does size matter?
David Cowans is a divisive figure in housing.
To some in the sector, the chief executive of Places for People (PfP) represents everything that is wrong with the changing face of housing associations: a relentless commercial drive, and a determination to diversify away from providing genuinely affordable social rented housing. Such critics argue that he has effectively turned PfP into a private property company at the cost of social purpose, setting a dangerous precedent for the future.
To others, Mr Cowans represents everything that the sector has been lacking: a relentless commercial drive, and bold leadership pushing to innovate in order to provide a range of housing tenures in an era of minimal grant funding. Such advocates argue that by moving PfP away from focusing on traditional social housing business models, Mr Cowans is testing new ways housing associations can adapt to political realities to secure an independent future.
Ultimately, then, any conversation about Mr Cowans must escalate into a debate about commerciality in housing. Because this what Mr Cowans unapologetically embraces and embodies.
He is by far the highest paid chief executive, earning £432,928 a year – eclipsing the sector average of £161,313. He also runs the biggest association in the UK. In the past two years PfP has more than doubled in size from a 60,000-home landlord to one that owns and manages 148,000 homes with assets worth around £3.3bn.
In driving this growth Mr Cowans has raised eyebrows across the sector by buying up two private rented sector management companies, a leisure business, a retirement business and several portfolios of private rented homes, as well forming a series of joint ventures with private housebuilders, and bailing out developer Urban Splash. Now, in perhaps his most powerful statement of commercial intent to date, Mr Cowans has opened a plush new office in the beating heart of London’s financial district.
At every stage of PfP’s heady expansion, Mr Cowans’ peers have privately questioned whether he has gone too far; whether there is even a strategy underlying his seemingly insatiable appetite for acquisitions. Inside Housing visits PfP’s new corporate shop window to meet the man himself and allow him to answer his critics.
‘We decided to move here because we wanted to raise our profile,’ explains Mr Cowans, seated on the other side of a table in a boardroom, gesturing to the view of the Square Mile’s iconic skyline. ‘If you really think that a big part of the sector’s future is in institutional finance then it makes absolute sense to locate yourself in a place where you are pre-eminent and can be much more active and engaging with the financial institutions to influence their thinking about the future.’
The goal of increasing ‘influence’ and ‘relevance’ underpins much of Mr Cowans’ decision making.
‘As a leader I feel very strongly about the subject of relevance,’ he states. ‘If you’re not influential then you’re not relevant. Whatever we do is about boosting our relevance – and that comes from capability; what you can do.’
Mr Cowans cites the unlikely purchase of leisure business DC Leisure in 2012 as an example of this. ‘The business makes one hell of a difference,’ he explains. By this he means offering benefits to communities in terms of health and well-being, but also to PfP. ‘It is essentially a property business and a social enterprise so it is very close to our ethos. It also gives us another relationship with local government.’
Being a trusted leisure contractor for 28 local authorities will doubtless prove handy in PfP’s current discussions with councils about possible contractor and development partnerships. This joint venture approach is what Mr Cowans calls the ‘new paradigm’ as he seeks to create ‘an end-to-end offer’, making PfP a one-stop property and regeneration shop.
PfP has already set more industry firsts than any other association. There were successes, such as the first ever retail bond. And most recently, in what Mr Cowans describes as ‘a breakthrough’, PfP struck two deals in April with Manchester City Council and Falkirk Council’s respective pension funds, each using £30m to build homes. In the latest move to the City, Mr Cowans is now also clearly positioning PfP for an institutional PRS deal.
Wooing investors makes sense for PfP. It is one of the few housing associations to speak about making a profit. While most prefer to refer to a ‘surplus’ and actively describe themselves as not-for-profit, PfP describes itself as a ‘not-for-dividend’ organisation.
Similarly, it is ‘one of the UK’s largest property and regeneration companies’ rather than a housing association – and it is not a charity.
Accordingly PfP is run and benchmarked as much against private for-profit businesses as other associations. Nowhere is this more apparent than on the ever-contentious subject of remuneration.
Mr Cowans is the sector’s best paid chief executive – in part thanks to a £112,236 performance related bonus – and the PfP chair is also among the best paid, receiving £60,000 a year. But compared to some other property bosses, Mr Cowans looks very reasonable.
For example David Atkins, chief executive of FTSE-listed Hammerson, which has £6.3bn of assets, earns nearly £1.3m. And Andrew Cunningham, the chief executive at the UK’s largest listed residential property company Grainger – which owns and manages 40,000 homes nationwide – was paid a comparable sum of £420,000 in 2013.
