Social Housing: Made Mutual By Cliff Mills and Gareth Swarbrick About Mutuo 1 Social Housing: Made Mutual Since 2001, Mutuo has worked to promote new mutuals. This has led to renewed growth in the mutual sector, with public sector mutuals established in health, housing and education and new community based businesses ranging from football to childcare. • Mutuo operates as a not-for-profit Society, committed to: • Campaigning for a better understanding of the benefits of mutual businesses • Conducting and publishing policy research on issues of importance to the mutual sector • Developing innovative new mutual businesses for the delivery of public services Acknowledgement The authors would like to thank Rochdale Boroughwide Housing Chair, Noel Chambers, for his input and comments on the document and to all the employees and tenants who have played their part in the RBH journey so far. Published by Mutuo c/o Westminster Bridge Partnership Ltd Kinetic Centre Theobald Street Borehamwood WD6 4PJ Tel: 0208 387 1256 Fax: 0208 387 1264 E-mail: enquiries@mutuo.co.uk www.mutuo.co.uk ISBN 0-9549161-2-3 October 2011 This pamphlet represents the authors’ interpretations of the subject, not the collective view of the publishers. This pamphlet, or any part of it, may not be reproduced without permission of the publishers. Contents Social Housing: Made Mutual 1 Foreword .......................................................................................................................3 2 Executive Summary .................................................................................................... 4 3 Social Housing: Made Mutual ....................................................................................5 3.1 Introduction ............................................................................................................5 3.2 Challenges .............................................................................................................. 8 3.3 An alternative option: Rochdale Boroughwide Housing Mutual .............. 12 4 Rochdale Boroughwide Housing: the vision for the future .............................. 17 5 About the authors ..................................................................................................... 22 2 “But the success of co-operatives is not simply a phenomenon to be admired for its impressive history. We should not forget that those original 28 weavers were the social and business innovators of their day” 1 Foreword 3 Social Housing: Made Mutual People know Rochdale for its proud heritage as the Council’s decision to support the creation of the next home of the co-operative movement. generation housing body for Rochdale – a mutual that engages both tenants and employees. From the original 28 Rochdale Pioneers, co-operatives globally now account for over 800 million members, At the heart of this is a desire to develop a with more than 100 million employees. These co- relationship between managers and citizens that operatives play an important role in the economic and encourages mutual respect and a shared purpose. By social development of countries around the world; the establishing a new mutual for RBH, we will be able to United Nations estimates that nearly 3 billion lives hard-wire the rights and responsibilities that we know were made secure by co-operative enterprises. our people both want and deserve. But the success of co-operatives is not simply a We will be able to capture the inherent solidarity of phenomenon to be admired for its impressive history. ordinary people, both tenants and workers, who are We should not forget that those original 28 weavers bound together by their shared community. The were the social and business innovators of their day. new mutual will blend together the best features of tenant and employee engagement to create a unique They saw a problem and designed a solution around the and progressive way of delivering high quality social people that it mattered to. In their case, it was access housing services. to affordable and safe food. Today, the challenges are different, but the solutions have a lot in common. I believe that the work carried out in Rochdale will be of major significance to local authorities that are seeking Rochdale Council originally created Rochdale new ways to co-produce their services with communities Boroughwide Housing (RBH) as an Arms Length and staff. Its importance will go way beyond housing Management Organisation (ALMO) in order to and will be of great interest to those who are seeking to continue the Council’s focus on providing high quality develop more co-operative council services. housing services to the people of Rochdale. The high tenant and employee satisfaction levels achieved Rochdale has long been celebrated as a place of today, point to the success of RBH as a valued part of innovation and I am proud that this generation of our local life, and we should all recognise that it is a Rochdale people has such an opportunity to lead the strong and respected body. development of new people-based public services. I believe that the Pioneers would have approved. But institutions are merely the vehicles for our aspirations and not an end in themselves. The future Colin Lambert challenges of housing finance and the ever-growing Leader, Rochdale Metropolitan Borough Council need to design services that retain the confidence of the people that they serve, are key factors in the 2 Executive summary Social Housing: Made Mutual 4 Over recent months, RBH has been working with interests, those responsible for delivering services are tenants and employees to develop a new ownership directly accountable to those most affected by them. and governance model for the future of council housing in Rochdale. This new co-operative or collaborative approach, which is consistent with the co-regulatory approach The vision is based on co-ownership, with tenants and followed by the Tenant Services Authority, has employees as members, to build into the fabric of the the potential to break down binary or dualistic organisation a sense of shared priorities and working relationships, and to get people, bodies and agencies together. working together much more effectively for the benefit of the community. It also forms a new basis for This concept emerged from the deliberations of an collaborative working with the Council itself. Investment and Involvement Commission set up by Rochdale Metropolitan Borough Council in 2009 to It is a model which other ALMOs may be interested examine the future options for the Council’s housing in exploring. For the reasons discussed below, it may stock. The final recommendation of the Commission also be a model which existing housing associations was to transfer the housing stock, which is currently would like to explore. owned by the Council and managed by RBH as an arms-length management organisation, to a new mutual model co-owned by tenants and employees. It saw this as the best way to secure long-term financial sustainability and to give tenants and employees a stronger sense of ownership in providing high quality housing service for the future. The transfer is subject to the approval of the tenants in a ballot and final Council and Ministerial consent. This approach is put forward as a new form of public ownership. It is a community benefit society (industrial and provident society) with a legal commitment to public purpose, and retention of any surplus for the benefit of the community. Through democratic governance arrangements involving tenants, employees, the Council and other key local “There are 1.8 million local authority owned homes in England - about 40% of the total number of social rented homes.” 