Analysis of Public Sector Housing Organisation

Contents:

1. Introduction
2. Types of Organisation
3. Legal Structures
4. Size and Scope
5. Organisational Functions
6. Macro Environments
7. Strengths and Weaknesses
8. References

Introduction

Choice Housing Ireland Ltd was formed in 2015 through the merging of several smaller housing associations to create one of the largest housing associations in Northern Ireland with over 11,000 properties and employing approximately 400 employees. Although only newly formed in 2015 the association has provided charitable purpose of benefiting the community for over 40 years through the legacy associations.

The objective of the organisation is to provide social and affordable housing and the type of accommodation provided consists of general needs units, sheltered properties and supported accommodation.

Choice is regulated by the Department of Communities and the Charity Commission for Northern Ireland and is an Industrial and Provident Society registered housing association and charity.

Choice Housing is made up of several subsidiaries, which are Maple and May Ltd, Choice Services Ltd and Oaklee Housing Ltd. Maple and May provide housing through the private rented sector and also offer affordable housing for purchase. Choice Services Ltd are an in-house direct services maintenance company which carry out both day to day repairs and planned maintenance works on the association’s properties within the Belfast area. Oaklee Housing Ltd operate and offer social housing within the Republic of Ireland.

All surpluses within the organisation are re-invested to fulfil the charitable purpose as Choice is a social enterprise with voluntary membership.

The vision of Choice Housing is for the organisation to be recognised as the leading housing association group in Ireland, and its mission is to enrich lives through great homes and services.

The stakeholders in Choice the tenants, employees, board members, Department for Communities (DfC), Northern Ireland Housing Executive (NIHE), Managers and Directors, contractors, consultants, suppliers, Northern Ireland Federation of Housing Associations (NIFHA).

Types of Organisation

There are several different types of organisation such as private sector, public sector and voluntary.

Choice Housing operates within the voluntary sector and is a not-for-profit organisation providing people with homes in the social housing sector.

Voluntary sector organisations help to support the local communities and any profit made is reinvested back into the business. Organisations within the voluntary sector are made up of charities and businesses which are not run by the government.

Housing associations in Northern Ireland are all currently classed as private organisations. This enables the associations to apply for funding through Housing Association Grants from the Department of Communities, Northern Ireland Housing Executive, Department Programme Group (NIHE(DPG)) and also financing through banks.

As Northern Ireland has been without an Executive since January 2017 there has been difficulties introcuding new legislation. In the UK housing associations were reclassified as private organisations in 2017 but due to the lack of government in Northern Ireland this legislation has not been approved and brought into ruling. If a ruling is not made prior to March 2019 in Northern Ireland, housing associations will then fall under public organisations which will result in financing being cut.

The effect of this will mean a huge reduction in the number of new social housing homes that associations are able to build and will result in a knock on effect for people on the housing waiting lists in Northern Ireland. It is currently being requested that the Northern Ireland Secretary persue this legislation to ensure that it is brought into effect prior to the deadline to prevent the issues that will arise.

If a company is owned privately and the purpose of the business is to make a profit they will be classed as a private sector organisation. The main objective of the company is to make a profit and a majority of any profit that is made will be taken out of the business. Any profit not taken out of the business may be either re-invested or could be used for further developing the company.

Public sector companies are controlled by the government such as the health or emergency services, education, social services, police service or armed forces. The costs for these services are partially contributed to through by any tax that a person pays within that particular country and the remainder of the costs are funded through the government. As these services benefit not just one area but the entire country it would be unlikely they would be funded by a for profit organisation as they wouldn’t see any benefit to them directly.

Legal Structures

A sole trader is an individual who sets up a business and starts trading. Although it is quick and easy to set up as a business and all profits are kept by the sole trader there are also negative issues. There is no separation legally between the business and the individual and they will be solely liable for any problems with either products or services and also for any compensation due to be paid to customers or suppliers.

When a group of people, normally comprising of between 2 and 20, create a business this forms a partnership. The partners would then be known as General Partners. A legal document called a Partnership Agreement is normally drawn up which confirms agreements such as the liabilities of the partners and the procedure for distribution of any profits. Partners would be equally liable for any debts incurred in the business, unless otherwise stated in the partnership agreement.

Choice Housing and its subsidiaries are all private limited companies. There are several different forms of private limited companies.

The first form is ‘limited by shares’ where a person’s liability is limited to the nominal cost of any shares owned and any return received on these. This form protects a person’s assets if the company became insolvent.

Limited by guarantee is another form where a guarantor agrees an amount of liability at the commencement of the agreement. There are no shareholders for a company that is limited by guarantee, only guarantors.

The owners or members of a private unlimited company have an unlimited level of liability regarding any financial matters if the company fell into liquidation.

Partners within a Limited Liability Partnership are not personally liable since this is a partnership, but a Limited Liability Partnership has the same protection for business debts as a Limited company.

