no. 28, 29/1995 Veronica COATHAM Who Now Handles Social Housing Provision - The Role and Performance of Housing Associations Housing Housing policy Housing associations Great Britain In Brìtaùì. Housing Associations are organizations whose prime objectives are to develop arid manage housing for people in housing need and who are on low ijiconies. Tfxey are sometimes referred to as the "voluntary housing sector" or the "t/iird arm" of rented housing provision, separate Jrx>m prwate sector landlords and rented housing provided by sta-tiäory local (municipal) fìousàìg authorities. This article discusses the rde of housing associations in the UK housijig market. Veronica Coatham Kdo je danes odgotx>ren za os-krbovanje s socialnimi stanovanji? Vloga in učinkovitost stanovanjskih združenj StaTiovaiya Stanovajyska politika StaìU}vanjske združenja Velika Britanija Stanovajijska združenja so v Veliki Brìtaiùji organizacye. čigar osnovni nameti Je gradili in iq^ravljati stanovanja, ki so namenjena občanom z nizkinn osebnimi dohodki. To Je tako imenovaiü "prostovoljni staiio-vanjski sektor' oziroma 'tretja roka' najenmih stanovai]), tó se razlikuje od privatnega najenvxega ter od na-Jenviega sektoija. kiga oskrbuje statutarna Idcabìa (občinska) Mast. Ta äanek obravnava vlogo stanovanjskih združenj na britanskem stajio-vaiyskeni trgiL Introduction In Britain. Housing Associations are organisations whose prime objectives are to develop and manage housing for people in housing need and who are on low incomes. They are sometimes refen-ed to as the Voluntary housing sector' or Uie 'Uiii-d ann' of rented housing pi-o-vision, separate from private sector landloixls and rented housing provided by statutoiy local (municipal) housing authorities. However, some people would now argue whether housing associations could genuinely be part of the voluntary sector, as associations receive substantial public subsidy (from central government) and are borrowing increasing amounts of money raised from tlie private sector. It is important to note that housing associations are not tlie major providers of rented housing in the United lüngdom (see Table 1 below) -tliey only hold 3.3 % of the total dwelling stock in England, Wales and Scotland, llie statutory sector, local authorities (municipalities) and New Town Development Corporations remain tlie major providers of social rented housing and pri\'ate landlords also hold a significant proportion of rented stock. Why then is this article focusing upon housing associations when the sector does seem such a small player in the UK housing market? Mainly because activity in housing provision by local authorities has been constrained by Conservative government policies in the 1980s and 1990s. Instead, housing associations have been favoured as the main agents for developing new social rented housing (note - local housing authority sector and housing association housing are commonly referred to as the Social Housing Sector). TTie housing association sector currently produces approximately 40,000 units a year. Housing association activities are regulated by the Housing Corporation, a government agency created in 1964. for Uie specific purpose of channelling public Ruiding through to associations and for monitoring tlieir activity. I-ater in this article, tlie role of the Housing Corporation in regulating housing association activity is examined more fully. 'Hie Housing Coiporation has responsibility in England only. Tai Cymru controls housing association activity in Wales and Scottish Homes in Scotland. All three agencies are controlled by Boards whose members Table 1 ; Stockof Dwellings by Tenure as at Decen^ber J993- UnitedKingdom Owner Occupied Rented Privately Housing Association Local Authority/ New Towns Thousand % Thousand % Thousand % Thousand % England 13.513 67.3 2.045 10.2 768 3.8 3.742 18.6 Wales 867 71,6 94 7,8 35 2.9 214 17.7 Scotland {p) 1.211 55.3 139 6.3 71 3.2 770 35.2 Total 15.591 64.8 2278 8.1 874 3.3 4.726 23.8 Source: Housing and Construction Statistics, March Quarter 1994 URBANI IZZIV št. 28,29/1995 are appointed by the Secretaiy of State for the Department of the Environment (DoE), and the Board in turn is required to report annually to Parliament on expenditure and performance. The three agencies have to work within the policy and expenditure framework set up by the DoE and are regarded as being agents of the government The other important feature of the housing association movement or sector, is that membership and committees of management are made up of volunteers. E^ch association is requb ed by English law to have a Committee of Management, but both tliey and otiier members of the association ai'e volimteere. Associations are not allowed to make profits in Uie sense that the membership and committee members receive no payment or benefits from any surpluses generated (Spencer. Mullins & Walker 1994). Associations are at liberty to appoint individuals to their committees but the Housing Corporation exercises management contiol and sets standards. It also has the power to nominate individuals to committees where it finds ijisuiTicient control or expertise exists, such as where an association mismanages its finances. Paid staff are employed by most associations to carry out Uie policies detennined by the association committee of management (although approximately 1 /3 of associations do not employ any paid stafR. No paid employees, including Chief Executives and Directors of associations can be on the committee of management - Uieir