It is clear that the housing sector is facing uncertain times. The only certainty is that more will change. Housing providers are starting on a challenging journey of transformation. This is now is a prime time for providers to think about other ways they can increase income without relying solely on their core activities.

These activities go beyond providing affordable housing. Diversification is nothing new, housing associations have had diversification initiatives for some time, created to protect tenants, strengthen housing communities and support social objectives.

Research certainly suggests that more housing providers are getting involved in these sorts of activities than ever before. Many have made a conscious decision to expand and increase their involvement in community-based initiatives such as employment and skills to help tenants find work. There is a growing interest in services for wellbeing, acute care and public health particularly for the elderly enabling hospital discharges or preventing hospital admissions.

These activities have already been identified by housing associations because of the positive impact they have on the communities in which they currently operate. By contributing to the health and wellbeing of their tenants and in turn contributing to the stability of the neighbourhood which helps to maintain the value of properties and helps to control the management costs.

Many of these are specific diversification projects and form part of a wider business strategy. Others have grown more organically as the resources of the housing associations are called on more and more with housing officers seeing their roles expanding to address social care needs, alcohol and substance misuse and mental health issues due to the cutbacks in statutory services. Previously housing officers have signposted people to resources; now they are providing support directly or through partnerships to help sustain tenancies.

Housing providers rely on information from their employees on the issues that affect their communities, and there is rarely budget for formal research, so the approach to diversifying and the projects associations take on needs to be influenced by the employees who have direct contact with the local community. These are the people who are best placed to identify the issues where a direct provision, commercial arrangement or partnership may be able to add value and impact social objectives.

The areas of work include support for tenants who have been homeless, recent offenders, drug rehabilitation and troubled families or community-based initiatives like youth groups or activities for the elderly. At first glance, it may not be clear why associations should get involved in these efforts, but the need to sustain tenancies, the increase in housing management and neighbourhood management costs if these activities are not in place is a big driver  for many housing associations.

For further revenue streams, providers are looking at, and running pilot schemes in care services, including care homes, hospital admittance prevention and domiciliary care as this is an opportunity to generate additional income where an existing tenant needs change and cannot be met within the general stock.

Diversifying from core services is one approach; another is to secure services that would be of benefit to their tenants or the local community by enabling charitable or social enterprise organisations to provide their services directly to tenants. These can be the start of a more formal partnership, but start out as an informal arrangement providing benefit to sustain tenants and help build the community and local neighbourhood. 

Potential risks

As with any change, there is an element of risk. By diversifying into non-core activities, housing associations need to be aware and understand the risks that apply to them, including strategic, operational, financial and governance.  It needs to be a major part of the strategy to identify and manage the risks from the outset.

Legal

It’s important to remember diversification can require a new business structure or might affect the provider’s   status if it is charitable. If an association acquires a business, forms a joint venture or adds an enterprise to its group, it will need the right legal advice to look at its contractual, constitutional and general governance arrangements. This is all part of the stress testing that associations are expected to carry out to ensure that any risks taken are properly assessed and understood and that decisions are taken with that in mind

There’s no doubt that diversified ways of working can offer housing providers additional income with services that benefit their tenants and communities.

The key is ensuring there is a valid strategy in place that looks at the needs, benefits and the funding available to get the ideas off the ground and properly analyses the risks involved in order to benefit the tenants, community and the housing provider in a positive but measured way.

About the author

Andrew Dudley Partner

Andrew provides governance, stock transfer and all forms of property advice to Registered Providers.