3 Social Housing: Made Mutual 5 Social Housing: Made Mutual 3.1 Introduction In England almost 1 in 5 homes are in the social housing sector. “Social housing” is the term used today to describe a sector which essentially comprises housing owned by councils and by housing associations. It provides an alternative to private ownership of homes, or the privately-rented market. There are 1.8 million local authority owned homes in England - about 40% of the total number of social rented homes. Of these, approximately 800,000 are managed by local authority owned arm’s length management organisations (“ALMOs”) under contractual arrangements. A further 2.5 million homes are owned and managed by housing associations. As with other core public services such as health and education, the origins of social housing can be traced back to voluntary and philanthropic origins. Early examples of this were almshouses, which were provided for “poor, old and distressed folk”. In the nineteenth century, the industrial revolution and the associated migration of workers from a rural to urban environment created severe housing problems. The work of philanthropists who built villages or towns for their workers, such as New Lanark, Saltaire, Bournville and Port Sunlight, aimed to alleviate these problems. Unlike other core public services however, social housing was not part of the post-War welfare state settlement. “Council housing” began in the late nineteenth century, following the Housing of the Working Classes Act 1890, which encouraged local authorities to improve housing in their areas. This became an obligation for councils after the First World War, when the poor physical health of urban recruits had raised concerns, and led to the campaign known as “Homes fit for heroes”. Nearly 4 million homes were destroyed in the Second World War, and although significant building of urban accommodation took place between the wars, this accelerated after 1945 to repair bomb damage, clear slums and undertake substantial redevelopment and the building of council estates. It was during this period that legislation removed the reference to providing housing for the working class, and introduced the concept of meeting general needs. The following decades saw a range of styles and types of construction, including semi-detached, terraced, tenement (particularly in Scotland) and high rise, as both Conservative and Labour governments sought to provide as much new housing as possible. This was secured by providing subsidies to local authorities, and council housing was in its heyday. There were two substantial changes in the final two decades of the twentieth century, which started the decline of council housing. First, the Thatcher government, as part of its aim to develop individual financial security and independence, encouraged the aspiration towards home ownership, and in 1980 introduced the Right to Buy scheme. This enabled tenants to buy their homes at a significant discount, and has resulted in over 3.3 million properties in Social Housing: Made Mutual 6 England transferring out of the social housing sector which were registered with and supervised by the into private ownership. Housing Corporation, which was itself appointed by government. For registration, housing associations The second major change concerned the financing needed to comply with the Corporation’s requirements of social housing. Restrictions were introduced on (amongst other things) as to independence, and a the ability of councils to subsidise housing from local commitment to social purpose. taxes. Earlier legislation in 1974 had already provided a favourable grant regime for housing associations, These developments created a mechanism whereby which encouraged significant development by housing government could provide financial incentives to associations. The Housing Act 1988 took this a stage encourage the transfer of dwellings out of local further by replacing government funding with private authority ownership (which the Conservative sector funding. These legislative changes encouraged government at the time was keen to do) into a form the emergence of housing associations, at the of ownership which was not directly controlled by expense of council housing. the state, but was nevertheless committed to a public purpose through regulation by the Housing The changes were consistent with an overarching Corporation. The result was a substantial number aim to reduce the size of the state. This policy, which of “large scale voluntary transfers” of much council- started in the early 1980s driven by a Conservative owned property into the ownership of housing agenda, continued subsequently under the Labour associations.1 administration, and now also under the Coalition Government, seeks to encourage public sector The required commitment to a social purpose meant provision to be locally owned and controlled, rather that housing associations continued (and continue) than municipally or state-owned and controlled. to be part of the social housing sector, separate and apart from the private, for-profit sector. However, Prior to the 1980s, housing associations were already LSVT has not been universally popular, with groups known and established as non-profit distributing such as Defend Council Housing mounting campaigns organisations, committed to a public or social to oppose transfer. Consequently the required ballot purpose. They had come into existence to meet of tenants (to evidence the “voluntary” nature of the particular needs such as homelessness, driven by transfer) does not always have a positive outcome. philanthropic or religious aims. But at this stage they were relatively small. 1 The subsequent Labour government was no more enthusiastic to encourage the ownership and management of housing by local authorities, and its approach was to The grant regime introduced by the Housing Act 1974 only made funds available to housing associations make funding available to support stock transfer and for where arm’s-length management organisations were established. “A further significant development over recent years has been the expansion of the role of housing associations – arguably led by those created on stock transfers – beyond the role of providing and maintaining properties and collecting rents.” 