What is the optimum size for a social housing landlord in the Ontario context?
Social housing has been delivered over the past 70 years under different program structures and arrangements. Some were deliberately targeted to community-based housing non-profits and others were not. Programs were often targeted towards particular client groups as well. The client group often dictated what the built form was (and vice versa). For example, apartment high-rises with bachelor units were targeted to single adults or seniors. Townhouses with multiple bedrooms were targeted to large families. Many units were accessible and built for families with one household member with a disability. Different client groups also required different levels of support. The organizational structure which supported the day-to-day running of each building was informed by the built form and client group.
Conventional thinking is that large scale is better however, operating at a small scale can be advantageous. In reality, both offer advantages and disadvantages. To answer the question, “what is the optimal size of a housing organization in the Ontario context?” it is important to first ask, what is the objective or the outcome the organization is trying to achieve?
Smaller scale can create a higher quality service because the landlord and residents are closer. Smaller scale can create a personal touch. Tenants and staff can have a stronger sense of being involved. On the downside, having multiple small-scale operations can create duplication of effort. For example, each organization must pay for its own administrator and auditor. Separate books must also be kept. At a system level it makes sense to have multiple larger operators that can address the complexity of needs in general. Larger scale organizations can benefit from some economies of scale through centralization of functions like finance, purchasing or IT. Larger scale organizations can also drive efficiencies and ensure value for money through the use of business intelligence analysis and hiring of specialized professional staff.
To determine what the right size should be of any organization, there needs to be a delicate balance between the views of staff and the Board. It is the board’s responsibility to ensure that there is a clarity of mission and mandate. Too many business lines can create confusion and diseconomies of scale. An example of a diseconomy of scale is when there is wastage due to a lack of coordination or when the organizations suffers from poor communication. If residents are feeling that their landlord is too out of touch, that they are not listened to or responded to, this would suggest they are too big and that they need to operate at a smaller scale or that they need to have a staffing structure that demonstrates responsiveness.
If the organization is trying to ensure local decision-making, closer relationships between landlords and tenants and quality service delivery, small can be a better choice. But then how small is too small? Too small generally means the organization does not have enough money to hire professional staff or it cannot meet the standards as set by government. Too small means the organization might not be financially viable in the future and that the organization cannot respond to economic fluctuations, revenue decreases, or other risk factors. Too small means it cannot spread risk across the organization leaving it vulnerable to demands it cannot meet. There needs to be a balance between delivering an effective service to meet the needs of tenants and government while also ensuring financial and social sustainability over time.
Housing organizations have to achieve their mission or their desired goals. Their missions include functions such as rent collection, tenancy management, asset management, maintenance, financial analysis, capital planning, staff training, customer service, legislative compliance and strategic planning. Some of these skills are highly specialized and the job market will require a higher level of pay for certain professional skills (e.g. accountants, building science professionals, etc.). Business and funding models have to be able to accommodate this.
If the organization is trying to ensure that it is effective and provides value for money, is an active partner with government in building and redeveloping aging housing stock over time, takes advantage by centralizing common services, then large can be a better choice. But then how big is too big? Large scale delivery can alienate tenants, lose focus and at some point, create diseconomies of scale. This can result in confusion on the part of staff about mission or mandate, lower staff motivation and may create a lack of accountability.
Combined solutions are possible. Larger scale may be good for market reach and ensuring efficient back office services but, it could be combined with small-scale, market-sensitive, local customer-facing operations.
There is no perfect ‘one size fits all’ approach. Organizational size is really a decision made by the board and leader. It is influenced by the mandate of the organization, how much funding or revenue the organization has, and the types of professionalized skills that are needed.
Research from the United Kingdom suggests that housing management might be better undertaken in an optimal range of 1,000-5,000 units. However, if there is a strong need for new development or redevelopment, a much larger optimal range of over 5,000 units is needed. If there is a strong need for sophisticated back-office services, more than 10,000 units is needed. But, then again, the organization has to be sensitive to local conditions. These ranges may work in a country like the United Kingdom which has a much higher population than Canada, a much denser population and a significantly larger social housing sector, but these ranges might not work in the Canadian context.
Canadian housing provider boards and staff need to ensure that their organization:
- focusses on its strengths
- retains those functions or specializations where it is an identified leader
- is clear about service delivery gains from focussing itself in one area over another
- partners with those organizations that are specialists in areas where the organization needs assistance
- carries forward with decisive action