Understanding the potential roles of housing associations in the market rented sector

1. Understanding the potential roles of housing associations in the market rented sector Ceri Victory, Graham Squires, Luke Burroughs and Colin Booth

2. Overview • Aim & Objectives • Data and Methods • Rationale • Literature Review • The Conceptual Model • Findings and Application • Limitations • Conclusions and Future Research

3. Aim & Objectives AIM: To apply research findings to an existing conceptual model which assists understanding of the potential roles of housing associations in the market rented sector. OBJECTIVES: • To understand why housing associations might enter the market rented sector • To scope the roles housing associations might play in the market rented sector • To identify an existing conceptual model with potential to assist our understanding of these potential roles • To apply research findings to this conceptual model in order to draw conclusions

4. Data and Methods • Literature Review • Bristol Housing Futures Project 2013: • Project Scope: institutional investment and private rented sector were key themes • Focus Group 1 (private rented sector) • Focus Group 2 (future housing strategies) • Questionnaire

5. DCLG 2014: 11

6. Rationale • 2012-13: private rented sector overtook social rented sector • Government seek a ‘less marginal, poorly regarded ‘third’ option’ type of private rented sector (Rugg and Rhodes 2008) • Evidence and anticipation of role for housing associations • Literature discusses in terms of social housing provision • What impact might this new role have on housing associations and their corporate identity?

7. Literature 1a: Contemporary motivation for Housing Associations to Adopt New Roles ‘You can’t be a philanthropist without any cash’ (D. Cowans in Chevin 2013: 31). Financial pressures • Diminished state capital funding (Pawsonand Soshenko 2012, Chevin 2013) • Constrained access to private finance (DCLGC 2013b, Mullins and Pawson 2010) • ‘Model of cross-subsidy from… sales… is broken, or at least inoperable’ (Mullins and Pawson 2010; Gibb et al 2013) • Constrained supply (Chevin 2013, Wilson 2013) • Welfare reform (Pawson and Soshenko 2012: 786, Chevin 2013, CML 2012)

8. Literature 1b: Contemporary motivation for Housing Associations to adopt new roles ‘You can’t be a philanthropist without any cash’ (D. Cowans in Chevin 2013: 31). Being a philanthropist • Pressure to charge ‘affordable’ rents (HCA 2011) • Removal of security of tenure (Localism Act 2011; Fitzpatrick and Pawson 2013) • Changes to regulation (Victory and Malpass 2011, Chevin 2013, DCLGC 2013a) • Incursion of profit-making organisations into ‘social’ housing delivery (DCLG 2011; Victory and Malpass 2011; Rhodes and Mullins 2009) • Changes in, and more attention paid to problems with, the private rented sector (Gibb et al 2013, Rugg and Rhodes 2008)

9. Literature 2: Housing Associations and the Market Rented Sector • Housing / Social need not confined to ‘affordable’ sector (data from DCLG 2014); • Market rented sector presents opportunities for effective investment (Grant and Sankoli2007, Mansfield 2000) and is in need of reform (Rugg and Rhodes 2008); • Increasingly role seen for housing associations in sector (DCLG 2012, Gibb et al 2013, HCA 2014, Pawson& Milligan 2013, Rugg and Rhodes 2008); • Stronger qualitative than quantitative evidence of change (Chevin2013, TSA 2011).

10. Literature 3: Modelling Housing Association Roles • Contemporary descriptors: ‘social entrepreneurs’ (Czischke et al 2012), ‘hybrid’ organisations (Blessing 2012, Mullins 2010, Mullins and Pawson 2010), ‘social commercial’ organisations (Crossan 2007 in Czischke et al 2012 and see Chevin 2013 and Mullins 2010). • Gruis (2008) proposes ‘defenders’ / ‘prospectors’ model set in context of social and commercial orientation (Gruis 2008, Neiboer and Gruis 2011, Czischke et al 2012); • Model captures orientation on social – commercial spectrum.

11. Key Concept: A Housing Associations ‘Role Model’ Nieboer and Gruis 2011: 4

12. Findings: Housing Association roles in the market rented sector • Own and manage market rented housing • Own market rented housing, outsource (or separate) marketing and management • Managing agent role: properties are in private ownership and let at market rents • Institutional investment – local authority, investor and housing association partnership • ‘Closer to market rents’ – develop hybrid products • ‘Sweating assets’ – conversion of existing properties to market rented model • Manage privately owned properties to house ‘social’ tenants • Provide high(er) quality market rented offer • Meet third party objectives via market rented provision – e.g. key worker housing • Ethical lettings

13. Situating the findings in the conceptual model 7 10 5 9 8 2 3 4 6 1

14. Own market rented properties and outsource or separate marketing and management: financial return (to be reinvested), market emphasis, new business model (move to commercial)but no change to skill (centre prospector)set required in-house – more closely aligned to core business Situating the findings in the conceptual model 7 10 5 9 8 2 3 4 1 6

15. Situating the findings in the conceptual model 7 10 5 9 8 2 3 4 Own and manage market rented housing: financial return (to be reinvested), market emphasis, new business model (move to commercial) and new skill set (move to prospector) required in-house 1 6

16. Situating the findings in the conceptual model 7 10 5 9 8 2 3 4 1 6 Manage privately owned properties to house ‘social’ tenants. As (2) but with the financial return minimised and social return maximised. Closer to core business (closer to social)in that not taking on ownership of properties in new sector and providing standard management service (more defender).