7 Social Housing: Made Mutual Nevertheless, housing associations now account for To summarise: more directly managed homes than councils, and this • trend looks likely to continue. Social housing has its origins in philanthropic and voluntary provision for the vulnerable • Council housing more recently set out to A further significant development over recent provide publicly-funded housing to meet years has been the expansion of the role of housing general needs associations – arguably led by those created on • The Right to Buy scheme resulted in a stock transfers – beyond the role of providing and substantial transfer of homes into private maintaining properties and collecting rents. There is ownership an increased focus on providing broader support to • Much council housing has been transferred tenants and communities, particularly in addressing through large-scale voluntary transfers to wider social and quality of life issues such as anti- housing associations, which are regulated social behaviour, financial exclusion, and the need to organisations committed to a social purpose support training and employment prospects. rather than private profit, a further 800,000 council homes are managed by ALMOs The creation of new organisations on stock transfer, • Recent developments have seen an expansion usually with the need to raise new finance, has of the role of housing associations beyond also contributed to a growing need for commercial traditional landlord services, as well as skills and awareness in managing these substantial the need to become more commercial and businesses, whilst remaining true to the core purpose entrepreneurial of serving the needs of the community. But what are these housing associations or social landlords? If they are independent of the state, how are they owned and governed? How are they committed to public, rather than private benefit? These questions will be considered in the next section. Social Housing: Made Mutual 8 The governance of housing associations has evolved 3.2 Challenges over the years. In general, it remains the norm The traditional or perhaps the caricature of the (including for new organisations created on a stock traditional housing association was an organisation transfer) that executives do not serve on the board, set up by the local solicitor, accountant and estate though the chief executive and other relevant agent, concerned to provide housing for the needy executives would normally attend board meetings; and deserving cases in their local community. and they are hired and fired by the board. A range of different legal structures was used, but As for the composition of the board itself, the basic following the establishment of the Housing Corporation model in which the board appoints its successors has in 1964 and the requirement to be committed to trading evolved in a number of ways, in particular with the for a social purpose rather than for private profit, a inclusion of tenants or representatives of tenants on favoured vehicle was the community benefit society. the board. Such tenant board members may or may This ensured that surpluses were retained and applied not have been chosen by the tenants themselves. 2 for the benefit of the community, and that the culture and ethos of the organisation was underpinned by a A common approach for new housing associations legal and constitutional commitment to the benefit of established on a stock transfer is a board comprising the community. one-third tenants, one-third from the council (commonly councillors) and one-third “independents”. Those establishing such organisations did so on a The latter generally comprise individuals with business voluntary basis; they became the (unpaid) board experience, often from the housing sector, who ensure members or directors of the organisation, and they that necessary experience is available on the board. appointed their successors. They could appoint managers or staff to manage the properties where With this background, it can be seen that such necessary, but generally such managers did not have housing associations did not really fall within the a place on the board. established public sector, nor were they part of the investor-owned private sector. They were somewhere This sort of arrangement was familiar in the in-between, with their commitment to public benefit, charitable sector. It worked well for relatively small and regulation by the Housing Corporation. organisations. It enabled those in charge to ensure that only appropriate individuals, with a shared vision, 2 were involved in controlling the organisation, and that incorporated under the Industrial and Provident Societies Act 1965. The other type is the such control remained local. bona fide co-operative The community benefit society is one of two types of industrial and provident societies, “There is no internal governance mechanism within the association for any other constituency of interests (such as tenants) to be proactive in challenging the board on their performance.” 9 Social Housing: Made Mutual The democratic or accountability deficit is commonly regarded as the custodian of public It is common, whether housing associations are interest and benefit; but there is a sense in which established as community benefit societies or as they are not really owned by anybody. There is companies limited by guarantee, to provide that effectively an ownership deficit, or as some would the board of directors are also the members of the put it, a democratic deficit. Because there were no association. This model has always been acceptable identifiable owners, this meant that there was nobody to the Housing Corporation (and its successor for to whom those responsible for running the business these purposes, the Tenant Services Authority). were in practice accountable on a day to day basis. Some might argue that they were accountable to the The weakness of this arrangement is that the regulator; whilst the role of a regulator is significant members of the board, wearing a different hat as and establishes a basis for the maintenance of members of the association, cannot credibly hold common standards across a regulated sector, themselves to account. Without any real or effective external regulation does not provide a constitutional accountability, this consequently means that the mechanism for the regular holding to account of those success of this form of governance relies upon the to whom power and authority has been entrusted, by general competence and goodwill of the individuals those most affected by the service provided. who are currently in office (board members and executives), and the external regulator. There is no It was against this background that a new approach internal governance mechanism within the association was developed and published, namely the Community for any other constituency of interests (such as Mutual model in Wales (2001), and the Community tenants) to be proactive in challenging the board on Gateway in England (2002). Both of these models their performance. sought to address this ownership and accountability deficit by opening up membership to tenants (and Whilst it might be argued that there has not been a potentially other residents). The aim was for tenants disproportionately high level of corporate governance to be able to be members and to become involved failures in this model, it nevertheless remains and engaged as owners of the new organisation, to objectively a weakness because it does not provide create a sense of ownership, with an