David Hucker explains why Orbit and English Churches decided against a large-scale swap
The news that Orbit Housing Association and English Churches Housing Group were considering exchanging some 1,000 properties each across the Midlands and the south west caused considerable interest among both housing associations and local authorities.

In the end, the exchange did not come off. What were the problems?

Although we had successfully completed smaller swaps in the past, we had not attempted anything on this scale and were in uncharted waters.

The plan had been that Orbit would withdraw completely from the south west, apart from the Cotswold council area, while ECHG would have left the Midlands.

The idea started with our three-year strategic plan, which contains an objective to “establish an asset management strategy aimed at rationalisation of our stock (in terms of both operational areas and stock type) to ensure that we can make an effective contribution to local housing strategies.”

Asset management is the range of activities undertaken to ensure that the housing stock will meet needs and condition standards into the future, in the most efficient way.

For most of us, it has been largely based on the assumption that the existing stock will be retained. But current thinking is that this static position needs to be replaced by a more dynamic approach.

Housing associations need to consider changing their asset base to ensure that it comprises well-located, good quality, affordable housing that meets current and future demand patterns and protects investment.

It is sometimes difficult to make informed asset management decisions, particularly where there are issues of mixed tenure, the presence of a number of social housing providers and political pressures.

It is also clear that associations struggle to determine a clear policy direction for asset management decisions when there is a conflict, for example, between short-term and long-term economic returns, or between business strategies that involve investment in the value of assets in more popular neighbourhoods, and a commitment not to abandon areas of traditional operation.

There may also be a desire to remain a preferred partner of a local authority, and pressure to continue investment in stock that will produce no tangible return.

Notwithstanding these problems, there are a number of internal and external factors that are pushing Orbit towards the development of an effective strategy.

The key ones are probably: the need to contain management costs, lettability and demand issues in some areas, wide geographic spread and too many local authorities with which to maintain relations.

There is also the need to release resources to fund growth plans, and to be able to contribute to regeneration and community development agendas and initiatives from the housing green paper.

All of these factors point to the need for a more dynamic approach to portfolio holding.

The key decisions are: A what type of housing do we see as our core business?

> where should it be located?

> how do we provide a cost-effective and high quality service to customers?

> who drives the growth in the business?

Among the issues that make stock swaps attractive, the greatest is probably geographical spread.

This is not the problem it once was, as more than 90 per cent of contact now comes through our 24-hour customer services centre, which handles 500,000 calls a year.

But there are still major costs and few benefits in Orbit trying to deal with 130 local authorities.

For each council, significant work is required from Orbit on waiting list and housing benefit administration, customer service and day-to-day liaison on right to buy. Orbit must also give input into 130 housing strategies, Best Value reviews and debates on sustaining communities.

If stock swaps are a good idea, what is it that stops them happening?

Firstly, housing associations often have little in common apart from their name. They have different origins, different stock profiles and different financial strengths. Finding the ideal swap partner is not easy.

Secondly, rent restructuring makes us think about where we are working in terms of values and income levels.

Do we swap property in areas with buoyant housing markets and prosperous local economies for others where unemployment is rising and house prices are falling? Having a geographically spread portfolio helps to minimise risk to the balance sheet.

Thirdly, the Supporting People agenda makes us nervous about increasing our exposure to this market. Is this a business risk, as we fear, or a business opportunity?

Fourthly, the people dimension cannot be underestimated. Significant numbers of colleagues would move from one organisation to another. Issues of culture, ways of working and harmonising terms and conditions of service all need addressing.

Fifthly, evaluating large stock swaps is incredibly time consuming and involves a lot of people.

For example, there was a difference in the swap portfolios as our stock was predominately new-build general needs housing, while that of ECHG involved about 20 per cent sheltered and supported housing, plus a key-worker scheme in Birmingham.

We appointed a project manager to steer us through the evaluation. But the scheme visits, risk assessments and financial modelling were all carried out by already busy people. We still have to do the ‘day job’ and deliver services to our customers.

Orbit can retain ownership and provide a good service for the bulk of the south west stock, which is within easy reach of the Bristol office, but we need to look at the outlying schemes to see how best to respond in light of the failure of the English Churches deal.

Having been through this experience, we still want to try again, but it would have to be on a smaller scale.

David Hucker is chief executive of Orbit Housing Group..