The takeover of Gallagher Estates (a land promoter) by the large housing association, L&Q is a pretty dramatic signal of a fundamental shift in the (previously) non-profit housing sector. A trend towards ‘commercialisation’ among housing associations has been noticeable for a few years. In 2015, Tom Murtha in the Guardian argued that this was part of a deliberate profit driven strategy by some of the large housing associations.
Adam Challis, head of residential research at JLL, is positive about the L&Q deal.
A really exciting development for efforts to boost housing supply. They are effectively turning themselves into a multi-tenure developer. Getting hold of Gallagher Estates is a way of getting hold of oven-ready strategic sites. It’s about getting access to a pretty extraordinary development pipeline. It shows that L&Q are very serious about ratcheting up their rate of delivery.
Apparently his view is that that big housing associations are in a stronger position than volume house builders to carry out an acquisition like Gallagher because they had stronger balance sheets and so could raise debt at cheaper rates.
Having emphasised the raw capitalist nature of the land promotion business yesterday, it’s difficult to see how cultures, ethos, skillsets etc. of housing associations and land promoters could be a good fit unless the ethos, cultures etc. of housing associations is changing or is expected to change.
It reminds me of the experience of the Dutch non-profit housing providers over a decade ago which , in turn, reminds me of the furore of the ‘fatcats’ in previously state owned UK utilities awarding themselves huge pay rises following privatisation.
In the Netherlands, as the Dutch housing associations used implicit and explicit state guarantees to become large scale developers of market housing, there were a series of critical headlines over high executive salaries, Maserati-driving CEOs and golden handshakes. In the Netherlands, the non-profit providers seem to morph into conventional profit-driven volume housebuilders whilst (at least temporarily) retaining the image, goodwill and government support given to non-profit developers. It didn’t end well there.