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March 24, 2020

Does size matter?

The issue of size is something of an obsession for me. I sit firmly in the Schumacher camp which extols the virtue of staying small. When things go wrong for an organisation it’s usually because it has gone for growth and lost touch with its purpose. It’s why I believe in the inherent value of the community based housing movement and am deeply suspicious of mega housing associations building ‘strategic partnerships’ with the wee guys. Housing consultant, Mark McLintock, went digging into the numbers in an attempt to bring some hard analysis to the ongoing debate.

Mark McLintock, MainStreet Consulting

After reading articles from Martin Armstrong and David Bookbinder about the relative merits of large and small housing associations, Mark McLintock from MainStreet Consulting carried out some analysis and details his findings.

MainStreet has worked with some big housing associations and some small housing associations. So we were very interested in recent articles in Scottish Housing News by Martin Armstrong, CEO of the Wheatley Group and David Bookbinder, Director of the Glasgow and West of Scotland Forum of Housing Associations regarding the optimum size of registered social landlords (RSLs).

If you missed the articles, Martin argued that size (in Wheatley’s case over 93,000 units) brought advantages.  He highlighted investment heft, provision of wraparound services, greater digital service delivery. Martin also stressed that, despite their size, they had a community focus through the operation of a ‘housing officer patch’ system, and local decision making.

David had a different perspective. He replied that smaller community-based associations enabled local decision making, achieved faster repair response times, had higher tenant satisfaction scores, and lower rents; and, importantly, acted as community anchors, particularly for other community groups.

Who is right?

We are continually struck by what we see in smaller RSLs. Documentation, such as their risk registers, frequently includes terms relating to staff capacity, governance burden, and regulatory intervention.

Perhaps coincidently, Scottish Housing News has brought us a steady stream of RSLs seeking a strategic partner. The recurring theme is that the status quo for some organisations is not an option, whether that’s as a result of governance failures, and/or regulatory intervention, departure of their CEO leading to a strategic review, or recognition that there may be better value for their tenants from partnering with a larger association. Over the last year, the following RSLs have either started or completed strategic partnerships:

Transferring RSL                                      Units                 Partner                                          Remarks

Dumfries & Galloway HP                      10,300        Wheatley Group                             Strategic review

Kendoon HA                                                318           Pineview HA                  CEO retiral options appraisal

Wishaw & District HA                               973                  Trust                                         SHR intervention

Pentland HA                                              483              Cairn HA                       CEO retiral options appraisal

Thistle HA                                                  947             Sanctuary Group                        SHR intervention

Kincardine Housing Co-op                         72              Grampian HA                            SHR intervention

Ore Valley HA                                           674               Kingdom HA                    Partner discussions ongoing

The average number of units owned by these organisations is 1967 but this is skewed by the very large DGHP – if it is removed, the average of all the other RSLs drops to 578 units.

This started us thinking, is there an optimum size for a Scottish RSL?  Is there a magic number? Are some RSLs just too small to be able to deal with being a regulated body?

To find out, we looked at the regulator’s data set for 2018/19 and discovered a few interesting numbers:

The average size of an RSL is just under 1600 units

Just over half (51%) of our RSLs have fewer than 1000 units

The average figure for ‘number of units per office based staff member’ across all Scottish RSLs is 56.2 (units) i.e. for every 56 units, the RSL has one staff member

There are 69 RSLs that have a higher than average ‘units per office based staff member’ ratio: of these 48 (70%) are RSLs that have fewer than 1000 units

Within all Scottish RSLs, the average percentage of tenants that were satisfied with the service they received was 90%

95 RSLs had a tenant satisfaction score that was above the average: of these, 66 (69%) had fewer than 1000 units, and 29 (31%) had more than 1000 units – interestingly, the six RSLs in the Wheatley Group (not including DGHP) had an average tenant satisfaction score of 91.4, above the national average.

Can we draw any conclusions from this (admittedly very crude) analysis?

The first thing to say is that the customer satisfaction data might actually support both Martin and David. It also suggests that whilst RSLs with fewer than 1000 units generally deliver a high level of tenant satisfaction, many of them also have a high number of units to each staff member, potentially highlighting staff capacity issues.

If this is becoming an issue, then there could be some tell-tale signs to look out for: staff burn out; high levels of staff turnover; increased reliance on external support; tenant satisfaction scores slipping; and, potentially, the emergence of governance issues.

Many RSLs could be suffering from sustained pressure on their staff. For those of us that sit on governing bodies, we have a duty of care to review urgently the extent to which officers are stretched. If this is a widespread issue, then the magic number won’t be anything to do with the minimum size of an RSL, it will be about the growing number of associations that are looking for a strategic partner to provide them a viable future.