role is purely advisory. The Origins of the Housing Association Movement The housing association movement can trace its origins bac'k to the twelilh century when almshouses were first established by charitable benefactors to meet local housing needs (Cope 1990 in Spencer, Mullins & Walker). Today, Uiere are still 1.700 almshouses. However, itwasinthe 19thCentury that tlie origins of the current housing association movement can be traced. Philanthropic truists were developed to provide decent housing in iut)an areas in response to the housing and health problems associated with rapid urbanisation. TTiese trusts were small in number and received donations from private individuals concerned to see an improvement in the living conditions for working class people in cities. The Peabody Trust was fonned at this time, operating in I^ndon where it soon established a substantial property portfolio. Otlier trusts followed with Uie Guiness Trust and Sutton Housing Trtist fonning in Ixindon and Boumville Village Tmst in Birmingham, lliese associations are still operating today, indeed 3 of them number amongst the largest 12 associations operating in the UK today (see table 2). The housing association movement did not then see a major increase in activity until the 1960s, when new associations were established oRen by local voluntary groups, to respond to tlie poor housing conditions in tlie private rented sector, to provide housing in urlxui areas for immigrants from Uie new commonwealth and to provide an alternative Table 2: Tl\e 12 largest registered housing associations - March 1993 Total Homes Total Staff New Homes 1992/1993 No LA'S with stock North British 23.128 1.120 1.078 106 Anchor 22.834 5.529 660 209 North 22.032 674 1.390 45 Merseyside Improved Homes 15.268 626 556 9 Sutton Housing Trust 14.421 575 191 37 Peabody 12,378 521 771 15 Sanctuary 12.330 672 777 113 Broomleigh 12.265 255 74 3 Guiness Trust 11.787 514 1,456 82 London and Quadrant 11.649 388 466 45 Royal British Legion 11.502 889 235 202 Northern Counties 11.163 557 489 42 Notes: Total Homes = total rental stock in ownership of association. Total Staff include full time and part time New homes added include newly built and purchased. No LAs with stock = number of local authority areas in which association has rented slock. Source: Housing Corporation (1994) Housing Associations in 1993 Part 2, Supplementary Tables on Individual Associations. no. 28, 29/1995 approach to Uie cleai'ance of old sub-standard property. Associations tended to operate in specific localities and associations fonned at this tiine tend to be still active in the causes behind their foundation, for example, Notting Hill Housing Ti-ust are still active in refuibishing pro-pei-ty in West London, Focus Housing Association, (previously COPEC Housing Association) is still active in providing housing in areas of high black and etlinic minority populations in Binningham and Üie West Midlands. At the same time, oUier housing associations supported by tlie Housing Coiporation; began to experiment with different fonns of housing tenure, including cost-rent and co-ownership schemes which were directed at higher income households. Not only do housing associations rehabilitate old stock and build new acconunodation but they may also provide housing for specific client groups, such as elderly people, lone parent families, single people and people in need of care and support. An added complication is the diversity in size of associations. Of tlie 2.177 associations registered with tlie Housing Coiporation in 1993, 1900 associations or 87 % of all associations own less than 250 units. Almshouses would fall into tliis category. A large numl^er of tliese associations employ few or no stair and are not engaged in new development. 60 associations or 3 % of all associations have over 2,501 units in management (Housing Corporation 1993). 12 of this number account for 25 % of all housing association homes. They have more Uian 10,000 homes and employ over 50 staff. Table 2 lists these associations. We will be looking more closely at the activities of Sanctuary Housing Association as a case study, later in this article. Some would argue that tliis diversity in range and scale of activities is a strength of the movement, as individual associations are able to respond to specific housing needs, while others might argue that there is scope for increasing efTiciencies Üirough the consolidation of different associations eg., through mer- gers, or tlie de-registration of the very small non-development associations such as almshouses. Despite such pressures for change, tlie movement is typified by a strong voluntaiy etlmic and in some areas a resistance to adopting government policy. But changes are being forced uf)on the voluntaiy housing movement by the Housing Corporation operating on behalf of tlie government and it's this ti-end we'U examine next. Legislation Affecting Housing Associations 'iTie 1974 Housing Act heralded a major role for the housing association movement in the provision of social rented housing. Under this Act, associations were provided with public funding through the Housing Corporation for lx)tli the costs of new developments and associated revenue expenditure. In effect, the state undeiwrote any 'risk' and enabled tlie movement to grow at a rapid pace. 