Circle Housing has announced it is discussing the possibility of a merger with Affinity Sutton.

The two housing associations (HA) are examining if the consolidation will enable them to develop more homes and 'provide greater investment in local communities.'

If the merger goes ahead, it could potentially form one of Europe's largest HA's, with almost 127,000 properties home to almost 500,000 people across England.

The announcement comes in light of a housing shortage in the UK.

It is understood the country needs at least 200,000 new homes to be built each year, however only 140,000 are currently being developed.

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Keith Exford, CEO of Affinity Sutton, said: "As the recent election showed, new housing has become a critical issue for the country and yet there are few effective routes to providing the social and affordable homes at the scale so desperately needed.

"In the light of the significant reduction in our rental income announced in the Budget, both organisations are reviewing their business plans.

"As part of this we are also jointly exploring if we could raise significantly more capital together, allowing us to fund a far greater building programme than we could if we stay apart."

Mark Rogers, CEO of Circle Housing said: "It is very early days while we model the potential that this could have, in the context of the radically altered business plans which both organisations are now preparing; but we passionately believe that the sector needs to transform and this is one potential way to make that step change."

(LM)