The applicability of portfolio analysis in social management

As a result of changes in housing policy in the 1990s, social landlords in the Netherlands operate largely independently from the government. Without direct financial support, with less government regulation and decreasing demand for social housing, they are adopting a market-oriented approach in housing management. In doing so, they may use methods from 'commercial' business theory. This paper focuses on the method of portfolio analysis and answers the question how this method can be used by Dutch housing associations. On first sight, the usefulness of the classic forms of portfolio analysis known from business theory seems to be limited. These analyses put emphasis on financial performance, which is not conclusive for social landlords, and on diversification while housing associations have little possibilities to diversify out of housing. However, financial performance has become more important for the Dutch housing associations since they have to operate without direct financial government support. Furthermore, Dutch housing associations manage a wide variety of dwellings, so the analysis can be useful to diversify within their residential portfolio. The usefulness of the method may improve by using portfolio analyses which have been specifically designed for housing management, but will remain restricted. At a strategic level in the organization the method offers general directions for strategies to follow but does not offer conclusive actions that should be taken. Furthermore, there will always be discussion about the performance measures that social landlords should use, and in particular about how they should weigh social and financial performance against each other. For social housing managers, it might be best to use classic forms of portfolio analysis as a mirror for their decisions. If they choose a path differing from the one suggested by the portfolio analysis, they have to explain why, referring to their social objectives.