opportunity for an internal mechanism for self-correction. There is a democratic participation. basic lack of accountability. In the Community Mutual model, tenant members But it goes further than that. Housing associations elect their representatives to the board, have a say in are carrying on business for a public purpose. But the appointment of independents, and can have a say not only are they not owned by the state, which in the appointment of council representatives. The Social Housing: Made Mutual 10 Community Gateway model is in some sense more directors of corporations including duties of care and ambitious, setting out to generate community pride, competence (now codified for directors of companies). tenant democracy, and cultural change. This involves For a large and potentially complex business with not only enshrining tenant membership and tenant responsibility for substantial assets, it is appropriate for elected board members in the constitution, but also directors to have appropriate levels of skill, experience establishing local community areas which undertake and competence to enable them to discharge their community options studies. A number of stock duties adequately, and with minimum risk. transfers have taken place using these models. The traditional approach in social housing, as Whilst housing associations continue to be regulated already explained, is for executives not to be board to protect the public interest (the Tenants Services members4, and in the case of a large-scale voluntary Authority is due to pass its functions to a reformed transfer for the board to be composed of a mixture Homes and Communities Agency in 2012), the creation of tenants, council representatives and independents. of a number of member-based housing associations There are essentially three main weaknesses in this supports the emergence of direct accountability arrangement. and a new form of locally-based public ownership to underpin and protect the public interest. The Tenant First, the person likely to have the greatest knowledge Services Authority itself puts at the forefront of its of the organisation and its business, and also the regulatory approach the concept of “co-regulation”, person who is particularly qualified to understand and by which it means robust self-regulation by those who contribute to making decisions about issues facing the govern the delivery of housing services, incorporating organisation – namely the chief executive – is not on effective tenant involvement (including monitoring the board. Although they attend the board meetings, and scrutiny), subject to a ‘backbone’ of regulation by they do not formally share in the decision-making the TSA.3 process as one of those board members. Board issues On the face of the constitution, not being one Aside from the issue raised above in organisations of the board members, the chief executive does where the board members are also the members of not therefore owe the same legal duties and association, there is a further governance weakness responsibilities as board members, even though they with the traditional approach. 3 http://www.tenantservicesauthority.org/upload/pdf/Regulatory_framework_from_2010.pdf A board of directors carries ultimate legal 4 responsibility for the business and activities of the executives have become board members corporate entity. The law imposes strict duties on In recent years, there have been a number of departures from this where chief “We do not question that tenants and the council have a clear interest in the governance of the organisation, that their voice should be heard and that they should be able to have significant influence.” 11 Social Housing: Made Mutual have been selected for their skills, background and In the case of those people nominated by the Council experience to serve in the role of chief executive. or elected by tenants, whilst they are likely to be individuals with a real and genuine interest in the The second weakness is the composition of the board organisation and its success, there is no requirement itself. At one level, it makes sense for representatives for them to have any particular skills or experience of tenants and the council to serve on the board, but that is suitable for a governance role. They may, as they are likely to be frequently reminded, their role coincidentally, have such experience, and they may is always to act and make decisions in what is in the be particularly and suitably qualified for the role, but best interests of the association itself. This means where this is the case it is not due to the design of the they must put to one side their interests as tenants, governance structures. or councillors. In practice, this can be difficult: what is the point of having representatives of tenants This is not intended to be disparaging of the and the council on the board if they unable to act as individuals who serve in this role, or of the representatives of those interests? The very design contribution they make. There are many excellent of the governance arrangements creates a conflict of tenant and councillor board members. We are interest for them and this can lead to real frustrations focussing specifically on the design of the governance for councillors and tenants at their inability to arrangements. The point being made is that these represent the Council or tenants at Board meetings. governance arrangements rely too often for their success upon technical competence being provided by The third weakness is the question of qualification. the chief executive who is not a board member, and As already pointed out, the person likely to have the independent board members who are in minority on best qualifications to serve on the board is the chief the board.5 These structural weaknesses also apply to executive, but they are not on the board. Independent the traditional ALMO model. board members are specifically recruited and appointed because of their knowledge and experience Our central argument is that this is a weak design. We in the sector, and/or of business and commerce in do not question that tenants and the council have a general. The intention is that they should bring to the clear interest in the governance of the organisation, board some general or specific competence relevant that their voice should be heard and that they should to the business. be able to have significant influence. Indeed we would assert that “representativeness” and the ability to 5 Ironically, if the matter were ever tested in court, it may well be found that a chief hold those in power to account are essential features executive in this model was a shadow or de facto director, given their actual role and of good governance. But we question whether the influence over the board. current design of governance delivers this. Is there Social Housing: Made Mutual a better option – one which will deal with these governance design weaknesses and better enable 12 3.3 An alternative option: RBH Mutual social landlords to deliver the outcomes their tenants and stakeholders wish to see and face up to future The previous chapter argued that there are some challenges? inherent weaknesses in the existing