The housing associations said they want to build a variety of homes across a range of price points but with a focus on delivering homes for subsidised rent and low cost home ownership for people in housing need, should their merger go ahead.
The boards of Affinity Sutton and Circle formally agreed the deal on 1 September, which will create one of the largest house builders in the UK.
The group could start building affordable homes within the next few months, as approval from the Homes and Communities Agency is expect to be considered in September and legal completion will take place “as soon as practically possible after that”, they said.
Chair designate Robin Young said: “We have recently seen the collapse of a number of planned mergers in the sector. Given this I am very pleased that our respective boards have put in place both the formal agreements and the structures to ensure the successful merger of Circle Housing Group and Affinity Sutton.”
The merger should be good news for the government, which has been lagging woefully behind meeting its housing targets of building one million new homes by 2020, despite indications house builds had risen by 7% in England between April and June.
During that period housing associations brought to market 6,400 new homes and started 4,970 entities out of a total of 34,920 and 36,400 respectively – too few, according to the industry.
MPs are currently investigating whether the industry has the capacity to build enough houses or, if not, what constraints it is facing and how they can be overcome.
Affordable housing is a particular problem, as house prices have risen steadily in recent years spurred by high demand and low supply.
A damning report by the Local Government Association in July had warned millions of working people would need access to some type of affordable housing by 2024 as they will no longer be able to afford somewhere decent to live.
In response, provider Legal & General called on the government to mobilise local authorities and associations and incentivise private constructors to build “thousands” more homes.
Affinity and Circle said they plan to lead on major neighbourhood transformation projects, which would generate support from both local and national government.
Deputy chair designate Neil Goulden said: “We have approached this merger in a diligent manner which has led us to this critical milestone. The shadow board and designate executive team are confident that we will play a leading role in building more homes and investing in communities and providing vital help to those who have been failed by the market.”
The groups also pledged to create a regional structure that would ensure local decision making and close working relationships with the community.