Friend or foe?
Can for-profit housing providers be compatible with the traditional ethos of social housing?
STRATEGY
Image: Istock
Francesca Stanyer
Policy and Research Team Manager, Campbell Tickell
Each month there seems to be a new article in the housing media about companies setting up a For-Profit Registered Provider (FPRP) with the Regulator of Social Housing. A recent development has seen more traditional housing associations, such as Hyde Group, join the new market entrants in setting up an FPRP.
So why the hype? Articles written about FPRPs are often sceptical about the business model, with concerns expressed around profit being generated for shareholders as opposed to being reinvested in the affordable housing sector. Some commentary has also suggested that the for-profit status may negatively impact the charitable reputation of traditional housing associations, with an accompanying call for caution.
In numbers: For-Profit Registered Providers
64
For-Profit Registered Providers in 2022, compared with 31 in 2017
20,000
homes owned by FPRPs - this is expected to grow to 140,000 by 2027, worth £26.8 billion
66%
of existing FRPR stock is low-cost homeownership
91%
of existing stock is owned by large providers (more than 500 homes)
Source: Savills Spotlight: Equity investment in affordable housing
Opportunity knocks
How justified are these concerns? Politicians, academics, and housing professionals agree that the country needs more affordable homes.
FPRPs bring new funding and are increasingly developing their own homes, and not just bidding for section 106 purchases alongside housing associations. There is therefore a strong argument that the housing sector should welcome opportunities and new ways to increase the number of affordable homes that FPRPs bring.
Additionally, new entrants bring new ideas and ways of working to improve services to customers and become more efficient. This is attractive to existing, traditional housing providers facing an ever-increasing list of deliverables and fewer resources to meet these demands.
Image: Istock
Questions remain
Yet the question remains around social purpose and the extent to which that is compatible with a profit motive. Some academic literature argues that individuals’ motivation changes when private sector models and ways of working – such as performance-related pay and hard targets – are introduced. To explore this issue further, I undertook research with a number of people across the social housing sector, as well as providers through traditional housing associations and FPRPs.
The research set out to ask what impact the rise of FPRPs would have on the affordable housing sector beyond the delivery of new homes? To what extent might new entrants – with seemingly competing priorities of profit and social purpose – jeopardise what it means to be a social housing landlord. Do the benefits of the opportunity for existing providers to innovate and improve resident services outweigh the potential costs?
Findings of the research include:
01
There is an opportunity for existing housing providers to learn new ways of providing services to meet residents’ needs and expectations.
02
Traditional housing associations are open to the growth of FPRPs and are actively examining their approach. For some, FPRPs can help existing housing associations balance the expected deliverables between net zero, retrofitting, meeting housing targets and improving consumer standards.
03
FPRPs consistently set a high bar on excellent customer service. This is reflected in KPIs and in questions from shareholders.
04
FPRPs have the potential to increase supply of affordable housing, particularly through working with existing housing associations and joint ventures. New entrants have also demonstrated a route for equity investment into the sector.
Friend or foe?
So, what is the conclusion – are FPRPs friend or foe? Clearly it is not possible to brand all FPRPs as incompatible with the core ethos of social housing. It would be too simple to conclude that it is inherently bad for your purpose to be generating profit for shareholders. Rather, much like already exists in the sector now, some FPRPs will be more principled than others.
This leads to question of whether it matters if the motivation for providing good customer service is moral or a profit, if the output is the same?
What was clear from the research was that it is possible to have two motivational drivers at once. As one interviewee said, they haven’t lost their drive for wanting to be a good social landlord just because they now work in a for-profit. What they do have is new and innovative ways to be a good social landlord and want to share this with the wider sector.
“It would be too simple to conclude that it is inherently bad for your purpose to be generating profit for shareholders.”
