Housing Associations have no accountability and a 2-year-old has paid the price

The tragic death of Awaab Ishak, the two-year-old killed by exposure to mould, has been described in detail over the last week. We’ve heard of all the complaints made against Rochdale Boroughwide Housing (RBH), the housing association which owned and managed the flat.

And yet, the organisation appears to be full of self-congratulation. It boasts on its website that “on 26 June 2013 RBH became the UK first social housing provider to become a mutual organisation, co-owned by its tenants and employees”.

The culture of the organisation can be illustrated by a decision taken earlier this year. RBH is completely separate from the local council and has no councillors on its board. But there were two councillors on the housing association’s representative panel, a group made up of employees and tenants who approve the corporate strategy and appoint the non-executive directors.

In the centre of Rochdale there are seven late-1960s tower blocks, known as the Seven Sisters. In 2017, RBH proposed to demolish four of them. Responding to local opinion, the two councillors had the temerity to criticise RBH’s decision in public and to table a motion about it at a full meeting of the council.  

RBH accused them of breaking its code of conduct and voted to remove them from its panel. Despite being democratically elected and having the support of the council, they had no means of redress.

We might reasonably wonder, given that this is how councillors could be treated, how tenants of RBH might have felt when contemplating a complaint about the conditions of their accommodation.

The potential interactions were the topic of an important book written 50 years ago by Albert Hirschman, then at Harvard.  Entitled “Exit, Voice and Loyalty: Responses to Decline in Firms, Organisations and States”,  it has stimulated a huge literature in academic disciplines such as politics and economics.

Hirschman’s basic idea appears to be simple. If consumers, tenants, or voters think they are getting bad service, how can they respond? They might do nothing and just put up with it, a behaviour which Hirschman called loyalty. They can complain, described as voice, or they can buy another brand or vote for someone else – exit.

His framework can be set up as a formal model in game theory.  Of course, it’s complicated by the fact people often have imperfect information. But in essence, the model predicts that an organisation will only respond to an individual using “voice” if it either depends on the individual’s support or he or she has a credible exit strategy.  

The tenants of outfits such as RBH do not usually have “exit” available to them as an option. In principle, mutual ownership means that the board does depend on the support of an individual, but in practice the complainant can easily be ignored. Indeed, there is an incentive to deter complaints by making the potential cost of using “voice” high.

Organisations such as this proliferate up and down the country. Both Labour and Conservative governments have been willing to hand over power to outfits which are insulated from political control in the belief that this will somehow make them more efficient, less susceptible to the short-termism of politics where the focus is always on the next election.

Councils can certainly be inefficient and remote. But in practice, voice can have more impact on elected councillors. In Oldham, for example, next door to Rochdale, in two successive elections the Labour leaders have been voted out by the electorate with large swings entirely contrary to the national sentiment.

Rochdale Council has called for RBH stock to be handed over to them. The government should act and do the same with many of the housing associations which currently exist.