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London
Tenants Federation
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ALMOs
- The Issues Examined What is an ALMO Arms Length Management Organisations (ALMOs) require the council to transfer the housing department to a non-profit company which operates semi-independently from the council. The council retains ownership of the housing stock and tenants retain security of tenure, and the right to manage, right to repair and right to buy. Flawed rationale for ALMOs The rationale for Arms Length Management Organisations (ALMOs) is financial. The ALMO leads to the council receiving additional grant of about £500 per dwelling. This is used to increase borrowing by a ratio of 10:1. In other words, there is no large windfall, the bulk of the additional money is borrowed and is repaid by tenants through the HRA in the normal way. Tenants fund ALMOs, not the government. The claim that moving the housing department outside of the council and corporate control will 'free-up' management and create a 'culture of innovation' is without foundation. ALMOs and the modernisation agenda ALMOs are promoted under Labour's 'new localism' umbrella. The centre-right uses language such as diversity, choice, participation and local control which implies a reform agenda of 'putting the public back into public services' and the 'rebirth of popular socialism'. However, this language masks an extension of privatisation, marketisation and deregulation. Far from being an alternative, ALMOs reinforce the third way. Set-up costs are substantial ALMO set-up costs have been substantial although few councils have disclosed the costs. Ashfield allocated £2m for set-up costs and all councils have spent heavily on consultants to 'justify' ALMOs and on selling the idea to tenants. The London Borough of Haringey planned to spend £612,000 on consultants, partly funded from its homelessness budget, until tenants and trade unions organised opposition. The formation of ALMOs means widening competitive tendering for repair and maintenance, support services and other activities and services thus increasing transaction costs (preparing specifications, advertising, evaluating bids). Higher transaction costs means a lower percentage of the budget spent on services. Democratic accountability and governance ALMOs are a regressive step for democratic accountability. Firstly, because there is no legal requirement for a tenant ballot on whether to have an ALMO or not, tenant involvement has often been marginal and fragmented. Tenant ballots have been held in some authorities (for example, Rochdale, Hounslow, Kirklees and Stockton) whilst others held 'consultation exercises' in which 'participation consultants' were employed to canvass tenants views. Most of these appear to have been sham exercises devoid of any discussion of alternatives. Secondly, tenants are in a minority on ALMO Boards. Most ALMOs have between 12-15 Board members split three ways - local authority, tenants representatives and 'independent' members with area boards reflecting the same structure. There is widespread concern
over the selection and 'appointment' of independent Board members.
The five 'independent' members in Hounslow include a property director
of a private firm, the managing Director of a property company,
a financial analyst at British Airways, a Waltham Forest bid for a place in the first round of ALMOs but was rejected, partly due to a proposal for a tenant majority on the Board. This was changed and they were successful in the second round. Thirdly, the transparency of decision-making may not change for many basic housing management operational matters, but key decisions on major policies such as demolition, regeneration, contracts, improvement programmes and the ALMO's corporate strategy, will in many cases be less transparent and accountable. Impact on tenants organisational capacity and representation A number of concerns have been expressed by tenants organisations including the potential loss of independence and danger of tenants being sucked into the ' business' of housing management; that the most active tenants will become Board members leaving a gap between them and other less experienced members; and that tenant's representatives will be held responsible for the ALMO's performance. Power through seats on the Board: Having a third of the seats on a company board gives the illusion of power rather than power which can be immediately exercised to affect change. All Board members are legally required to put the interests of the company before any other interest. The history of Leisure Trusts is a good example- they are run by management. That is why many senior housing officers are so keen on ALMOs. Tenants could lose their political independence to lobby and pressurise the council. Tenants are not getting power - they are being incorporated. The fact that at least three local authorities (Hounslow, Kirklees and Ashfield) have established an arms length company chaired by a tenant's representative surely reflects the 'security' felt by local authorities rather than an example of tenant empowerment. Effect on tenants organisation campaigns: In most cities ALMO Boards and area boards will require between 10-20 of the most active tenants to become Board members. There is concern that this will leave a vacuum which will be exploited by the ALMO. Demanding policy changes
in an ALMO is more difficult: An ALMO will be removed from direct political control compared to the housing and other council department or directorates. Tenant representation on the Board will frequently be helpful but this does not mean that it will be any easier to get tenants campaign demands met. In fact, housing officers will be able to hide behind the Company culture This is a consequence of establishing a company structure at arms length from the local authority. Although it manages public assets owned by the local authority, an organisational culture inevitably develops because of the company structure and because it is situated in a middle ground, neither part of the local authority nor in the private sector. Senior managers have, or believe they have, much greater freedom to manage. Recent examples of a AMLO company culture include moving the headquarters staff out of the town hall/civic centre to new 'business premises, pay increases for senior management, new company posts (Director, Company Secretary) at higher grades with private sector-style job titles, use of commercial names, for example, 'Wigan and Leigh Housing Company Ltd' and 'Tristar' in Stockton; and a new interest in type of company cars and allowances. Impact on DSOs Where housing management and repair services already operate within the same department, for example, Rochdale, Ashfield and Hounslow, repairs and maintenance services have also been transferred to the ALMO. However, this is not the case in most larger local