Helping social landlords diversify safely

  • A growing number of social landlords are diversifying into commercial activities to generate extra income
  • Zurich Municipal’s research shows three-quarters are introducing new services
  • Our ‘New World of Risk: Embracing the Unknown’ report looks at the risks and rewards of trying a new venture

Political uncertainty, major welfare reforms and unprecedented financial pressures are leading increasing numbers of Registered Providers (RPs) of social housing to consider new business models and innovative ways of working, in order to meet the needs of their tenants.

Our ‘New World of Risk: Embracing the Unknown’ report on the social housing sector, shows that three out of four (76%) RPs are introducing new services to supplement their core role of providing social housing.

Richard Wood, Head of Housing and Health, Zurich Municipal, explains: “The appraisal and management of the new and existing risks arising from this diversification is crucial if RPs’ initiatives are to achieve their desired objectives, and deliver for the often vulnerable people that rely on their services.”

Substantial rewards

The rewards of diversification can be substantial. According to a 2014 report by Social Housing magazine, RPs are generating an estimated £2.3 billion from diversified activities, such as agricultural lettings, building homes for market rent, and leisure centre management.

The report revels that some groups are generating up to half their income from non-core activities, with one association bringing in the majority (53%) of its income in this way, driven largely by market sale and shared ownership sales.

Stockport Homes, an Arms-Length Management Organisation (ALMO) ranked as one of the top social landlords on a list compiled by 24housing and the Housing Quality Network, has diversified in a number of interesting ways, including fitting photovoltaic panels to bring in money from the feed-in tariff; running maintenance programmes for schools; collecting water charges and running a private sector lettings agency.

According to 24housing.co.uk: “Maximising income has meant it has been able to invest heavily in communities through, for example, its work and skills training programmes, its troubled families team and reaching out to every household affected by the bedroom tax.”

Additional benefits of diversifying

Our New World of Risk report concludes that diversification can produce additional income streams and potentially enhance an RP’s reputation within the community.

Before you commit to a new strategy consider the following:

  • Do you have the right leadership skills to support new ventures?
  • Do your staff have the capacity/expertise to match ambitions?
  • Do you have the scalable supply chain to achieve manageable growth?
  • How will you compete with rivals with more specialist experience?
  • Are you aware of the regulations and governance requirements when dealing with mergers or acquisitions?

The challenging financial environment in which social landlords operate is unlikely to change, and diversifying into commercial activities can provide necessary additional income. By carrying out a thorough appraisal of the new risks they are likely to be exposed to, and updating their risk- management strategies accordingly, RPs can take advantage of the opportunities that diversification offers.

Talk to Zurich Municipal about how we can support your business. Call or email us at info@zurichmunicipal.com to find out more.