopped councils from building and started using housing associations - channelling public money into them through an unelected quango called the Housing Corporation - they have moved a long way from their roots. The government exploits that image of cuddly, charitable, and above all local organisations when selling privatisation to tenants. But it is a false image.
If you used to live in a council home in Carlisle, in the Netherley and Dovecot areas of Liverpool, or in Manchester council's homes in Langley, Rochdale - then your home now belongs to the Riverside Housing Group which owns "in the order of 40,000 properties and operates in 27 local authority areas." 1
Similarly the 4,500 tenants in the London Borough of Bexley who transferred in 1998 to London & Quadrant Housing now belong to a group which manages over 33,000 homes spread across more than 60 local authorities. In September this year the group added another 5,500 homes to its portfolio in a merger with Nucleus Group. 2
"Alongside the growth of the housing association sector overall, and stock transfer associations in particular, there has been a trend towards organisational restructuring, both internally… and externally (Pawson and Fancy, 2003). Internally, they have adopted flatter structures, a stronger business focus, and diversified their activities. The great majority of stock transfer associations report considering setting up or joining some form of group structure and a third have also considered merger (Pawson & Fancy, 2003). Pawson and Fancy, using Housing Corporation registration data, found that 60% of all English transfer landlords in existence in 2001 were part of group structures." 3
Tenants in East Hertfordshire were transferred to Stort Valley Housing Association, which is now part of the Anglia group. The tenants of Barking and Dagenham Council have already been transferred twice - to Stort Valley Housing Association, and then to Barking and Dagenham Housing Association, also part of the Anglia group. Anglia (which also owns homes transferred from Harlow and Basildon councils) is about to link up with Circle 33, described by Inside Housing as "one of the capital's biggest social landlords.. If the merger goes ahead, the new organisation will manage 32,000 homes across London and the east of England, making it England's fifth biggest registered housing association." And does the reason behind the merger have anything to do with local solutions and responding to the needs of transferred tenants? The Chief Executive of Anglia told Inside Housing "that the creation of the new organisation would assist the M11 growth corridor's development". 4
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Expanding Into Private Markets
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Registered Social Landlords are required by law to make their primary object the provision of social rented housing at "affordable" levels. This means that they are allowed to devote up to 49% of their business activities to market renting, property development and other speculative schemes typical of private sector businesses.
Many transfer associations, not long after they are formed, set up a group structure of their own, so they can enter the world of non-social housing - market renting, buying, building and selling houses on the private market. So for example, Somer Community Housing Trust, a new organisation set up to take over stock from Bath and North East Somerset council, set up a related but profit-making company, SOMACO Ltd, so that as well as managing the homes of transferred tenants it could also develop "new and diverse activities including shortlife leasing; market and sub market renting; care services and repairs contracting." 5
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Pressure to Join Up
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There are many pressures on housing associations to expand, merge and rationalise their stock.
The bigger an organisation is, the greater the economies of scale - they can buy goods and services cheaper because they are buying more of them. With the latest announcement from government that private developers will be allowed to build social housing, RSLs will be under even greater pressure to compete.
There are also pressures from lenders. The bigger the collateral, the smaller the risk. (In other words, the more houses an association owns, the more money it can borrow.) Banks put pressure on organisations to join up and pool their assets in order to minimise risk.
In January 2004 the Housing Corporation announced plans to let associations borrow against their social housing "assets" to finance non-social housing development schemes. That means using tenants' homes as collateral for schemes to make money out of the private sector - and if those profit-making schemes go wrong, the banks could seize tenants' homes to pay back the loans.
The Housing Corporation is now aiming to pay 90% of its grant money only to organisations which set up consortiums, or "partnering" arrangements, to bid for cash.7 This is part of the drive to push associations to join up and become bigger and bigger. The case of Pavilion, below, shows how a consortium can be the first step towards a full merger or takeover.
The drive towards mergers brings yet another problem as well as the loss of democracy and localism. Restructuring companies in this way comes at a price. "Millions of pounds are being wasted every year through failed merger negotiations, a consultant has warned. In a report for the Housing Quality Network, Debby Ounsted urged RSLs to think carefully about prospects for success before embarking on costly negotiations. 'There is as yet no published reliable data on the cost of failed negotiations in the RSL sector,' said Ms Ounsted. 'But the direct costs must be high, as are the hidden costs of damaged morale, abortive effort and tarnished reputation.' On top of the tangible costs of lawyers and accountants, there were non-tangible costs such as the amount of time chief executives spend on mergers." 8
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The Risks of Failure
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Housing associations are not safe, risk-free organisations. Many of them face financial shortfalls, poor performance and "governance" problems - problems facing boards who are unable to control the organisation.
