It has been forced to make the 51 redundancies in development, design and support staff because of the investment it must make to meet the decent homes standard. It has set aside £1m to cover redundancy payments.
It is also being forced to sell land in London worth £5m that already has planning consent – an action that interim chief executive Caroline Pickering admitted was "unusual".
This is despite the fact the registered social landlord made a surplus of £6.3m for 2002/3 – down from £10.5m for 2001/2.
Peabody is known for high-profile, innovative developments such as Murray Grove and BedZed, which were lauded by the government (see "How Peabody made its name", right). It claims to have built 3885 homes in 2002/3 – which would make it the largest housebuilder in the sector. It will now cut its development budget from £9m to £6m.
Pickering said: "We'd have to put our hands up over things like BedZed and say, yes, we've lost money. Innovation is important, but we're going to have to balance it with more traditional construction.
"This is a major change of direction for Peabody, and one that has been growing since March. It's been a realisation of the scale of the investment we face, which really means we're going to have to cut back."
Pickering said Peabody would have missed its £48m 2004/5 budget by £3m-£4m if it had failed to take action.
She made the decision to cut jobs last month and governors backed the move at a meeting on 3 December. Pickering informed all 790 staff of impending redundancies in an email last Wednesday. On Thursday, 51 staff were individually informed they were being made redundant.
Those being made redundant will have use of an "outplacement" service to help them find new jobs outside the organisation.
One RSL chief executive said: "They've lost money on development. For them, cutting edge has meant bleeding edge."
A chief executive of a large South-eastern RSL added: "Peabody needs quite a lot of medicine – it is not a very healthy patient. It hasn't invested enough in its housing stock."
Of Peabody's 19,500 homes, 40% do not meet the decent homes standard.
It has committed £156m to bring them up to scratch over seven years. It also has unusually old stock: 5792 of its homes were built before 1900.
Derek Joseph, managing director of consultant Hacas Chapman Hendy said: "Peabody is in a unique position with the bulk of its stock being turn-of-the-century houses, which are very expensive to refurbish. However there must be issues around why it has only just realised this."
The news comes just two months after a boardroom row over increased development risk at Places for People, England's largest RSL, ended with it placed under Housing Corporation supervision.
Pickering said the choice of whether decent homes or development should be a priority is one that many associations may now face.
This flies in the face of the interim findings of the Barker review into housing supply, which called on the government to increase building (HT 12 December, pages 7-9).
Peabody appointed a replacement to McCarthy, former Amicus Group chief executive Steve Howlett, on 28 November. Pickering says he was informed of the move before he took up the post.
Pickering herself was appointed on 5 November and will stay until Howlett takes over in March.
McCarthy and Howlett were both unavailable for comment.
How peabody made its name
Groundbreaking schemes like BedZed, Murray Grove and Raines Court helped make Peabody’s name but undermined its ability to concentrate on other projects. Murray Grove in east London led the way in the rehabilitation of prefab in 1999 but things did not go entirely to plan: it took 10 months to build the 61 homes – almost twice as long as expected. Eco-friendly BedZed, built in Surrey in 2001, won plaudits from architects, but the costs involved prevented other developers from following Peabody’s lead.Source
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