'lliroLighout the 1970s and early 1980s associations completed up to 40.000 units a year working on schemes that complemented the work of local housing autliorities. As well as new build, associations worked in inner city areas, rehabilitating old housing stock and concentrating on providing accommodation for single people. elderly people, people with disabilities and other groups such as childless couples who weren't provided for or who couldn't gain access to local authority housing. Local housing authorities had tended to concentrate on providing family housing for people on low income during their major development periods of the 1920s and 1930s and then in the 1950s and 1960s. The second and more recent landmark has l;)een the 1988 Housing Act. It is this Act which transformed the role of associations in the late 1980s and early 1990s. It did this by: 1. Shifting the responsibility for providing social rented housing from local housing authorities to housing associations. This was effected by transferring subsidies for URBANI IZZIV št. 28,29/1995 new house building from local authorities (whose output was reducing anjway because of decreasing state subsidy) to housing associations. 2. Requiring housing associations to secure private sector or commercial finance to replace pail of the public subsidy for new schemes, deregulating new tenancies in the sector so that rents could reilect Uie costs of loan repayments and at tlie same Ume, inti-oducing competition between associations for public subsidy. By introducing these measures, tlie government hoped to shift the housing association movement out of the public sector into an independent sector along wilh private landlords. However, Uie movement, whilst embracing some of the new challenges posed by the legislation, was reluctant to be associated with the private rented sector and some of the bad practices associated wiüi it eg., harassment of tenants, illegal evictions, substandard and overcrowded housing. It has maintained that it is still part of the social rented sector along witli housing authority housing. However, changes have taken place (Spencer, Mullins & Walker, 1994): - there has been a continuous reduction in the proportion of public subsidy by fimds from Uie Housing Corporation towaj-d scheme cosls (62 % in 1993/94, 52 % approx. in 1994/95). 'Hie Annual Development lYogramme (ADP) which is used to allocale the housing associations grant to associations is expected to decline further as a result of Uie govemmentUs expenditure plans. For example, in 1992/93, Uie ADP was £ 2.4 billion, in 1994/95 it was £ 1.5 billion. - large ainoimts of private finance have been raised (from 1989/90 to 1993/94, £ 2.6 million was raised), Banks and building so-cieUes being the main providers of fimds. - there has been a reducUon in unit costs due to intense compeUUon at a Ume of a recession in the building industiy. - Üiere has been a substantial increase in rents especially for new homes. The outcome of these development is Uiat the 'developing' housing as-sociaUons are now resembling private sector insUtutions in tenns of 'their ability to borrow, Uieir exposure to financial risk and their lack of democratic accountability' (Spencer, Mullins & Walker 1994). In oUier words, they have become housing businesses whilst retaining some public sector chai-acterisUcs such as access to public subsidy, a mission to provide housing for tliose in housing need and regulaUon by the Housing Corporation. Associations, by law, are still not able to make profits yet are increasing adopUng private sector business practices, whilst at the same time following social objecUves. Housing Associations How they are organised and what they do - A case study of Sanc-ttiary Housing Associations Associations have gone through a rapid period of growUi since 1988, but this needs to be placed against a relaUvely low base figure (see table 1). 'ITiey have increasingly moved from rehabilitation work to providing new housing in rural areas or on in-fill sites in urijan areas, llie Housing Corporation in the period from 1989 to 1993 U-ansfeired a larger segment of public money available for new development to rural areas. Firstly, because Uie provision of low-cost rural housing was seen as a priority, in tenns of meeUng housing need, and secondly, because it was more cost effective to iDuild new housing raUier than refurl^ish older housing - more housing could be produced for the same amount of public funding. This has meant that some associations, especially the larger ones, moved out of the areas they traditionally worked in, as they were able to be compeUUve in terms of oiTering Uie lowest development cost for a given proportion of public subsidy. Sanctuary is one of (Jiese associations. no. 28, 29/1995 Introducing Sanctuary Housing Association Sanctuary was established in 1964 when it was known as the World of ft'operty Housing Trust. One of its founder members was involved in establishing two of the UK's lai'gest charities : Help the Aged and Oxfam. Hie initial growth of tlie association was slow, by 1975 it owned only 200 units of accommodation but following Uie 1974 Housing Act it underwent a rapid period of expansion helped by substantial quantities of public funding. By 1989 Sanctuaiy owned over 6.500 units of accommodation. In 1989 Sanctuaiy joined forces witli Spiral Housing Association who at the time managed 5.400 properties. ITie two associations merged in 1991. 