TWO of Hampshire's largest housing associations - the Eastleigh based Atlantic Housing Group and Aldershot based Pavilion Housing Group - are in talks about a possible merger.

The two organisations, which have control of more than 10,000 homes, have signed a "memorandum of understanding" that commits them to serious negotiations but is not yet legally binding.

Discussions are now said to be continuing on how the pair might come together as a new group.

Earlier this year, the Pavilion Housing Association - the founder member of the Pavilion Housing Group which is the largest provider of housing association homes for rent in the Aldershot, Farnborough, Ash and Farnham areas - was heavily criticised following an Audit Commission inspection.

A report said the association was providing a service to tenants which showed scope for "considerable improvement".

It said performance in the maintenance service had been falling for some time, there was underinvestment in some housing estates and the standard of estate services in some cases was poor.

Eastleigh Housing Association, with nearly 5,000 homes for rent, is the largest part of Atlantic Housing Group and operates in Eastleigh, Winchester, Fareham, Southampton and the New Forest.

A spokeswoman said tenants had been informed about the merger talks in a recent newsletter and added that they would be consulted about the move along with staff and stakeholders.

Board members from both groups are said to believe that both partners would see "major benefits" from a merger. Atlantic is strong in affordable housing in south Hampshire and along the south coast, has a repairs and maintenance subsidiary, Wessex Property Services, and a care services subsidiary, Fernhill Care. Pavilion manages and develops homes in north Hampshire and Surrey with its assets in shared ownership, key worker and student housing.

Atlantic's chief executive David Smith said: "The overriding motive for both Atlantic and Pavilion in all our discussions has been whether any merger will improve services.

He declined to comment on Pavilion's poor audit commission report as did Jackie Davenport, a tenant board member of Eastleigh Housing Association.

But Mrs Davenport said: "I think that the merger could only be good for the housing association and, therefore, for the tenants."

But EHA residents living in Falkland Road, Chandler's Ford, did not seem so sure.

One woman, who asked not to be named, said: "You can't possibly know in an area that big what individual tenants' needs are."