Shares for a public limited company (plc) must be made available to the general public. A majority of the time the shares are made available on the stock exchange, where they can be bought and sold by the public. There must be a minimum share capital of £50,000 made available to by company.

An incorporated company is an organisation which is completely separate from the owners of it the business. The owners would not be liable for any of the debts within the business. The business is also able to enter into contracts with other companies. Private Limited Companies, Limited Liability Partnership and Public Limited Companies are all types of incorporated companies.

Size and Scope

A majority of private sector businesses in the UK are small, medium sized enterprise (SME) with less than 250 employees, have an annual turnover that does not exceed £40m or an annual balance sheet total not exceeding £34m and 25% of its capital or voting rights are not owned by one organisation or jointly by several larger organisations that are outwith the definition of a SME.

SMEs are important for local areas providing employment, development and business growth. Local governments are encouraging individuals to start up business and providing assistance by offering funding through grants and rates relief for tax and business.

The level of employment within an organisation is the method used to gauge the size of an organisation. Small firms have become more important over the last number of years. Multi-national corporations that operate in more than one country can pose problems because of their size.

There are three main industry sector areas which are categorised by the type of business and goods they provide. These are:

• Primary sector – Consisting of businesses that provide raw materials such as oil or coal through mining and meats or vegetables from farming and agriculture.

• Secondary sector – Manufacturing companies that use the materials produced in the primary sector to produce a final component such as food production and textile manufacturing.

• Tertiary sector – Organisations that provide services to others such insurance, financial sector or health care.

Choice Housing is continuing to grow due to the continual demand for social housing in Northern Ireland. The Development Department within the organisation works to produce new homes for applicants from the Northern Ireland Housing Executive waiting lists. These new homes can be existing properties that are purchased or newly constructed properties constructed by Choice to meet demands for social housing in an area. In Northern Ireland housing associations do not have their own waiting lists but instead there is only one waiting list maintained by the Northern Ireland Housing Executive where all applicants appear on the waiting lists for their chosen location. Each housing association has access to this waiting list and uses it to make allocations of accommodation.

The Northern Ireland Housing Executive is the largest and main social housing provider in Northern Ireland, followed by 20 smaller housing associations offering social housing of varying types. The number of Housing Associations in Northern Ireland has reduced over the last 15 years from a total of 39 due to smaller associations merging together to create larger organisations.

These mergers result in the provision of better quality housing and services to the public. Rather than being competitors I believe that all the associations work together for the same aim.

Growth of organisations can happen either internally or externally. Internal growth occurs within a business either when there is a higher demand and further production required for the same goods or more products are made available by the company.

External growth happens through either takeover or merger. When two business join together voluntarily and by the agreement of both companies, this is known as merger. However, if one company opposes the merger when an offer is made this can result in a hostile takeover.

Mergers such as has happened to create Choice Housing is known as a horizontal merger. This type of merger is where businesses within the same sector and at the same stage join together to create a better and more specialised organisation, improved financial opportunities and reduced competition.

Organisational Function

There are two types of structure used by organisations, a functional structure and a divisional structure. Both structures have advantages and disadvantages which are discussed below.

• Functional Structure

Organisations that use functional structures organise the business by area rather than by product. Areas of the business are grouped together by similar skills or functions and each department grouped together as a whole, no matter how many different functions are undertaken within that department.

By using this structure it allows specialised teams to be grouped together although it can also result in inequalities in resources in departments. However, if a business is a single-product company this structure may be best suited as it would promote specialism within a particular section.

•    Divisional Structure

Self-contained business units within an organisation that each operate to make a profit would be use the divisional structure. Each unit would have a key function, located centrally such as HR, Finance, Development.

There are a number of both advantages and disadvantages of using divisional structures. There are some processes within divisional structures that are similar to those in functional structures.

The divisional structure is the structure that is favoured by most organisations as the advantages outweigh any disadvantages.

Macro Environments

Macro environments have an effect on all businesses regardless of its size or type. However, the amount of impact varies depending on the type of business the organisation operates in.

• Political Factors

Changes to legislation and government policies can impact negatively on businesses. Within the housing sector the introduction of bedroom tax has had a negative impact for both tenants and landlords. Tenants either require to look for smaller accommodation more suitable to their requirements or to find further funds available to pay the shortfall in their rent and possibly face financial hardship. Landlords are experiencing higher rent arrears due to this.

As a new immigration policy will be brought into effect following Brexit, businesses may have difficulties finding employees with the relevant skills required. An example of this is within the NHS who currently employ a large number of staff from EU countries and following Brexit may experience a shortage in nursing and medical staff with relevant skills. This could possibly result in reduced medical care and longer waiting times within the NHS.

