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Why tenants are key to mergers

Boards need to put tenants at the heart of decision making and make their promises accountable, says David Wilton.

Over the last six months we have seen a rush of Welsh housing association mergers being announced and if rumours are to be believed there are more to come. Naturally, the question TPAS Cymru has been raising is where do tenants fit into this? Mergers are like marriages – they should not be entered into lightly and should be about much more than just operational efficiency, they need to bring together the best in culture, expertise and thinking. Unlike marriages, they can’t easily be undone so all parties must be very certain that the merger is in everyone’s best interests. This article will demonstrate why tenants need to be a KEY party in any merger discussions.

Readers will know that Welsh Government firmly placed the responsibility of any merger decisions with the respective boards. It is essential that all board members remember that tenants are so much more than customers. They should be at the heart of all decision making and therefore boards need to demonstrate that tenants have been properly involved in the merger process from the beginning and beyond.

Why tenant engagement is vital

Anyone involved in tenant voice will know that tenants raise and consider factors that a board will never think of. They will give board members invaluable points to think about and that insight will help a board make better-informed decisions.

Consulting with tenants and securing their engagement will help clarify the purpose and priorities of a merger. Mergers can bring plenty of new opportunities, but they also bring with them significant challenges and tenants can provide vital guidance to a board on these issues.

Effective tenant engagement is good for obtaining wider stakeholder buy-in. Regulators will be happier and bankers, staff, politicians, and community stakeholders will have fewer concerns if they can see measurable tenant voice throughout the process.

For effective boards, mission statements, values and brand have to be more than words on a strategic plan signed off every few years. If a board believes in their values and lives by them, then they must ensure tenants understand every step of the merger process and how they may be affected.

Having tenants involved helps shape and define measurable tenant benefits. How will the wider tenant population understand and value any benefit to them if they are not clearly defined and understood? Tenants rarely get excited about gearing ratios, credit ratings and EBITs. I suspect many staff are the same. Having easy to digest communications that explain these benefits are essential – not just for tenants but also for wider stakeholders!

From what I have seen recently, one area that Welsh RSLs under merger talks could do better is to be more open about the possible risks and costs etc. We know from England that mergers don’t always go perfectly, focus is sometimes lost, local offices close, key staff leave, and most importantly sometimes financial black holes are discovered. Whilst the latter is rare, it happens more than we care to admit. I recently saw a communication to tenants from a well-respected landlord, who flatly stated that ‘there would be of no negative impact to the [landlord] and its residents’.  Really?   I am very sceptical of that, and I’m sure I can’t be the only one.

As a former marketing director, there is a saying in the communications sector that: ‘Where there is a void in communication, negativity will fill it. Fill the voids so negativity can’t breed and grow.’ Digital platforms can be an interesting place for misinformation and where conspiracies are created. For communications teams, fighting negative stories and conspiracies can be demoralising.

It’s not just about tenant engagement, we also need to remember there are other tenure stakeholders such as shared ownership properties, intermediate rent, right to buy leaseholders and business leaseholders of local shops and community facilities. Depending on the stock mix, they may need appropriate, customised communications and alternative engagement opportunities.

Finally, and perhaps the most important reason it is essential that boards engage with their tenants in a meaningful way, is that it is the right thing to do. So just do it.

The how: What works in mergers for tenants?

Develop a clear tenant promise/offer document. One of the successes of stock transfer was that often a ‘contract’ was developed with the impacted tenants to deliver on a set of expectations. Those promises were considered, documented and most importantly they were tracked. How else are tenants able to understand the benefits and risks of a merger if they’re not clearly outlined to them?  We need for boards to understand this and commit to a clear tenant offer document.

Build in plenty of time for consultation. Good consultation should run in parallel alongside the merger timetable, not just at as a token exercise before a board makes its final decision. Too many tenants have said to us: ‘What’s the point, they [board] have already made up their mind’. Tenants are not easily fooled and know when a consultation is tokenistic. It’s a sure-fire way to turn tenants against you. I have also already highlighted that the regulator expects meaningful consultation. This means there needs to be sufficient time for tenants to look at and respond to the proposals, plus time at the start to plan the consultation and time at the end to review the result. Consultations are notorious for taking far more time to deliver than the timescale that is usually set out in the project plan.

Get tenants involved early in your joint working groups. Skilled tenants can bring valuable perspective to merger considerations. Scrutiny panels are experienced at asking the important questions around purpose and benefit. Use them and they will ask the hard questions.

Use your offer to tenants as an opportunity. Having an offer document with clear commitments and promises to tenants is probably the most important thing in the process. It focuses the merger working group and the board on maximising the benefits for customers. If the benefits are not sufficient or compelling, what’s the point? Like all good prospectus, they would also contain the risks and mitigations. Creating a good quality offer document will build trust with tenants and with your wider stakeholders. It can also transform the merger into a real opportunity to tackle the issues that are important to tenants and create a step change in the way both landlords deliver their services.

Be honest. It’s vital that landlords are clear and up front with tenant about the drivers behind the merger. Tenants value and appreciate honesty. They already know about any service failures and will value honest and realistic plans for new approaches. The merger process is an opportunity to build trust that will support engagement for the post-merger organisation. Also looking at examples from England, it’s just as important to avoid promising the earth and failing to deliver! The same applies to any delays or changes in the merger plans. Unexplained delays can create suspicion and anxiety, so be open and honest about delays, risks and any possible impacts.

Be creative in your engagement. If you are going to reach a wider range of tenants and get them engaged in a complex subject, you need to creative in your engagement approaches.   You need to know your tenants, their profiles and engagement preferences. You need to be creative, create a mix of opportunities online and face to face to give views and allow meaningful conversations. TPAS Cymru have seen the good, bad and ugly in terms of engagement and can help anyone do better.

Make your promise accountable: Tenants should expect the merger benefits to be delivered. For that we need a tenant offer document as well as clear accountability and details of how it will be tracked and measured. This is sometimes missed, and I think it is such a shame. Trust and transparency are key words that come up time and time again with tenants with regards to their landlord. Mergers offer a great opportunity to offer a ‘new deal’ a promise of better, and boards should be keen to be open about tracking delivery of that promise.

In summary

TPAS Cymru does not take a view on the pros and cons of mergers. What we want is informed, accountable decisions that are made for the right reasons. For boards to make these decisions, tenants have to be included in discussions and all risks and benefits to them are set out clearly and can be tracked and measured.

These eight landlords will not be the last. We will see more over the coming years as boards consider the implications of WHQS and their build programmes. TPAS Cymru is committed to work with landlords and tenants to develop better engagement and to help with the journey to merger and beyond.

David Wilton is chief executive of TPAS Cymru

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