'fhe reason behind tlie merger was to produce a housing association with a wider geographical spread and a stiong financial base to be able to atti'act continued public sector funding and also private sector funding. As a result of the merger Sanctuaiy is now active UiroughoutEngland with theexcep- Table 3: Vie Number of Hoiismg Units Managed and t/ie ToLcd HAG Allocation for Sanctuary Housing Association wid its Subsidiaries as at MarchSl, 1991-1995 As At March 31 Number of Units Managed Total HAG Allocation (£ millions) %of National HAG Budget 1992 16,161 43.8 2.8 % 1993 17,367 60.9 2.7 % 1994 19,146 45.2 2.5 % 1995 21,983* 50.6 3.3 % ' projected Source: Sanctuary Housing Association - unpublished information. Table 4: Sanctuary's Stock FYofUe UNITS 1993/94 TURNOVER Stock Number Percentage Amount (£ millions) Percentage General Rented Housing 11.332 59.2 % 20.710 50.4 % Sheltered Rented Housing 2.539 13.3% 8.461 20,6 % Other Home Ownership Special Needs 3.945 20.6 % 1.403 25.3 % Shared Ownership Schemes 1.330 6.9 % 1.516 37 % Total 19.146 100%» 41.090 100% Source: Sanctuary Housing Association - unpublished inforrriation. tion ofMerse3^ide. It is now working in partnership with 157 local authorities throughout the countiy (Annual Report 1993/94) and is now the sixth largest housing association in the UK in terms of units managed. As of March 13th 1994 Sanctuaiy managed 19,146 units of housing with a furtlier 2,801 units under development. Sanctuaiy's rate of gi'owth has been staggering. In 1994/95 it received the largest single allocation of housing association grant issued to any housing association in England, amounting to 3.3 % of the total funds allocated (see Table 3). Sanctuary had previously received the tliird largest allocation of grant in 1993/94. In addition. Sanctuary has also been involved in a series of innovative and successful private sector financings. An example of tliis is the raising of 75m dollai'S on the United States money market, the first association in tlie UK to bonow overseas. Tlie money raised will be used to support the current development programme and to pay off other existing loans. Table 3 illustrates Sanctuary's growth over a period of four years, and Table 4 its stock profile. As can be see by tliis latter table Sanctuaiy is active in a number of different aspects of housing provision. Sanctuary Housing Association as with other associations, must be registered under the Industrial and Pi-ovident Societies Act 1965 in order to qualify for recognition. In addition it is registered with the Housing Corporation which provides access to public sector funding. To comply with legal requirements it has to have a set of rules, by which it conducts its affairs. Sanctuary is also a registered charity with the charity commission and is unusual in so far as it does not have a subsidiary to imdertake non-charitable work. It undertakes all activities such as providing housing for shared ownership and selling development services through the main association. Other associations have created subsidiaries for this purpose. The management and overall dii-ec-tion of Sanctuary is the responsibility of voluntaiy committee members. Central Council is Uie control-Img body for Sanctuary, it is a nonexecutive supervisory board of 16 unpaid individuals who can offer the association skills and experience relevant to its work. Its prime role is to exercise overall control of Sanctuaiy's operations, fomiulate policies and ratify major decisions. A committee of Central Coimcil, chaired by tlie Honorary 'IVeasurer has delegated responsibility for financial control. Members ai-e elected to central council from divisional committees or through national election. Tliere are four divisional committees representing four regions - North, Midlands. Soutli East and Soutli and West, reflecting tlie operational management of the association m England. 'Hiese committees ai'e made up of representatives of area committees, of which there are neaily 30, located in local areas where Sanctuary has a strong presence. Day to day management of Uie association is delegated by Central Coiuicil to paid employees wor king for the Managing Director supported by a team of four Divisional Director-s and Uie Director of Finance. Each of the four divisions has a series of district and local offices responsilDle for local areas. The intentions of this decentralised structure is to grant local ofiices SLilIicient autonomy to manage properties effectively, identify growth opportimities and more generally keep costs down and develop a iirore competitive organisation. All matters relating to development, finance, internal audit, computing, personnel and housing are controlled from Sanctuary's head office in Hertford. The association employed approximately 730 people as at March 31st 1994. The Key Functions of the Association There are four key functions performed by all housing associations, though clearly their relative impor- št. 28,29/1995 tance and the extent to which they are undertaken can vary between associations. 