17. Limitations and Opportunities for Developing the GruisModel • What sector housing falls within is open to interpretation (PRS or MRS) (DCLG 2010) • Likewise, the position of roles in the model is based on interpretation (of qualitative data) • Model is two dimensional and does not illustrate the influence of other factors (beyond commercial/social, defender/prospector etc) • More sophisticated model might also consider dimensions of context, barriers/opportunities, costs and benefits, motivations/behaviours, decision making

18. Conclusions • Findings broadly support assumption of ‘societal innovator’ role but suggest market rented activity compatible with broader range of possible corporate identities • Market emphasis does not necessarily equate with prioritising financial return • Contextual factors as important as activity itself in determining effect on organisational identity • Opportunities to enter market rented sector encapsulate the social-commercial tension which may characterise contemporary housing associations • Scope to develop a defence here towards negative charges of ‘commercialism’?

19. Future Research • Further primary research to scope potential roles in more depth; • Quantitative data, and a more sophisticated matrix • Gibb et al (2013) propose series of criteria against which models or policies can be tested and which might assist understanding of potential roles • Identify and assess barriers to entry to market rented sector.

20. References • Blessing, A. (2012) Magical or Monstrous? Hybridity in Social Housing Governance. Housing Studies. 27(2), pp. 189-207. • Chevin, D. (2013) Social Hearted, Commercially Minded: A Report on Tomorrow’s Housing Associations. London: The Smith Institute. • Council of Mortgage Lenders (CML) (2012) Funding Social Housing – A Review [online]. London: Council of Mortgage Lenders. Available from: www.cml.org.uk [accessed 11 April 2014]. • Czischke, D. , Gruis, V. & Mullins, D. (2012) Conceptualising Social Enterprise in Housing Organisations. Housing Studies. 27(4), pp. 418-437. • Department for Communities and Local Government (DCLG) (2010) Promoting investment in private rented housing supply: international policy comparisons [online]. London: Department for Communities and Local Government. Available from: https://www.gov.uk/government/publications/promoting-investment-in-private-rented-housing-international-policy-comparisons [accessed 11 April 2014]. • Department for Communities and Local Government (DCLG) (2011) Laying the Foundations: A Housing Strategy for England. London: Department for Communities and Local Government. • Department for Communities and Local Government (DCLG) (2012) Review of the barriers to institutional investment in private rented homes [online]. London: Department of Communities and Local Government. Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/15547/montague_review.pdf [accessed 4 April 2014] • Department for Communities and Local Government (DCLG) (2014) English Housing Survey Headline Report 2012-13 [online]. London: Department for Communities and Local Government. Available from: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284648/English_Housing_Survey_Headline_Report_2012-13.pdf [accessed 31 March 2014].

21. References • Department for Communities and Local Government Committee (DCLGC) (2013) Regulation Committee of the Homes and Communities Agency, Written Evidence [online]. London: The Stationery Office Limited. Available from: http://www.publications.parliament.uk/pa/cm201314/cmselect/cmcomloc/writev/rchca/contents.htm [accessed 28 March 2014]. • Department for Communities and Local Government Committee (DCLGC) (2013b) The Work of the Regulation Committee of the Homes and Communities Agency [online]. London: The Stationery Office Limited. Available from http://www.publications.parliament.uk/pa/cm201314/cmselect/cmcomloc/310/310.pdf [accessed 2 April 2014]. • Fitzpatrick, S. and Pawson, H. (2013) Ending Security of Tenure for Social Renters: Transitioning to ‘Ambulance Service’ Social Housing? Housing Studies [online publication only]. [Accessed 11 April 2014]. • Gibb, K., Maclennan, D. and Stephens, M. (2013) Innovative Financing of affordable housing: international and U.K. perspectives [online]. York: Joseph Rowntree Foundation. Available from: http://www.jrf.org.uk/publications/innovative-financing-affordable-housing [accessed 2 April 2014]. • Grant, K. and Sankoli, S. (2007) Current Issues Note 18: Institutional Investment in housing [online]. London: Greater London Authority. Available from: http://legacy.london.gov.uk/mayor/economic_unit/docs/current-issues-note-18.pdf [accessed 27 March 2014]. • Gruis, V. (2008) Organisational archetypes for Dutch housing associations. Environment and Planning C: Government and Policy. 26(6), pp. 1077–1092 • Homes and Communities Agency (HCA) (2011) 2011-15 Affordable Homes Programme - Framework [online]. London: Homes and Communities Agency. Available from: http://www.homesandcommunities.co.uk/ourwork/affordable-rent [Accessed 12 February 2014].

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