The role of mutuals in social housing

Mike Gaskell examines the place of mutuals in the social housing field and reports on his firm’s involvement with the setting up of the novel Rochdale Boroughwide Housing structure.

Mutuals and mutualism are growing phenomena. Whether in the context of Big Society initiatives or simply different structures for delivering public services, the contribution that mutuals can make has been widely debated. It is now being implemented with the support of the Cabinet Office.

Ground breaking initiatives such as the recent establishment, with institutional finance, of Rochdale Boroughwide Housing as a mutual registered housing provider are extending this movement into the world of social housing provision.

History and principles

Of course, some housing mutuals have been around for many years. In more recent times new, larger models have been developed adopting some of the co-operative principles, including the Community Gateway in England and the Community Housing Mutual in Wales. The Government's 'Right to Provide' initiative has also seen many Pathfinder mutuals set up in the health, education and other public sectors. Mutuals are emerging in differing guises, and elements are being applied across different sectors, including housing.  

Not all of the bodies described would meet the full definition of a 'mutual'. Fully mutual bodies are entities which have a specific legal form and exist to trade with and for the benefit of their members. In this technical sense many bodies that are branded as mutuals today, such as charities, industrial and provident societies, community interest companies (all of which operate for public and/or community benefit), cannot, by their very nature, be fully mutual.

However, the heart of the modern mutual retains some fundamental characteristics based on the co-operative principles: a belief that an organisation's major stakeholders should be involved in key decision making and that there should be accountability to these major stakeholders. In other words, there should be a recognition of a coincidence of interest between those who make decisions and those who are affected by those decisions – through these things an organisation should be better placed meet its wider public and community - based aims.

Membership – tenants

The concept of accountability and involvement for key stakeholders has informed the Community Gateway Model, which has been adopted successfully in a number of stock transfer landlords, starting with Preston. As the title of the model indicates, the association's membership structure facilitates, or acts as a 'gateway', to devolve power to local communities.  

The Welsh Community Housing Mutual places its emphasis rather on ownership of the Mutual than on devolution, with only tenants being eligible to become members or shareholders in a community housing mutual.  

Both the Community Gateway Model and the Community Housing Mutual present challenges and options, with variants being adopted to reflect local issues; but they remain an exciting option to improve resident accountability and involvement.  

Membership – staff

One of the key features of many of the pathfinder mutual projects is the role for employees as the owners of the organisation. Co-operative membership of housing providers has to date been confined to tenants (and leaseholders). However, staff are major stakeholders and as the mutual concept begins to capture the social housing imagination, the role of staff is coming into focus.

The Rochdale Boroughwide Housing mutual (on which we advised and which has secured full funders' support) will see staff sharing membership of the Rochdale housing mutual on an equal basis with tenants.

Rochdale has a long history of co-operative endeavour and it is natural that this novel housing mutual would see staff as major stakeholders alongside the tenants.  

As was the case with Rochdale Boroughwide Housing, there are obvious safeguards – to do with conflicts of interest, for example – which need to be put in place, and some technical issues to be addressed, but this is an important option to consider when debating whether the mutual concept works for you.  

Boards and stakeholder representation

The mutual debate is beginning to draw attention to another issue. So far housing providers have tended to see representation in terms of places on the board and/or local panels/committees. There has always been a potential tension between the perceived need for a relatively small board and a more inclusive structure to gain the benefits of stakeholder involvement.

The experience of mutualism in other sectors suggests that effective representation might better be achieved outside, rather than within, the board (and panel/committee) structure, perhaps within a representative body (such as an 'assembly' or 'council') which includes representatives of all key stakeholders: tenants, leaseholders, employees, the local authority, community groups, representatives from local health and education groups etc. This is the model which Rochdale Boroughwide Housing has chosen, with this representative body having the responsibility for appointing the board to run the operations of the mutual and the Representative Body working collaboratively with the board to set the parameters and framework within which the service to tenants is determined and monitored.

The model provides a framework which is designed to bring out the best in the people involved in governance. It enables members of the Representative Body to freely represent the interests of (particularly) both tenants and employees, as well as securing a skills based (rather than representative based) approach to board directorship.

Constitutional summary

The mutual constitution for Rochdale Boroughwide Housing can be summarised as:

The role for members follows from the basic membership rights of voice, information and representation and is:

• To elect the representatives on to and to stand for election to the representative body.
• To receive annual reports and accounts together with other relevant information.  
• To attend, speak and vote at membership meetings.

The role of the representative body is:

• To set the policy framework within which the board of directors must work.
• Appoint and remove the non executive directors.
• Feed into the planning of future services standards performance levels and strategy as they are developed with the board and then to finally approve them.
• To monitor performance against these.
• To be responsible for approving updating and monitoring progress of the membership strategy.

The role of the board of directors is:

• To exercise all the powers of Rochdale Boroughwide Housing subject to the constraints and requirements set out in its rules.
• To ensure that Rochdale Boroughwide Housing operates within the strategic framework approved by the representative body.
• To work with the representative body to develop the policy framework and strategy which the representative body finally approves.  

The central role which this constitution gives to members (tenants and employees) addresses the perceived accountability and governance weaknesses in previous social housing models.  

Who will be interested?

Well established registered providers of social housing may already have re-fashioned their board arrangements and tenant involvement processes to achieve some of what mutuals have to offer, but for those organisations who feel that more can be achieved, these developments offer new models to explore.

New stock transfer organisations and sponsoring local authorities may also find this model attractive to provide a broader offering in terms of stakeholder involvement and accountability.

Conclusion

Through our work in Rochdale and elsewhere we are helping to test the boundaries of what is achievable in the housing context. We see this as a natural extension of our role at the forefront of developing new governance structures for housing providers over the years in England and in Wales.  

Whilst many providers will be satisfied with the balance of interests they have achieved in their governance arrangements we believe that there is merit in testing existing governance arrangements against the mutual principles, even if the outcome of the review is to leave current structures in place.  

Mike Gaskell is a partner in the Manchester office of Trowers & Hamlins. He can be contacted on 0161 838 2033 or by This email address is being protected from spambots. You need JavaScript enabled to view it..