Mergers of housing associations have been a feature of the sector for well over a decade. Our analysis shows a total of 14 mergers between housing associations took place in 2020*. We would expect that this figure would have been higher without the lockdown.
With more than 1,600 social housing providers in the UK, there is still plenty of scope for further consolidation within the sector.
Why are housing associations merging?
By merging and becoming a bigger organisation, housing associations can increase their ‘borrowing power’ and ultimately build more homes. This will be crucial in helping towards overcoming the UK housing crisis.
Rising costs may also encourage mergers as those costs can be balanced out by economies of scale. Housing associations face bigger costs in the coming years due to the introduction of new regulations such as the 2019-20 Building Safety Bill. Once implemented, this legislation will require organisations to improve the fire safety standards of their buildings and employ building safety officers. In addition, property portfolios will need to be made carbon neutral by 2050.
Mergers can allow housing associations to deliver quite substantial economies of scale through combined purchasing and shared back-office functions. These cost savings can then be reallocated into improving frontline and digital services, for example, providing better systems so customers can pay their rent online.
Housing association mergers can create extremely large organisations, making it much more complex to operate. As a result, additional skills and experience are likely to be required at the board level for both execs and NEDs so that the new organisation can be run effectively.
At present, demand for senior executives with digital, customer and governance experience is particularly high.
Sarah Stevenson is a director and leads the housing practice at NSCG. If you are a housing association in need of support with finding and hiring talent with experience at a senior level, please get in touch.
*Source: Regulator of Social Housing, year-end December 31