The worst nightmare for tenants must be when the housing association which has taken over their homes gets into financial trouble and has to find a bigger partner to buy them out. There are some spectacular examples of failure in the sector - like West Hampstead Housing Association, which speculated on dodgy private market schemes until it was millions in debt and had to sell out to the Genesis Housing Group. Or Solon Wandsworth Housing Association, whose board refused to sell out and whose homes are now being forcibly sold off to Wandle Housing Association by the Housing Corporation. 9
Transfer associations are not exempt from these sorts of problems. Tenants of Kerrier District Council transferred in 1998 to Kerrier Homes Trust. By 2002 the trust had been placed under supervision by the Housing Corporation because of concerns over its financial viability, failures in performance and the inability of the board to properly govern the association. "The association's financial condition is presently of concern… The governing body does not demonstrate effective control of the organisation…. The association's performance fails to achieve the outcomes specified in the Regulatory Code." When the Housing Corporation puts an association under supervision it makes its own appointments to the board - so much for local accountability! Kerrier was not released from supervision until two years later, and during that time had to go through the resignation and suspension of board members, and the threat of takeover. 10
Another stock transfer organisation which has just been placed under supervision is Weaver Vale Housing Trust - just two years after after they took ownership of 7,000 homes from Vale Royal Council. "The corporation found that the potential risks to the organisation have not been properly controlled or monitored. Indicators show 60 per cent of the trust's homes fail to meet the decent homes standard. The corporation said this was higher than it would expect, even for a young stock transfer association." 11
Pavilion Housing Group (whose homes were once owned by Rushmoor Council) is considering a merger with Atlantic Housing Group (set up to take the transfer of Eastleigh Council's stock). Both associations originally formed a 'development consortium' so they could make a big enough bid to secure Housing Corporation grant. Now Pavilion is in financial trouble, has had damning reports on its performance from both the Audit Commission and the Housing Corporation, and is looking for a merger to rescue it. "Two members of the development consortium Sappling Housing Partnership are planning to link up in the wake of Pavilion Housing Association's damning inspection report. Pavilion's annual report for 2003/04, due to be published at its annual general meeting next week, is expected to reveal an accounting loss of £27 million. It is understood that Pavilion was leading the development plans for Sappling but has transferred the responsibility to another consortium member." 12
Many of the problems experienced by RSLs are connected with their boards. The government claims that stock transfer is an empowering experience for tenants who get seats on the board, but this is nonsense. The housing press is full of examples of rows, resignations and scandals on RSL boards; the examples above show how an unelected quango can appoint its own board members if things start to go wrong.
Just this week (22nd Oct 04) three board members were axed from the Bradford Community Housing Trust Group (the transfer organisation which took over Bradford's council homes) - their crime? daring to complain about part of the group to the Housing Corporation. 13 Two tenants from Hackney were dismissed from the Canalside Housing Partnership board in 2002 for publicly criticising proposals to break rent guarantees. 14
Anchor Trust, one of Britain's biggest registered social landlords, has just 'slimmed down' its board from fifteen members to seven. The association, which pays its chief executive the highest salary in the sector (£210,000 a year), has also started paying its board members. 15 Most of the other big organisations are following suit, just months after the Housing Corporation changed the rules to allow them to do so. By paying board members, housing associations take one more step towards becoming identical with big-business private enterprise.
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Sources
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1 Housing Corporation Assessment: Riverside Housing Group
2 Housing Corporation Assessment: London & Quadrant Housing
3 Changing Boards: Emerging Tensions Liz Cairncross, Oxford Brookes University
(Paper presented to Housing Studies Association Conference, Spring 2004)
Maturing Assets: the Evolution of Stock Transfer Housing Associations.
Pawson, H. & Fancy, C. (Bristol: Policy Press, 2003)
4 Housing Corporation Assessment: Anglia Group
'Circle 33 and Anglia announce merger plan' (Inside Housing, 30 Sep 2004)
5 Housing Corporation Assessment: Somer Housing Group
6 Housing Corporation Assessment: Irwell Valley Housing Group
7 'Take your partner for next steps' (Inside Housing, 02 Apr 2004)
'New partnering model aims to drive development' (Inside Housing, 05 Aug 2004)
8 'Mergers "risk driving out staff" ' (Inside Housing, 11 Mar 2002)
9 ' "Guerilla warfare" set to force association takeover' (Inside Housing, 8 Apr 2004)
10 Housing Corporation Assessment: Kerrier Homes Trust
'Kerrier considers group structure' (Inside Housing, 10 Jan 2002)
'Kerrier chief goes after merger row' (Inside Housing, 11 Jul 2004)
11 'Supervision for trust that went £2.3m over budget' (Inside Housing, 7 Oct 2004)
12 Housing Corporation Assessment: Pavilion Housing Group
Housing Corporation Assessment: Atlantic Housing Group
'Consortium pair plan merger after criticism' (Inside Housing, 10 Sep 2004)
13 'Trio axed from board' (Inside Housing, 22 Oct 2004)
14 Letter to Camden New Journal 2 Aug 2002
15 'Pay for today' (Inside Housing, 1 Oct 2004)
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