‘We commission independent research, which creates a simple benchmark,’ explains Mr Cowans. ‘Given the sort of outfit we are, we are a bit of hybrid, so we use a hybrid basket, and I can tell you my pay is sub-median.’
What is his response to those who consider his pay as excessive?
‘I don’t normally respond to that because it is a very emotive subject to which there are as many views as there are people. So it’s a discussion that isn’t worth having to a large degree. I stick to the facts of the matter: I don’t decide my pay. The board does. Every board has the responsibility to reach some decisions and use the correct data to do so, and if it does then it meets its governance requirements.
‘Am I well paid for what I do? Yeah I am well paid for what I do. Do I generally think we should pay what it takes to get the best talent? Yes I do. I have always thought that.’
Mr Cowans attributes the sector’s discomfort debating and justifying competitive pay as a ‘transition pain’ as it grapples with change. He might be right.
On pay, financing and diversification, it’s certainly the case that where Mr Cowans leads, a growing number of landlords are following.
David Montague, chief executive of 70,000-home L&Q says: ‘Often David will say something at a round table and I will think “what are you talking about?”. Then, months later, I will find myself agreeing. I think the sector needs leaders like David. He pushes boundaries, and even if you disagree with him it creates space for others to do more. Two years ago I’d have said there is more I disagreed with than I agreed with. Now, I think I get it.’
Not everyone is onboard yet, though. Mr Cowans describes himself as ‘a fully paid-up member of the pragmatic party’. This entails being firmly rooted in the ‘real world’ and not having much time for views that he regards as undeliverable. Despite his undeniable charms, Mr Cowans’ bullish appetite for provocative plain speaking, ruffles feathers.
One chief executive, who did not want to be named, comments: ‘He [David] is a bright bloke with ideas, but he doesn’t take people with him. He doesn’t listen to other people, and so doesn’t have all that many friends in the sector.’
Tony Stacey, chief executive at South Yorkshire Housing Association and chair of the Placeshapers group of 100 smaller associations, says: ‘He is certainly innovative… but David has a tendency to trot out the “bigger is better” mantra. He once made an unfortunate comment about how housing associations should be more like Coca Cola. Quite daft.’
Hearing Mr Cowans express his view that grant funding for social housing is a thing of the past, it is easy to see how people could be rubbed up the wrong way. ‘“We are doing a good job, the government should give us loads of cash” is a paradigm that is well dead,’ he implores. ‘[But if you say that] you get criticised: “you can’t say there’s no grant, because then there won’t be”. There’s none now you idiot!’
How does Mr Cowans think he is perceived?
‘I really don’t know what people’s perceptions of me are. And there’s a bit of me… it’s not that I don’t care. It’s that I don’t have time, is the truth. So, I am more focused on what we need to be doing.’
However, he does care about any implication that his commercial focus in some way detracts or dilutes PfP’s social purpose.
‘The marriage of achieving a social ethos and a social outcome with commercial purposes is what we are really about. One is not that antithesis of the other,’ he states.
Mr Cowans also downplays the significance of PfP’s new-found scale. ‘I am not interested in claiming to be the biggest. I never have been… It really, genuinely doesn’t matter how big you are. At conferences, people going on about how many properties they have got is puerile. If the focus is so internal, no wonder we are not punching above our weight in the bigger world.’
It is notable that despite his emphasis on maximising relevance and influence, Mr Cowans does not regard sector-led approaches as the solution to this. Indeed, while many chief executives tell Inside Housing that the sector needs leaders like Mr Cowans, there is concern about whether Mr Cowans feels he needs the sector. L&Q’s Mr Montague says: ‘As a result of being on the outer edge of the sector they [PfP] are sometimes seen as not being part of it at all – which I think is a shame.’
Certainly Mr Cowans seems skeptical about the value of being involved in ‘the sector’.
‘It’s not that I don’t want to comment on other people [organisations] or the sector – it’s just, what’s the point?’ he reasons. ‘I don’t think there is one common view within the sector. I am not even sure there is agreement on what “the sector” means.
‘I only have so much energy. I used to do all this lobbying and get very involved – but it is a waste of time. You can spend a lot of time in committees and groups talking and it doesn’t matter a jot.’
Determined not to offend, Mr Cowans reiterates his main point: that every organisation is different and there is no right or wrong way to do things. ‘There is enough work for everyone,’ he says. ‘The truth is that one part of the housing industry isn’t going to solve the housing crisis. It needs to be all of us working together.’
On this point at least, however divisive he might be, Mr Cowans must have universal support.
In numbers: Places for People’s 144,120
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