model of ownership and governance for housing associations. To summarise: For the reasons explained, it does not seem to be a Housing associations have been committed to model designed to assure governance competence serving the public benefit for many years – insofar as a model can achieve that objective. Nor • The increasing use of member-based does it seem to empower representatives of tenants associations (Community Mutual and and councils (but particularly of tenants) to be tenants Community Gateway) points towards a or councillors within the governance, and to seek to new form of public ownership with direct specifically influence the association to meet their democracy to protect the public interest needs. • Regulation continues to be part of this protection But this was not the starting point for Rochdale The current model of governance of housing Boroughwide Housing. RBH is an arm’s length associations and ALMOs is arguably in need of management organisation, established and wholly- improvement owned by Rochdale MBC (the council) to manage the • Chief executives and other executives not 13,700 dwellings it owns. It was established in 2002 in serving on the board means that they do order to access funding to enable the completion of not share important formal legal duties and the Decent Homes programme, funding for which was responsibilities not available if the management had remained within • It is difficult for representatives of tenants the council. and councils to fulfil their representative role whilst being board members • Success often relies too much on the By 2009, it had become clear that serious financial challenges faced Rochdale within the next four or technical competence provided by a chief five years, and so an Investment and Involvement executive who is not on the board, and a Commission was launched.6 A decision had to be minority of independent board members made whether, in order to meet future financial needs, 6 Chaired by Professor Ian Cole, and including representatives from tenants, the council, and RBH management. The Commission issued an Interim Report in January 2010, and a final report in December 2010. “Tenant involvement was already well-established in Rochdale with the authority having been well regarded for its approach to engaging with involving tenants in decision-making since the mid 1980s. ” 13 Social Housing: Made Mutual RBH should continue as an arm’s length management and three independents. The choice of the future organisation, whether the council should take back vehicle for the ownership of the housing-stock clearly in-house the management of its stock, or whether has an impact on the level of tenant involvement. the council should transfer the stock outside its ownership. From a financial point of view, only a Tenant involvement was already well-established transfer of stock seemed likely to enable homes to be in Rochdale with the authority having been well maintained to an acceptable physical standard. regarded for its approach to engaging with involving tenants in decision-making since the mid 1980s. But there was more to it than just money and the provision of physical homes to an acceptable RBH currently supports and works with 41 tenant and standard. For those living in those homes, equally resident associations and there are 19 community important was the potential role of the landlord in bases on estates which provide a valuable resource dealing with anti-social behaviour, creating training for community led activities and outreach work and employment opportunities, and tackling by a range of agencies. Three estates are directly financial exclusion. RBH had commenced a number managed by tenant management organisations, of initiatives which were broadly and strongly including Cloverhall, where a tenant management co- supported by tenants.7 Whilst the landlord’s ability to operative has been successfully operating for over 25 continue and develop such initiatives is significantly years. In addition tenant led Area Panels and Service dependant on having the funds to do so, being able Improvement Panels feed into the development of to work effectively alongside other agencies will policy and practice. also be important, to maximise impact and minimise duplication. In particular, having the right relationship In addition to established levels of tenant involvement, with the council is important as is a genuine RBH has succeeded in delivering good services which commitment to the locality and a clear recognition have secured a high level of tenant satisfaction, of the need to address deprivation and to support recorded at 81% in 2009. This level of performance, regeneration to create sustainable communities. which is not uncommon in ALMOs, has been secured by a high level of commitment from RBH staff, who 7 As well as looking at the future options for funding are rightly valued by tenants and are key to the future and the landlord role, the Commission was also tasked success of the organisation. A high level of employee with considering how tenants could be more involved satisfaction has also been achieved (86% in 2010) in decision-making. Currently, RBH has a board with employees believing that the organisation has comprising six tenant members, four council members a clear vision and is delivering real improvement for communities. See Interim Report page 18 Social Housing: Made Mutual 14 Despite this RBH is concerned about the levels of Neither of the existing member-based models active tenant and employee participation. Although (Community Mutual or Community Gateway) provided there are well- developed structures in place the for employee membership although some such as number of active tenants is actually quite small. An Phoenix Community Housing offer employees non- imaginative new approach is required to engender voting associate membership. At the time these greater levels of active involvement. Simply trying models were emerging, employee participation was harder using the existing approach will not work. not a pressing issue in the sector, whereas providing a means to engage and involve tenants most RBH also feels there is a need to find new ways of certainly was. However, even then the idea of both facilitating active front line employee engagement user and staff constituencies of membership was in developing the services of the future. Crucially starting to become established in other sectors at it believes that the views of and knowledge held by this time.8 Since then it has developed further.9 The both tenants and employees need to be captured and Coalition government’s Localism Bill and its support fully utilised if the organisation is to have a successful for employees to be proactive in the ownership and future. control of their services take this a stage further. The future vision for RBH is therefore based on There are sound arguments for both users and staff a further development of close working between having a role as members and owners. Both have tenants and employees. This approach already a clear and valid interest in the organisation, the works well in some areas and RBH believes that this services it provides, and its