1. Development - cleai'Iy the last six years has seen a rapid period of expansion for Sanctuary (see Table 3) and otlier associations witli sizeable development pi'o-grammes. Sanctuary is able to support de-velopnrent teams in each of its regional divisions who are responsible for ensuring a continuing flow of development work. Because of its size, Sanctuary is able to negotiate both discounts Willi building suppliers and builders, so helping to keep scheme costs down. Sanctuary also sells development services to otlier associations; for example, it has woi'ked witli black housing associations to help them achieve viability; with rural associations and in partnership with otlier associations and local housing associations. (Sanctuary Housing Annual Report 1993/94). Sanctuary is able to support its development activity tlirough access to housing association grants and its ability to raise private sector money. It Lises its property assets valued at approximately £ 600,000million to support these private sector ventures. However, as discussed earlier on in Ulis article, bidding for housing association grants is becoming increasingly competitive and the amount of housing association grants is decreasing and so the period of rapid grov^ is likely to come to an end in (lie next 5 years For some associations this may mean no furtlier development activity and a refocus to the management of housing stock, as they are unable to bid competitively, but for Sanctuary and other large stiategically placed associations, it is envisaged development will continue but at a lower rate and Willi decreasing amounts of housing association gran L . Housing Management and Maintenance Tliis is at Uie core of a housing associations business bu t is often no. 28, 29/1995 regarded as secondaiy to development activity. Cun-enUy, there is a debate al^ut tiie nature of housing management activity in the UK, initiated originally by the govemmenL The spur for this was the changing nature of housing association developments, an increasingly poorer tenant population, and the opportunities presented by the tendering proposals for local authority housing management (Spencer, Mullins and Walker 1994). A docLUiient produced by tlie National Federation of Housing As-sociaUons (1996) (the trade body forali registered housing associations) identifies two conti-asting views of the nature of housing management: - a property management view -maintaining the rental income stream and the capital value of stock assets, - a social service view - providing afibrdable homes, care services and support, advice and protection for tenants. There is a conflict here - the first model is svipported by the need for associations to meet the requirements of Iheir private fun-ders, in temis of meeting targets on numl:)ers of empty properties, rent arrears levels, and stock improvement whilst at tlie same time keeping costs low. Associations such as Sanctuaiy will set their own targets as pail of their overall business plan, which have to Ije made available to private lenders. 'Hie second model has occuiTed because: 1. With the changing composition of housing association tenants, more are likely to be unemployed and very poor. For example, 75 % of all Sanctuary's tenants receive some or all of tlieir rent in the fonn of Housing Benefit, a personal state subsidy to meet housing costs. 2. New developments, such as larger estates, with higher child densities and fewer social amenities, are often more difficult to manage. The development team of Sanctuary, for example, work closely with housing management stall on new developments so that, as far as possible, difficulties do notarise. This may be achieved Üirough mixing the dwelling size, taking care over the layout of estates, ensuring easy and safe access to local amenities, and providing a local housing management presence. 3. The impact of other changes such as the move towards providing care for people needing support (the mentally ill and the elderly) in the commmiity rather than institutions now needs to be addressed. For example, Sanctuary has a substantial proportion of sheltered housing for elderly people (see Table 4) and works in partnership with agencies such as the Loc^ Health Authority to provide residential care homes, and with otlier voluntary agencies to provide accommodation for the mentally ill and people with disabilities. It is likely that housing management will have more importance in future years, as development activities decline and housing associations concentrate more on the management of their stock and Uiose of oüier agencies for whom they may provide manage-mentservices. Some associations have already won large tenders to manage local authority housing stock, which have been put out to tender on a voluntary basis. Sanctuary is involved with this process where it is invited to participate by local authorities but oUierwise will not put in a spe-culative bid. Maintenance issues are also increasingly important. Associations are required to set up sinking funds for major repairs on schemes developed under the new mixed (public/private) funding regime. Older schemes may be eligible for funding from the Housing Corporation if they were built prior to 1988. In 1993/94 Sanctuary channelled £ 11 million into the improvement of existing housing stock. In addition to the cyclical maintenance programmes and major repairs grant from the Housing Corporation, Sanctuary št. 28, 29/1995 allocated £ 1.5 million from its own resources. This commitment to improving stock using boUi internal and external resources is an important part of Sanctuary's business plan. 3. Support Services Tliese generally comprise financial and personnel seivices, information technology and internal audit Sanctuaiy's head ofiice provides these semces to tlie divisions and areas. However, legal advice, advice on securing piTvate funding and external audit are usually purchasedfrom outside agencies and consultants. Monitoring and Regulation of Housing Associations Despite housing associations being independent of the statutoiy housing sector and being regarded as part ofUievoluntaiy sector, Uieyare subject to a considerable amount of regulation and control. Wliy is Ulis? Mainly because, since Uie 1974 Housing Act, tliey have been in receipt