Variations on a theme

Once upon a time, a housing association was a housing association was a housing association. Fairly staid organisations maybe, but reliable, efficient, and above all, simple. Quality accommodation at below market rent - what could be more straightforward than that?

Then came care and support, Housing Plus, regeneration, market renting, commercial services, student and nurses accommodation, call centres, group structures, PFI - and the story line drastically changed.

Now, with changes in the permissible activities of associations and a new Housing Corporation regulatory framework in the offing, it's likely the next chapter will go even further, featuring more anti-crime schemes, personal finance services and retail activities. for such a fundamental development in the sector there is a remarkable lack of hard figures. There is no real information on how many associations are doing it, how far they are going, or even an agreed definition on what constitutes diversification.

Julian Ashby, director of HACAS consultancy which is undertaking an ongoing study on diversification for the Housing Corporation, sees two driving forces behind the process.

He says: "One, the mainstream traditional SHG-funded rented programme is slowing down and therefore associations are looking at how they can continue to grow without SHG and that inevitably forces them to look into other areas. The second driver is the regeneration/New Deal agenda, which is not primarily focused on housing, but housing associations are potentially very strong partners within that area and have a very important role to play. But it's not going to be a social housing role."

Certainly there are many routes into diversification for associations. Swaythling housing association in Southampton got into market renting last year when its 40-unit Tasman Court in the Ocean Village development in the city's marina proved difficult to let to social tenants.

According to chief executive Ann Santry the scheme did not work well despite its desirable location as it was too far from shops, transport and facilities.

Santry says: "We looked at it and said "there's a problem in terms of voids, is there an alternative use?" And its location in the marina meant there was quite a large private market there. Now it certainly has higher occupancy than it did when it was social housing." Crucially, the income comes back and goes into subsidising other schemes. "Its only been up and running for a few months but in the fullness of time it should make a significant contribution to running costs," she says.

Another growing area of diversification is partnership deals to provide accommodation for students and hospital key workers. This is regarded in the sector as a low-risk venture as the university or health trust can guarantee high long-term occupancy rates.

At the other end of the technological scale, telephone-based support systems for the elderly such as those operated by Magna housing association are popular with residential homes, tenants and non-tenants alike. One or two associations have even considered development on the continent.

But how far can an association go down this route? Housing Corporation deputy chief executive Simon Dow has some clear ideas - no more than one third of its turnover should come from diversified operations.

He explains: "We believe that RSLs should predominantly be social landlords. I would say two thirds, or at least between 66 and 75 per cent measured in terms of turnover, number of staff or capital employed. If an association was 90 per cent job creation we would say that's fine but you are no longer by any stretch of the imagination a social landlord - you are a training agency that happens to have some homes, and you should not be regulated by us," he says.

"Diversification must be for a purpose," he says, "and that is to reinforce the housing in the communities where you are building. Problems start to occur at the point at which you are doing more of the reinforcing than you are of the housing."

And problems do arise - witness the corporation's investigation into English Churches housing group about aspects of a deal involving Birmingham Children's Hospital (Housing Today, 28 January).

For Dow, problems take two forms - inexperience and the effect on core activities. "Firstly people don't know about the business they are moving into and secondly even if they do, they take their management eye off the ball. Consequently they are out there diversifying and the main part of the business is losing management control and concentration," he says.

However, Dow is careful not to equate diversification with risk. He points out that expansion in general needs social housing - such as a transfer - can be equally, if not more, risky than diversification if it is not undertaken properly. This is why risk management is so important, he maintains.

So the extent of diversification within associations is clear. But how far can it go in terms of areas of activity? If the criteria is that the new venture "reinforces local communities" then couldn't this be stretched to meet just about any venture, especially if the profits were used to subsidise housing?

Richard Clark, chief executive at Focus Housing, which has diversified widely into training, employment and community services in the West Midlands draws a distinction between "delivering" and "enabling" services. you are talking about the things we want to make happen around the areas where we work then we need to go very wide and link in to all kinds of partnerships in an enabling role. If you are talking about direct provision you need to build out from your base and be more cautious," he says.

For Clark, the limits of diversification are quite clear. "The new activity has to flow naturally from an association's core work. If you are redeveloping an area and what's needed is a health facility an association might be a natural body to build it - it's an extension of what you are doing. it's property-based, redevelopment-based and its services are linked directly related to housing."

Diversification then is seen by many in social housing as a powerful weapon for attacking social exclusion - but one with definable limits that needs to handled carefully.

As Julian Ashby says: "Diversification may not be traditional but it does have considerable social value. It then becomes a matter of how it is described, regulated, encouraged or discouraged, and that goes to the heart of the debate that is going on about housing association activity in the longer term - a debate which needs to come up with the answers to those questions."

Then, perhaps, housing associations will be able to live happily ever after.