authorities. In one authority a proposal to continue the DSO's repair and maintenance service and council support services for the first five years of the ALMO is under discussion. In the longer term, ALMOs will be tendering for all services despite tenants in most authorities long demanding direct service provision and integrated services, not outsourcing and fragmentation. The viability of many multi-service DSOs will be threatened by the loss of housing work. The wider impact on the local authority has never been examined in most ALMO studies. Long term sustainability It is important to take a 5-10 year perspective. It is doubtful whether stand-alone arms length housing management companies will be able to remain single service companies and resist internal and/or external economic pressures to expand by organic growth either by competing for work in other local authorities or through take-overs of other housing companies. Are ALMOs any different from housing associations which have consolidated through mergers and take-overs? ALMOs also face external challenges from housing associations, particularly those formed from stock transfers. Whilst ALMOs focus almost exclusively on housing management and maintenance, the larger housing associations have diversified into social and economic regeneration. Other developments include an increasing 'developer' role in major regeneration projects and the formation of partnerships between some RSLs and builders/developers in acquiring land for development. Will this put pressure on ALMOs to move into development and regeneration and thus seek to take over local authority regeneration functions? It is likely that a future government will encourage, if not force, mergers and take-overs to form single 'social housing' companies and partnerships with private developers. There is a clear parallel between the formation of ALMOs for council housing and Foundation Hospital status for three-star-performance NHS hospitals. Both mean transfer from the public sector (although ownership of council housing stock initially remains in the public sector), reduced democratic accountability and transparency, greater freedom to management to hire and fire, and the creation of legal entities which will make full privatisation much easier. Public management There is no evidence that an ALMO will improve housing management. Good and bad managers and the current organisational culture will transfer to the ALMO local, stock and barrel. There is nothing in the structure of an ALMO which directly improves the ability and capacity of management. Good managers will continue their work. But an ALMO gives poor managers greater freedom with less accountability The effect on staff All ALMOs to date have transferred rather than seconded housing department staff under the TUPE regulations. Trade unions in Ashfield attempted to get a 'fair employment clause' inserted into the contract but the council because "it would significantly exceed the requirements of TUPE" and "would affect the independence of Ashfield Homes Ltd". There are a number of other issues: Exclusion from national
pay ballots: Staff in Leeds City Council's arms length education company was excluded from the 2002 national pay ballot and many trade union branches fear that the same approach will be made to exclude AMLO staff in future ballots. This could be very divisive locally. National pay awards: Trade unions are concerned that ALMOs may not automatically agree to national annual pay awards. If staff are not balloted on the basis that they are no longer part of local government then it might be argued that there should be no automatic right to national annual pay awards. An ALMO which gets into financial difficulties will almost certainly seek to change terms and conditions, which has happened in a number of leisure trusts. Changes in recognition: Senior management in some ALMOs have attempted to negotiate only with shop stewards in the ALMO staff, refusing to deal with branch officials. This separation of trade union responsibilities and reduced facility time was common with transfers and outsourcing in the 1990s. It can lead to a more fragmented and weaker trade union organisation. Regeneration The formation of an ALMO will have significant implications for tenants and housing staff in regeneration areas. ALMOs will have more freedom to determine demolition policy and the development of sites. This could lead to larger scale demolition in selected areas to meet other objectives such as creating the 'right' conditions for 'growth' and 'balanced communities'. ALMOs are also likely to have more independence in determining rehabilitation and improvement policies, perhaps biased towards improving areas adjacent to new privatised urban villages in conflict with tenants demands and priorities. Setback in search for integrated services Achieving joined-up and integrated services is a shared objective of tenants, local and central government. There is some valid criticism of the 'silo' mentality created by vertically divided council departments with staff having tunnel vision and operating to safeguard narrow vested interests. But an ALMO makes this problem worse. It not only separates housing management from strategic housing policy, it also creates a single service company outside of the main local authority corporate structure. It reinforces the company's and staff vested interest in housing management or landlord service making joined up service delivery with other council departments such as social services, education, leisure and regeneration more difficult to implement. There are thus more organisational, budget and vested interests to break down in order to achieve genuine joined up service delivery. Staging post to privatisation Most local authorities
are quick to deny that an ALMO is a staging post on the route to
privatisation. However, although privatisation may not be currently
on the agenda, the lack of clarity and weak rationale for ALMOs
conceals concerns about the government's longer-term commitment
to council housing. For example, a Pricewaterhouse Coopers report
for the London Borough of Haringey reinforced this point: Furthermore, an arms length company structure makes privatisation much easier. Look at what happened with arms length municipal bus companies in 1985/86. They were privatised at the stroke of a pen because they were separate companies. Privatisation would have been much more difficult if the service had been an integral part of the local authority corporate structure. There is an alternative The financial benefits could and should be made available to all local authority housing departments thus avoiding the necessity of an ALMO. The government could introduce investment allowances to finance investment to give tenants real choices about future investment options and secure the rapid improvement of council housing.
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