of large amounts of public funding for which they have had to account This task has been the responsibility of the Housing Corporation who, since 1964, has had statutoiy responsibility for regulating the activities of registered housing associations. It defines its mission as 'supporting social housing in England by working wiUi housing associations and others to provide good homes for Üiose in housing need'. lis key puipose is to ensui e that the public fuinds given to housing associations are used effectively and efficiently for the purposes for which they are provided ie., the provision of rented housing. This relationship remaiiied more or less unaltered until 1988. when housing associations were requii-ed to carry some of Uie fìnanciaJ risk involved in developing and managing housing. As discussed previously. this has led to some housing associations revising their approach with some becoming major commercial businesses. 'Hie Housing Corporation has therefore had to change its role too. and has identified three new aims ffhe Housing Corporation: llie Next lliree Years - 1994- 1997): 1.To ensure that housing associations comply wiÜi tlie range of requirements for providing social housing and that tliese are properly and tightly defmed; 2. To objectively assess perfonnan-ce against the reqiiirements on a regular basis; 3. To feed the outcome of tlie assessments into investment decisions. The overall intention of this new approach is to ensure tliat housing associations (Housing Coiporation, ibid): - manage Uieir afiairs economically, efilcienlly and eifeclively, making responsible use of public resources; - use their public fiuiding to fulfil tlie housing puiposes for which it was intended; - maintain good standards of management and delivery of services for their tenants: - preserve their reputation for sound managenientand financial sti-englh to enable them to continue to attract private investment in Social Housing. Since 1988, associations in England have invested over £ 8.5 billion of public funds and around £ 2.6 billion of pi-ivate sector funds to provide 190,000 homes. In total, housing associations now manage and maintain around 750,000 properties, housing over a million people. Housing associations have therefoi-e had to develop strategies to cope with bo til short-tenn risk in the management of theii- portfolio of loans and long tenn repair liabilities. To reflect these changes, tlie Corporation has reviewed its i-egulatoiy approach in the following ways; - the criteria for tlie registration of new housing associations has been tightened. Newly founded associations now need to demonstrate they can operate effectively witliin the new climate and that Uiey are social businesses from Uie slart; - housing associations annual ac-coLtnts are now reviewed and no. 28, 29/1995 analysed on a more rigorous basis; the quality and frequency of financial information generally available is being improved. Housing associations are now required to make quarterly financial returns to the Coiporation and funding decisions are made on the basis of the information provided and tlie perfonnance of the associations, the standards against which tlie overall perfonnance of associations are assessed is being refuied and tightened. New criteria were published in 1992 covering areas of committee and management control, financial control, housing management and the development process; a more rigorous and objective approach to the perfonnance auditing of associations is being developed, especially to draw out poor perfonnance; associations are strongly recommended to create internal systems of financial contiol which are regularly reviewed and aui-dited. This is primarily targeted at eliininating fraud and mismanagement. nie Corporation, through its regional offices, is seeking to evolve this approach further through a new system of perfonnance review introduced in 1994. This involves associations completing Tperfonnance standardsU criteria, certified by tlieir Committee of Management and submitting Uiem to tlie Housing Corporation for a 'desk-top' review, along with annual accounts and quarterly financial returns, against a range of indicators. 'Hie new procedures include Uie Housing Corporation: - visiting associations on a cyclical basis to validate the infonnation contained witliin perfonnance standards: - requiring associations to demonstrate effective committee and management control, and financial well-being: - seeking the views of tenants' organisations and local authorities when assessing tlie perfonnance of associations. 'Hie next few years are likely to see a consolidation of the Corporation's role as described above. But two changes are also being sought which would require new legislation. First the Coiporation is seeking the de-registration of smaller, non- developing associations such as alinhouses, who could be regulated purely by the Charity Commission. And secondly the Corporation is seeking to extend its regulatoiy powers to unregistered subsidiaries of registered housing assocations. Ulis new regulatoiy framework has therefore given increased responsibilities to the committees of associations. The first key standard witliin the perfonnance standards recjuires associations to "have a suitably skilled and representative committee which conü'ols. plans and oversees all aspects of the association's work in an effective and accoiuitable way". Housing association committee members come from varied backgrounds and with dilfer-ing reasons for becoming committee members - some members are elected tenant representatives, others are invited to become members because Üiey ai"e active tenants; some meml^ers represent local authorities or other voluntaiy agencies with whom the association may be working; others may be interested in and committed to the provision of social housing or those in housing need. Tliese skills may not always be representative of what is now required to manage tlie activities of a social housing business and increasingly associations are seeking to recruit members witli legal and financial skills; housing management and development skills are also rated highly. Tliere is increasing concern that the growth in housing association activity has not l:>een matched by a growth in skills of committee mem-l^rs. One reason cited for Ulis is because committee members cannot be paid for their services. Section 15 of the Housing Associations Act 1985 states that an association shall not make a payment or grant a benefit to committee members, with tlie exception of expenses, and št. 28, 29/1995 any interests in the association, such as a tenant committee member holding a tenancy with the association needs to be declared on an annual basis. This, it has been argued, may work against associations as they cannot 'buy in' useful and necessaiy expertise. Recently an enquiry has been initiated by the housing association movement, into the 'Governance' of housing associations. Issues being addressed are: payments for committee members; whetlier paid senior executive staff should be on management committees: and what the appropriate proportion of tenants on committees should be. These matters are being addressed as part of tlie wider issue of how social housing businesses should be conducted in the future. Should associations with stock valued at billions of pounds and with up to £ 30 million in reserves be governed by lay people? - that is at the crux of the matter. The enquiry has yet to report, but it seems that at this stage that there is no consensus view as to how associations might be governed in the futui-e. Views expressed range from the most fervent desire for association committee members to remain unpaid and to retain the vokmtary ethos of the movement, to those who feel that tlie time has come for a review to take place. Interestingly, the newer black associations are saying committee members should be paid as they are having difficulties in recruiting members with the business skills tliey need to survive and grow in size. But whatever the outcome of the enquiry, there will be some changes to the governance of housing associations, and it is anticipated that some of Uie lai-ger developing associations will become public limited corporations in the future. The Future for Housing Associations Before we examine Uie position of housing associations, say, in 5 years time, we need to establish where housing associations ai'e now. As- sociations have followed government policy and replaced declining grant rates with money borrowed from the commercial sector. TTiis has had four outcomes: 1. Rents have increased because of decreasing public funding and the need to pay off private sector loans. This has raised key issues of afibrdability. especially as tenants rehoused by associations are increasingly poor and more likely to be unemployed; 2. Because associations have borrowed against their assets ie., property, so collateral is being used up - it is anticipated that in five yeaj-s it will all have been Lised. Some smaller associations have not sufficient security now to raise money; 3. Some associations are using tlieir reseives to subsidise development programmes. But not all associations have substantial re- " serves and healthy balance sheets and generally there is reluctance to use reserves if it could affect an associationUs bon'ow-ing potential; 4. Competition for public funding is exti-emely tight, and associations are Linder pressure to bid at lower than grant nonns to win allocations. Potentially, this may affect tlie standards of new-build housing. In addition, as rents are increasing, so more people are being pushed into poverty; for example, it may be financially more advantageous for people not to be in paid employment, because, at present, as unemployed, their rents will be met in full by Housing Benefit. However, there is a fear tliat Uie government will put a 'ceiling' on Housing Benefit levels, by restiicting the amount of benefit they will pay against the rent of individual properties. For those housing associations with increasing numbers of tenants from tliose on full housing benelit, tliis has led to concern about Uie security of future income levels, and a recognition of Uieir vLilnerability to changes in government policy. no. 28, 29/1995 Because of these trends, in five years time, some housing asso(;iaUons may no longer be able to develop -so what options ai'e available to tliem? 1. Hiey can play a wider role in ui-ban regeneration initiatives in partnership with local auUiori-ties and otlier government sponsored schemes, such as Care in Uie Community, and local em-plojrment development programmes, where puiblic funding is likely to be channelled for social housing. 2. ITiey can concentrate on excelling in the economic management of rented housing and win competitions to take over tlie management of the remaining local authority housing, when it is put out to tenderin April 1996. But local housing autliorities themselves are seeking to win tliese contracts eitlier through putting in competitive bids tliemselves or by establishing - local housing companies, who could be used as the vehicle for buying uip stock, so releasing ftinds for furtlier local housing investment. 