success. Indeed they are “co-production” in which the traditional binary or the two main constituencies of interest which are polarised relationship between landlord and tenant, critical to that success. However, they are distinctly employer and employee no longer creates a barrier, different interests. and in which employees and tenants can both contribute working alongside each other to optimise This means that they both have to be identified, the outcomes, is the key to future success. Difficult recognised and given appropriate voice and influence decisions will have to be faced in the future, affecting so that they can be balanced against each other. It is both tenants and staff, and providing a mechanism to be expected that staff will want to have good terms through which both groups could share in making and conditions of employment for their own benefit. some of those decisions is clearly important. But what was to be the ownership and governance model 8 For example, the membership arrangements for NHS Foundation Trusts was introduced for this and could this act as a catalyst for the type of via the Health and Social Care (Community Health and Standards) Act 2003 9 E.g. Leisure services, Out-of-hours primary care services, Co-operative Trust Schools change RBH wants to see? see further 15 Social Housing: Made Mutual But clearly it is in the interests of tenants for rents to performance as a result of the new responsibility of be kept as low as possible. So there is a tension on ownership which tenants will have so that it becomes this basic issue, which has to be resolved. In reality “their” service rather than one delivered to them by tenants understand that unless staff are content and others. feel that they are fairly treated, they are unlikely in the long-term to work so effectively. So a mechanism In terms of addressing the governance weaknesses is needed to resolve this, and other such tensions described above, the approach followed by RBH is between different interests. to separate out from the board the “representative” function by creating a separate representative At the end of the day, the organisation exists to body; to build the composition of the board based provide services to tenants for the benefit of the around skills and experience, and then to ensure community, so it is important that no one interest that the board operates within a clear framework of can distort the organisation to operate in the accountability to the members via the representative interests of one group alone. Competing interests body. The structure is then: and therefore tensions exist, whatever the ownership and governance arrangements. Protecting the public Members interest effectively means balancing a range of competing private interests. Where those interests and tensions can be recognised and brought within the constitutional arrangements, those tensions can Representative Body be resolved in a balanced and structured way, within the governance, rather than through the media, campaigning or less transparent ways. Board of Directors The recommendation of the Commission in its final This approach is designed to build on excellence, and report was therefore to transfer to a new mutual to ensure insofar as possible that those serving at organisation, to be fashioned by tenants and different levels of the organisation are those best employees. This was seen as the best way to protect qualified to do so. In particular, it seeks to provide the investment already made, to offer the prospect a forum where representatives of tenants, staff and of levering in private finance and provide a secure the Council can fully express the point of view of long-term future. It was also seen (amongst other those they represent, and where all of the potentially things) as providing a mechanism for making tough competing views can be heard and balanced. In decisions in the future on regeneration, increasing the terms of the board of directors, it seeks to ensure motivation of staff, and leading to improved landlord that those carrying legal responsibility for taking “At the end of the day, the organisation exists to provide services to tenants for the benefit of the community” Social Housing: Made Mutual 16 the major decisions about the organisation have the - qualifications and skills to do so. By making the board gives the representative body teeth: it is not of directors directly accountable to the representative body, this ensures that the directors operate within a The power to remove non-executive directors just a talking shop. • The board of directors will comprise 8 non- framework which the representative body has helped executive directors including the chair, and 2 to shape, and that they deliver. executive directors. The board of directors will be legally responsible for running the organisation The Commission’s recommendations and the within the framework established by the establishment of the new mutual organisation can representative body. only be implemented if the tenants vote for the transfer in a tenants’ ballot, which will be conducted later this year. Subject to that, the outline of the proposed new mutual structure for RBH is as follows. • There will be two membership constituencies, one open to tenants and one open to employees. Being a member is optional, and provides the right to attend and speak at members’ meetings, to elect representatives (and stand for election) to the representative body, approve changes to the constitution, and receive certain information. • There will be a representative body comprising 15 tenant representatives, 3 representatives from tenant management organisations, 8 employee representatives, 4 council representatives, and 3 representatives from external stakeholder organisations.10 - The role of the representative body is to set the policy framework, to appoint (and remove) non-executive directors, monitor progress, feed into future plans and strategy, communicate with members and receive the annual report and accounts. 10 Slightly different arrangements will apply until the fifth anniversary, during which period the representative body will have 2, not 4 council representatives, but it will also have 2 non-executive directors. 