Institutional logics and organisational hybridity: English housing associations’ diversification into the private rented sector

Abstract

State withdrawal combined with challenges in raising private finance has led not-for-profit housing organisations in a range of countries to diversify into commercial activities as means to generate additional income streams and cross subsidise their core social operations. Within England, an increasing number of housing associations (HAs) has looked for new forms of investment, notably from private rental housing, to generate additional cash flows and fill gaps in the housing market. Drawing on the concepts of institutional logics and organisational hybridity, the paper uses organisational archetypes to examine the different hybrid financing, governance structures and housing products that two pioneering London-based HAs have employed to undertake private rental activities alongside their social businesses. The paper argues that the trends identified are indicative of wider institutional change, with not-for-profit housing organisations facing difficult strategic choices about how to fund their core business in a world of lower public subsidy and uncertainty over future sources of private finance.

Keywords:

• Social housing
• housing investment
• private rented housing

Acknowledgements

I would like to thank the senior executive teams and Board members of Notting Hill Housing Trust and Thames Valley Housing associations, Dr Tony Manzi at Westminster University and the anonymous referees for their constructive feedback on earlier drafts. The usual disclaimers apply.

Notes

1 Since 1996, not-for-profit housing organisations in England were termed Registered Social Landlords and subsequently Registered Providers, under the provisions of the Housing and Regenerations Act 2008. For the purposes of this paper, the generic term housing associations will be used.

2 Under the Australian national affordable housing agreement (NAHA), funding to the social housing sector has been substantially cut since the mid 1990s (Australian Government, 2014).

3 In 1995, Dutch HAs were granted financial independence following the ‘Brutering’ (Gross and Balancing Agreement) whereby state subsidies were substantially withdrawn. Following European Commission Directives and a Dutch Parliamentary Inquiry in (2014) into their activities, HAs are now legally obliged to separate social and commercial activities (i.e. non-services of general economic interest) and ‘focus more on core tasks’ (p. 19) (Ministry of Economic Affairs, 2014).

4 Hybrid organisations denote those that have significant characteristics of more than one sector—public, private and third, in which their roots primarily adhere to the distinctive principles of one of them (Billis, 2010).

5 Government capital grant allocations were reduced from previously £8.8 bn to $4.4 bn in the HCA’s 2010–2014 Affordable Homes programme and to £1.7 bn in the 2015–2018 programme (HCA, 2015c).

6 The number of affordable rent units has significantly increased year on year, by 103% from 37,755 to 76,643 units in England and from 5047 to 10,330 units in London between 2013 and 2014, with this trend set to continue (HCA, 2014b).

7 As of April 2013, annual housing benefits have been capped for working aged households to £26,000 with further reduction to £23,000 by April 2016 (HM Treasury, 2015).

8 HCA ‘The Regulatory Framework for Social Housing in England’ (2012) Governance Element para.1.4 states that non-regulated vehicles should not prejudice activities of regulated providers. HCA ‘Regulating the Standards’ (2014a) para 5.1 sets out a more explicit expectation that regulated parents ensure their non-regulated subsidiaries do not create excessive risk to regulated assets—there is therefore indirect accountability imposed on unregistered vehicles.

9 Fizzy Services Management Company sits alongside Fizzy Living Joint Venture, undertaking its asset management, development services and property management for a fee from Silver Arrow. It also receives a performance fee which incentivises TVH to grow this commercial subsidiary (Stephen, 2014).