3. niey can build on existing specialist activities, such as working in closer partnership with Social Service and Health Au-tliorities to provide accommodation for 'vulnerable" people living in tlie community. 4. Associations can expand their activities in refurbishing existing property, such as ain-down local authority stock. (See accompanying ai'ticle by Pi-ofessor James Low). 5. Some of tlie larger associations may consider becoming housing developers, providing both subsidised and non-subsidised housing and competing witli private sector volume buiklers. 6. Smaller associations may need to fonn partnerships with developing associations so tliey can continue to address particular housing needs. 7. Mergers may l^ecome increasingly likely - such as larger as- sociations taking over smaller ones. This will enhance tlie asset base of Uie larger association. 8. Working more closely wiÜi local auUiorities not just in areas of regeneration and refurlDishment but also to meet housing need in local areas. 9. Some associations may become private companies which would enable them to operate in a more market orientated manner. 10.Associations could also concentrate more on tliose activities which assist more people into owrier-occupation, such as low-cost home ownership schemes and other schemes designed to enable association tenants to transfer to full ovmer- occupation. Associations are therefore considering their futures, in the realisation tliat tlieir 'developing' days may be over. But still at the heait of the movement is the mission to provide housing for those in housing need, and coupled witli associations' en-trepreneurialism a decline in their role is not anticipated. At the same time it is anticipated tliat tlie diversity of the housing association movement will increase over tlie next few years, as associations seek different roLites, survival for some and growüi for others (Spencer, MuDins & Walker 1994). But the need for social housing remains for those less well-off individuals unable to gain access to Üie owner-occupied sector and who cannot afford tlie higher rents in the private sector. For some politicians, the re-privatisation of housing associations is on Uie agenda (Spencer, MuUins & Walker 1994). This means maximising the output of dwellings for a lower public sector grant It has been suggested that making public subsidy available to private sector developei-s may make the competition for public resources more intense and produce better value for money in tenns of the number of units provided and unit cost. To some extent Ulis is a logical development as IdoÜi associations and private developers make use of private št. 28,29/1995 funds and they both operate under the same legal framework for determining rents and security of tenure. These scenarios makes the position of voluntaiy committee members uncertain. Is it right that association committees should remain unaccountable to the local community when associations are still receiving large amounts of public funding and working in close co-operation witli local authorities, from whom they may receive discounts for land purchased, in return for local auUiority nomination rights to the new accommodation provided. Association committees maybe required to have greater local political and tenant representation among their membership. Alternatively some larger housing associations may adopt the Board stjiicture associated with non-proßt or commercial organisations, as private lenders request a place on Boards. Greater diversification of the movement is therefore envisaged given these pressures, Spencer, Mullins & Walker 1994, argue, A major shift in ouUook is expected. Bibliography Cope, n.: Mousing AssociaUons: PüÜcy and Practice, Macmillan, Basingstoke 1990. Spencer, K., Mullins. Ü.. Walker, B.: Voluntary Housing - Today and Tomorrow, Scliool ofPublic Policy, The University of Birmingliam, Birmingliam 1994. Housing AssociaUons in 1993: An analysis of Uie annual statistica! survey, parts 1 and 2. Housing Corporation, Ix)n-don 1994. Perfonnance Standards for Housing AssociaUons, IIousing Corporation, l>on-don 1994. The next t]\i-ee years: llie Housing Cor-poraUons plans and prioriUcs 1994-1997, Housing CorpoiTiUon, London 1994. Valvie Added: A discussion about Housing Management, National FederaUon of Housing AssociaUons. London 1994. Sanctuary Housing Association: 1993/ 94 Annual Report Siinctuary Housing Association: Unpublished Repoils Whilst Uiere ai-e major uncertainties at the current Ume about what the future holds for associations in tenns of new patterns of organisation, working with other agencies, sources of funding, and changes in direction, few observers expect housing associations to go into a period of decline. However, Uie movement needs to establish a new role for itself, if it is to cease to become a tool of government and retain its independent status, so long held dear. iTie writer would like to thank Chris Withnall, Divisional Director, Midlands Division and Andrew Dench, Research and hifonnation OHlcerat Sanctuaiy Housing Association for their assistance in proving the information for this paper. Veronica Coatliam is a vokmtaiy committee member of Sanctuary Housing Association and meml>erof the Central Council Veronica Coatham, B.Sc., F.C.I.H., Head of the School of Housing, Faculty of the Built Environment, UCE Birmingham.