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What is behind the merger?
There is an awful lot happening in the housing operating environment right now in relation to cost pressures. We’re seeing a big increase in build costs – I think build costs are outstripping headline inflation at the moment. We’re seeing costs rising between 8 and 15% on fixed-price contracts.
The drivers behind the merger are that this is a more challenging operating environment, of which inflation is just one element.
There are the challenges of building safety. There’s also net zero carbon [targets], achieving EPC C by 2030 and decarbonisation by 2050.
We believe that by coming together, we can be a stronger and more resilient organisation. We believe that by investing in scale, we can do the best job. We can improve the way that we invest in our homes and look to potentially accelerate our programmes.
“This merger isn’t about geographical growth – it is about focusing on resident services and investment in existing homes”
We’ll be the largest housing association in Kent with over 10,000 homes, we’ll be the largest housing association in Sussex with more than 13,000 homes and one of the biggest in London with over 33,000 homes.
We’ll be a really substantial housing association within certain geographies.
We believe that presents a great opportunity to have different kinds of conversations with public sector partners in order that we can make sure that our investment in those geographies delivers as positive outcomes as possible for our residents and for people in housing need.
It’s that combination of a more uncertain, more challenging operating environment, rising costs, and the benefits of coming together to form a very local, but larger housing association.
There are some critics who say that when an organisation gets bigger it moves further away from tenants. What would you say about that?
This is a different kind of merger from many other large mergers we’ve seen. This is very much about consolidating around existing footprint rather than about geographical expansion.
We’ve been working alongside each other, Southern and Optivo, for decades. This has been in the same communities, dealing with the same local authority partners, and we believe that by coming together we’ll create a denser footprint.
So we’ll be doing even more within the places that we already work in. That densification, that concentration of activity, and having more of our people working in those local areas means that we can provide even better services for local residents.
This merger isn’t about geographical growth – it is about focusing on resident services and investment in existing homes.
So there are no plans to expand into different areas of England?
Definitely not, this is very much about focusing on the areas where we are already strong, becoming an even stronger and even better landlord and partner in those areas for the benefit of our residents and people that need a home.
What are your development plans?
The new organisation will be building around the same number of homes that we currently build. But I think over the next couple of years we will be very circumspect about how much we are developing.
If costs continue rising as they have been, given that grant rates are fixed, what we don’t want to do is be in a situation where our costs are escalating but grant levels remain static.
That will mean having different conversations with grant bodies, Homes England and the Greater London Authority, but also looking at our overall commitment.
However, by coming together, we believe we can do bigger and better developments and different kinds of developments.
“We are going to be investing much more in our people, in developing our workforce and looking at growing our own workforce”
And we do see numbers expanding as we go beyond this next couple of years into what we hope might be a better economic environment.
What we’ll be doing over the next couple of years is looking at land acquisitions, looking at option agreements, in order that we can assemble much more of a land-led development pipeline.
In the past Optivo has been more dependent on package deals and Section 106 and Southern has been more land-led.
The benefits of that mean that we have more control and that we can focus more on service charge affordability, which is a really important issue for residents.
We can focus on the quality and design of our developments. As a bigger organisation we want to develop bigger schemes that will reflect our placemaking aspirations, in order that we’re building places that will be genuinely sustainable into the future in terms of their environmental performance and their social mix, and their economic performance.
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