Tenant Management Organisations – a risky gamble?

By Tom

09 December 2012

This is a guest post by Julian Jackson*

Tenant management is promoted the best form of social housing management.  Tenant Management Organisations (TMOs), which have been around since the late 1980s, are touted as a co-operative system under which council housing residents – both renters and leaseholders – successfully manage their estates under benign council supervision.  Unfortunately this is not the whole story.  Tenant Management Organisations can go drastically wrong and are a huge diversion of scarce public funds from mainstream council housing. 

TMOs take many years to come to fruition and cost hundreds of thousands of pounds of ‘development’, funds which mainly go to consultants who are supposed to help residents through the complex process.  The development money comes from central government and local councils who are obliged by law to fund TMO developments by residents who want to pursue their ‘Right to Manage’.  The process involves a series of assessments before all residents finally have an opportunity to vote on whether to transfer management responsibilities to a TMO. 

As TMOs are run by voluntary management boards, often lacking the necessary skills and experience, they are prone to running into problems.  In Southwark three TMOs collapsed and were brought back into council management and a fourth is under a supervisory regime, having run into financial and personnel difficulties.  The Unwin and Friary TMO in Southwark was voted down in 2010 after eleven years of development costing over £213,000 – 74% of residents voted against it managing 900 homes.  In Bristol the Bedminster TMO never even got to the ballot stage; repeatedly failing its assessments.  Started in 2008 and set to take over 1,842 homes, it was closed down in 2011 as it didn’t reach the standards of governance necessary, costing the taxpayer £211,000. 

The supposed ‘efficiency savings’ made by TMOs are offset by the increased scrutiny needed and the unexpected pressures on council budgets when TMOs implode, as they regularly do.  The amount of money needed to get a TMO off the ground means that they aren’t a cheap option, but in reality a very expensive gamble. 

Perhaps more worryingly, Tenant Management is often a two-stage route to the privatisation of social housing.  TMOs do lead to stock transfers, something their proponents often deny.  Three in Lambeth became part of a Housing Association following a controversial vote last year.  The Walsall-based WATMOS Housing Association took over 1,400 homes in the south London borough. 

Far from the co-operative ideal promoted by parties with vested interests, TMOs are at best a form of benign paternalism from a small group of individuals, with little sign of a wide democratic mandate or participation.  The legislation (Industrial and Provident Societies Act 1965 and Housing Regulations 2008) is extremely weak, and allows TMOs to have extraordinary amounts of power, untrammelled by the checks and balances that reside in councils, or proper companies registered with Companies House.  There are therefore huge opportunities for financial mismanagement.  The arrest of several Lambeth TMO officers for alleged fraud last year and the discovery of a £606,000 budgetary overspend in another Lambeth TMO is therefore unsurprising.  Tabard Gardens and Perronet House – two of the TMOs that failed in Southwark a few years ago, both had serious financial irregularities which were major reasons behind their collapse.

Taxpayers’ money supports a phalanx of external private consultants whose job is to promote TMOs.  During the eleven years of Southwark’s Unwin and Friary TMO’s development, these consultants received over £200,000 of taxpayers’ money.  One consultant disappeared abroad in mysterious circumstances with funds from three TMO developments, including £18,788 from the UFTMO.  Once a TMO is set up, these consultants lose their income stream: therefore it is in their interest to then encourage the TMO to become a Housing Association, in effect a form of privatisation.  These ‘independent’ consultants’ views about the awesome delights of TMOs, widely disseminated, should be taken with a certain amount of scepticism. 

Council housing has proved over many years to be a stable, successful and cost-effective way of housing people.  The way to deal with the housing crisis and to also, in a classic Keynesian way, provide valuable employment in a recession/depression – which is what we are experiencing – is to provide more council houses, not farm out core council activities to individuals who are not necessarily capable of the managerial skills necessary and as volunteers, rather than paid professionals, have no long-term commitment to the project.  After a few years the TMO management board often dwindles to a tiny core of often-unsuitable people who run the estate after their own whims, which we in the NoTMO group call a Rogue TMO.  Not, I would suggest, a particularly desirable outcome for the majority of residents who in practice have less democratic input than under council management.  This is not because there are a few ‘bad apples’, but because of the weaknesses of the system which makes it likely that a significant number of TMOs will go wrong in various ways. 

*Julian Jackson is a founder of the successful NoTMO campaign against the Unwin and Friary TMO in Southwark.

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