4 Rochdale Boroughwide Housing: the vision for the future 17 Social Housing: Made Mutual We started this short publication by very briefly is how it may and frequently does start. It is more a reviewing the background and evolution of social case of transforming the organisation from being just housing so far: from charitable and philanthropic, a landlord, into becoming something rather different: to mainstream municipal provision, and now to a a mechanism by which people in communities can substantial housing association sector outside direct meet their own needs for essential and basic living, government ownership and control, but still regulated. and through which they can strive to face the challenges of their individual lives. The future for the sector comes back to a basic question: what is the purpose of a housing association This goes back to the origins of the co-operative idea today? in Rochdale, a movement based on self-help (not philanthropy or external intervention), and of people Clearly the starting point is to provide homes – decent working together to meet their common needs. It homes for people to live in, for those who don’t have takes us away from the rather tired twentieth century access to the privately owned and rented market. model of public services delivered or “done” to The basic requirement is therefore the ownership consumers; it seeks to break down the barriers of a and maintenance of homes to an adequate standard, series of binary and sometimes polarised relationships which requires a clear business and financial strategy (landlord and tenant, employer and employee, for the medium to long-term. This in turn requires provider and customer, citizen and state); it aims to an organisation and a management team with the construct a new vision of contemporary co-operation necessary skills and competence, and with sufficient based on a coalition between vital, core interests control, independence and certainty over its future to – those living in the properties, those working for be able to make such long-term plans with the belief it the organisation, the local council, and other key can deliver them. statutory, voluntary and community bodies – and building a mechanism by which they can collaborate Equally clearly, whilst providing homes is the on a day to day basis. essential part of the role, of itself this is no longer sufficient. It is not enough to provide well-maintained The ultimate purpose of this new co-operation is to homes if those living in them are unable to access optimise the use of such financial resources as are other essential services, or to live safely within a available, for the benefit of the community; to link community, or to have some prospect of economic together the different interests in a dialogue to see independence. how their particular activities and opportunities can work together to maximise the benefits available, This is not just a case of bolting on some additional and minimise inefficiency, duplication and overlap. It services to those of a traditional landlord, though that is a purpose which recognises that there are limited “The vision of RBH builds on, but deliberately departs from housing models developed to date” Social Housing: Made Mutual 18 resources available, and that their impact is greatest Those responsible for leading service-delivery – when those with the key influence work together at a the board of directors and the management team practical level to optimise them. immediately beneath them – must then use their skills to work out how to deliver the outcomes desired with What does this mean in practice? the resources available. This is a continual dialogue with the representative body: the board of directors is It means a transformation in the way that people legally and constitutionally responsible for managing think and behave – in other words, a transformation the organisation, but they discharge this function on of culture, which needs to be underpinned by more behalf of the wider community represented by the permanent arrangements (organisational structure) representative body. They are responsible, and they which support a different way of thinking and are accountable. behaving. The vision of RBH builds on, but deliberately departs This is why RBH’s plans start with a mechanism for from housing models developed to date. As well as engaging tenants and staff, so that they have a voice its role in providing its particular services, it is an and a means of influence. Membership, which is employer of local people (85% of its workforce live voluntary, will have to be built over a period of months locally), a participant in the local economy, supporting and years. People are not generally familiar today local businesses, community enterprise and self- with active participation, and they will only engage if help. It does not set out to deliver tenant control, it offers something meaningful, if they see it actually or employee control; the vision is to provide a voice achieving something, and if they think it could do and a right to be heard, through a mutual format, to something for them. create a new form of community or public ownership which seeks to get people working together on agreed It means that the body representing the interests of shared priorities. members has to have real influence over the broader strategic aims of the organisation, and future services Ultimately RBH’s vision depends on some essential which it will provide. The representative body requirements. must become a melting pot, in which the interests, aspirations, frustrations and concerns of the relevant • Being a successful business, financially competent constituencies and organisations can come together; and efficient, flexible and entrepreneurial and with it needs to become the mechanism by which the best the confidence to make the best of commercial outcome is worked out, in an ordered and balanced opportunities way. • Becoming the embodiment of the interests of 19 Social Housing: Made Mutual those living in its properties, and those working the community, and the continuing role of external for it, co-operating on a day-to-day basis and regulation to underpin that commitment, tend to through its mutual membership and governance suggest some form of public ownership. However, arrangements to secure the best outcomes the lack of direct state or municipal control in possible. These arrangements both support and the organisation itself (even where a council has drive the need to be a successful business, holding appointed some board members) can suggest to account those in positions of responsibility, something closer to private ownership – or at least on influencing future plans and sharing difficult a pathway towards private ownership. decisions • • Being committed to serving the needs of the The RBH vision confidently asserts the principal community, recognising the part RBH can play in of public ownership, but does so not through the wider regeneration, social and economic issues, by mechanism of state or municipal control, but through being the mechanism through which tenants, staff, membership open to tenants11 and staff, and a and the partner organisations who are integrally democratic form of governance which makes those involved in its services and the lives of tenants and ultimately in charge accountable to the community staff can collaborate much more effectively for they serve. This should be the prime mechanism the common benefit. This is the means by which for driving the organisation to improve, to adhere RBH can be a better business, make best use of to its commitment, and to carry on business for the resources and ultimately become a pioneer for a benefit of the community – not external regulation. new way of working for the public benefit In addition, there continues to be a legal and Remaining committed to Rochdale. This means a constitutional obligation to carry on business for the vision and business plan based upon a local focus, benefit of the community, retaining surplus for the and not becoming part of a regional or national aims of the organisation. organisation in which the