Three of London’s largest housing associations have announced they are in talks to merge, creating one of the largest housing developers in the country with aims to build around 100,000 homes across London and the south east.
L&Q, the Hyde Group and East Thames are hoping to form an association worth an estimated £30bn, with plans for investment of up to £25bn over the next 10 years. Their joint stock amounts to 135,000 homes.
By joining together, Yvonne Arrowsmith, chief executive of East Thames above, left), David Montague, chief executive of L&Q (centre), and Elaine Bailey, chief executive of the Hyde Group (right), the group anticipates it will be able to build 35,000 more homes than the three HAs would have been able to separately.
With an estimated average annual output of 10,000 homes a year, the new entity would be behind only Barratt, Persimmon, and Taylor Wimpey in the overall league table of UK housebuilders, according to Inside Housing magazine.
"Put simply, we are stronger together – more financially capable of delivering and managing our stock than we are apart. Every penny that we make will be invested back into the services we deliver and into building much needed homes."
Elaine Bailey, chief executive, The Hyde Group
The merger is thought to relate to changes in the landscape that housing associations are operating, with caps on rent imposed by the government last year, while associations are now facing the loss of stock and income from the extension of the Right to Buy scheme to their tenants. At the same time, ministers are seeking to increase housing output.
The combined pressures have already led to two recent merger announcements: Affinity Sutton and Circle Housing together have a protfolio of 125,000 homes, and Sovereign and Spectrum Group are in talks to create a 56,000 home landlord.
Andy von Bradsky, the newly appointed chairman of the Housing Forum, told Construction Manager that he expected other housing associations to take note and perhaps form their own plans.
He said: “It’s no surprise given the government coming down heavily on associations to deliver more homes. The only thing I’m surprised at is the scale of the merger which wouldn’t have been widely expected.
“All housing associations, in light of rent reductions, will have to take the decision as to how they continue to develop and the amount of private houses they build.
“I think any of the financial directors of these companies recognise the pressures they are under and facing from the government and will have to come up with new strategies.”
Bradsky added: “I think the only issue is the amount of subsidised or sub-market rented housing that will be delivered in the absence of government grants and the move towards a zero grant regime and that is something we will want to keep a watch on. Any drop in the amount of that would be of concern.”
Andy Von Bradsky was elected to the chairmanship of The Housing Forum on a three-year term from 1 April 2016. He is a consultant and former chairman of PRP, the largest architectural practice specialising in housing in the UK, and brings over 30 years’ experience in the design and delivery of housing for the private and public sector.
Speaking about his new tenure he said: “It is a particularly interesting time to be taking over as chair of The Housing Forum, with housing as high on the political agenda as it has ever been in recent decades and a government committed to stimulating supply.”
He succeeds Ben Derbyshire, managing partner at HTA Design, who has recently announced his candidacy in the next RIBA presidential election.
The enlarged new-build programme is targeting 25,000 affordable new homes for first-time buyers and 25,000 new homes for affordable rent, with the remaining 50,000 new homes for market rent and sale.
Under the new combined plans, half of the new homes will be for people on low incomes, making the new organisation the largest provider of affordable homes in the country.
The merger will also see a new training academy created with a £5m-a-year increase in investment over existing training budgets.
In a press release, Elaine Bailey, chief executive of The Hyde Group, said: “The combined strength of all three associations means that we will be able to deliver a house building programme that would have been impossible to achieve for each organisation alone. As well as this, we want to lead the sector in customer service, meeting the service aspirations of all our residents across a range of housing tenures.
“Put simply, we are stronger together – more financially capable of delivering and managing our stock than we are apart. Every penny that we make will be invested back into the services we deliver and into building much needed homes.”
Housing minister Brandon Lewis welcomed the news, stating: “This shows what can be achieved by combining the strengths of each organisation. It will make a real difference to increase their capacity to build, house and help thousands of people across London and the south east.”
He added: “In my mind, this is exactly what housing associations should be doing.”