• Economic Factors

Economic factors would impact negatively on organisations if there was an increase in taxation, interest rates or inflation. Increases in any of these would have a knock on effect not only for businesses but for customers and the general public, as people would have less money available to spend due to the higher cost of living and businesses would suffer a drop in sales. Businesses that are not prepared for any for any economic changes may be more liable to fall into bankruptcy. The opposite effect would occur if these rates fell as business sales would rise and customers would have more money available to spend. This would encourage business growth.

With Brexit just around the corner organisations are obviously very concerned about the repercussions of Brexit for their businesses. Companies that currently trade with other EU countries may experience difficulties until trade agreements are made.

• Social Factors

Demographics, lifestyle trends and advertising/publicity are some examples of social factors within the macro environment that would affect organisations. Businesses marketing products carry out research into each of these factors to ensure that there would be a strong market for their product. Demographic changes can have both a positive and a negative impact on a product. Within the social housing sector the demand or lack of demand for housing in a particular area can be seen as a demographic factor. A product that is in high demand in a specific area may increase sales if there is an increase in the local population but may also decrease if the population decreases. Companies therefore have to be prepared for change within the demographic factors to adapt their product to meet new or changing demands.

• Technological Factors

Technology is a constantly changing environment which affects all businesses from computers, manufacturing equipment, mobile phones and numerous other types of technology used on a day to day basis. Businesses have to be prepared to adapt to new technology to enable them to compete in the market they are operating in. Advantages to new technology are that it can enable organisations to operate more efficiently, faster and can also reduce costs overall by becoming more automated. Disadvantages are that initial costs purchasing and setting up new technology can be high, training for staff may be required and a reduction in staff could result in higher unemployment rates within an area.

• Environmental Factors

Environmental or ecological factors can impact businesses in several different ways that cannot be prevented such as the weather. The weather can impact on businesses by affecting production and supply of goods e.g. agriculture. The climate can also contribute to a reduction in demand for goods in particular weather e.g. winter jackets will not be required in hot weather, but an increase in demand for these items will occur in colder weather.

• Legal Factors

The law has a major impact on all businesses and how they operate through legislation and regulations. Changes can have either a positive or negative impact on businesses but can also help to protect the welfare of employees e.g. sick pay, holiday pay and the introduction of the minimum wage.

Strengths and Weaknesses

• Internal strengths

Specialised teams and departments such as asset management, development, finance and income recovery. Choice offers housing for all housing need types i.e. general needs, sheltered and supported accommodation.

• External strengths

There is a high and continuous demand for social housing in the area. Choice has properties throughout Northern Ireland so is therefore not limited to a specific area of the region. Housing association rents tend to be lower than private rented sector.

• Internal weaknesses

Policy and procedures can delay work progressing. The implementation of specialised teams can also be a weakness as staff cannot work within multiple sections. Repairs and annual planned maintenance are required on older housing stock to maintain it to a lettable standard.

• External weaknesses

Possible difficult to let properties in low demand areas. Housing associations are reliant on government funding to develop and build new homes. Government regulations and legislation can be problematic within social housing e.g. the implementation of bedroom tax creating difficulties for tenants to be able to pay any shortfall in rents, creating higher rent arrears. Reliant on government funding to develop new homes.

The macro factor of demographics and the external strength of continuous demand for housing are connected as they both play a large part in the demand for homes in certain areas. To further develop new properties Choice has to ensure that there is demand for social housing in the area and also what type of housing the demand if for. If the demographics of an area change and the population reduces after properties have been built this could lead to difficulties in letting the properties. If, however, the population increases in that area it may lead to further development of social housing within that community.

Both the economic and legal factors are also connected to strengths and weaknesses. If there are any changes in regulations within the housing sector the can have an impact on how Choice Housing operate. As previously mentioned, the implementation of the bedroom tax has had a large impact on how the Income Recovery team and Housing Department operate regarding the allocation of homes to meet applicant’s requirements and also regarding tenant’s rent arrears.

References

Books

• Pearson (2018) Higher Nationals in Business Core Textbook

Internal Report

• Choice Housing Ireland Ltd (2018) Strategy to 2021. Report. Belfast: Choice Housing Ireland Ltd.

Internet

• Oxfordcollegeofmarketing.com (2014) Oxford College of Marketing Blog [online]. Available from: <https://blog.oxfordcollegeofmarketing.com/2014/11/04/the-impact-of-micro-and-macro-environment-factors-on-marketing/> [Accessed 09 February 2019]
• Cron.com (2018) Advantages & Disadvantages of a Demographic Environment [online]. Available from: <https://smallbusiness.chron.com/advantages-disadvantages-demographic-environment-22283.html> [Accessed 10 February 2019]
• BBC.co.uk (2019) BBC News [online]. Available from: <https://www.bbc.co.uk/news/uk-northern-ireland-47094643> [Accessed 02 February 2019]