commitment to the local community would be diminished While RBH, if transfer takes place, will be regulated as other social landlords, it is not that relationship which 11 RBH effectively has a vision for a new form of public characterises its public ownership. It is the direct ownership. Currently, as already observed, there can accountability of its board to the local community, be some confusion about whether social landlords through its democratic ownership and governance are publicly or privately owned. The commitment arrangements. These ownership and governance to retaining and using any surplus for the benefit of arrangements create a framework for real and effective co-regulation, embedding active tenant and Associate membership will be open to others including leaseholders and long-term lodgers in tenanted properties employee involvement at all levels. “What about the role of the local authority? The transfer of housing stock by a local authority is an emotive subject.” Social Housing: Made Mutual 20 What about the role of the local authority? The a background of a tendency towards low turn-out transfer of housing stock by a local authority is an at local elections. In addition to that, the creation emotive subject. It is often a substantial component of local organisations with their own democratic of the local authority’s establishment, in terms arrangements can also seem to threaten the of people employed, direct and support services democratic authority of councils. provided, and time and energy spent by elected members. Losing all of those – and it inevitably There is a sense in which not only does the housing feels like a loss – can be seen as the price that has provider need to be transformed from being a to be paid for the ability to fund future plans from landlord into becoming a mechanism through which alternative sources. individual needs and aspirations can be met, but local authorities also need to be transformed from being The reality today is somewhat more complex than providers of particular services into becoming the that. As described above, for nearly three decades wider expression of their citizens’ and communities’ now, policy has tended to drive a reduction in needs and aspirations, across a much broader traditional municipal ownership and control of social spectrum, with elected members as community housing. This is consistent with a much broader champions. This reflects the change referred to above policy trend – for a variety of political and fiscal of moving away from some of the historic and divisive reasons – towards reducing the state-ownership two-way relationships of the past, and envisaging of provision, including in a range of other local a much more collaborative environment between government services through externalisations, in individuals, local organisations and businesses, and health through the creation of NHS Foundation Trusts, the council. Whether this is characterised as evolution the Right to Request and more recent Right to Provide through the localism agenda, or the development of a programmes, and through a series of other high Co-operative Council (as in the case of Rochdale and profile initiatives from the privatisations of utilities a number of other councils), it is consistent with a in the 1980s through to current Coalition plans to new way of thinking about and attitude towards local mutualise the Post Office. authorities. The Coalition’s Localism Bill, and its encouragement, For RBH, Rochdale MBC continues to be a vital partner through the Cabinet Office, of the emergence of organisation, without whose continuing support mutual and co-operative organisations from the public and active engagement it simply cannot achieve the sector continues this same trend. All of this poses results to which it aspires for its tenants and staff, challenges for local authorities. The “loss” of services and the council’s citizens. The council needs to be can be seen as diminishing their significance, against permanently embedded in the mutual governance “Social housing provides an almost perfect casestudy of this basic question: what form of ownership will replace state or municipal ownership as the public ownership for the future?” 21 Social Housing: Made Mutual arrangements, but in a way which really enables the council to influence thinking within RBH, and also to be influenced itself through a close working relationship. It is for this reason that the council has permanent long-term representation on the representative body. Social housing provides an almost perfect case-study of this basic question: what form of ownership will replace state or municipal ownership as the public ownership for the future? Housing associations have pointed towards that for a number of years, but the ownership and democratic deficit has been a weakness, leaving the protection of the public interest in the hands of the regulator, when the board loses sight of it. The proposed RBH Mutual points to a new approach, which seeks to create a sound basis for a new form of local public ownership to protect the public interest, to establish internal mechanisms to drive improvement and to embed a co-regulatory approach, and, at the same time, seek to assure business and commercial competence. In this way, it seeks to secure the future of social housing for the benefit of Rochdale in the decades to come. About the authors Social Housing: Made Mutual Cliff Mills Cliff Mills is a practitioner in the law and governance of co-operative, mutual and membershipbased organisations. He has written the constitutions of a number of the UK’s leading co-operative retail societies including the Co-operative Group, established the constitution and governance of a substantial number of NHS Foundation Trusts, and played a significant part in the development of mutual society legislation in the UK. He has worked extensively with Mutuo over the last decade in the development and application of mutual and co-operative models of ownership for public services. These have included healthcare, social housing, leisure services, education and children’s services. He has also worked in the voluntary and charitable sector. The aim has been to create robust models for organisations which are trading for a public or community purpose, with an ownership and governance structure based on user, staff and local community membership. Recent and current projects include the mutualisation of Post Office Limited, Co-operative Councils, library services and community health services. As well as being Principal Associate with Mutuo, Cliff is a consultant with Capsticks Solicitors LLP and Cobbetts LLP. Gareth Swarbrick Gareth Swarbrick has been the Chief Executive of RBH since November 2009. Over the past 18 months he has led on the proposed mutual stock transfer for RBH. Gareth has worked in social housing since 1989, starting his career as a Scale 1 Clerical Assistant for Oldham Council. Since 1992 he has worked in Rochdale in a variety of housing management and then policy roles. In 2001/2 he led on the process of establishing RBH as one of the first eight housing ALMOs nationally. 22 Design and Print by Multi Image Ltd: 01727 848088