Brighton Housing Trust in merger talks with the mental health charity Sussex Oakleaf.
They said that the aims of the merger included extending services for clients and tenants, strengthening and protecting their joint financial position and increasing opportunities for further growth.
If the two charities agree to merge, they are likely to become one organisation formally in April next year.
Sussex Oakleaf chair Graham Maunders said: “We are very excited about the prospect of working more closely with Brighton Housing Trust to improve our offer to clients.
“We have had a close relationship with them over many years. We are two organisations with very similar values and we feel that we complement each other well.”
Brighton Housing Trust (BHT) chair Joan Mortimer said: “By bringing the two organisations together, we will become stronger than the sum of our two parts.
“At the heart of our considerations are the tenants and clients of the two organisations.
“There is clear evidence that this is a win-win situation for them, benefiting from the combined strengths of both Sussex Oakleaf and of BHT.”
Sussex Oakleaf chief executive Philippa Thompson said: “We have for many years enjoyed a close relationship with BHT, working to provide training for our staff teams, attending each other’s conferences and, most recently, collaborating on various projects.
“It became increasingly apparent that there is an exceptionally good cultural fit and this has been evolving further over the last six months.”
BHT chief executive Andy Winter said: “We were delighted when approached by Sussex Oakleaf regarding a possible merger.
“It makes complete sense to come together in the interests of our tenants and clients, our financial wellbeing and our ability to grow in the future.
“Frontline services will not be affected by this merger and we will be building a new management structure which will reflect our joint strengths.”
Over the next three months joint consultation will be undertaken with tenants and clients, stakeholders, funders and regulators.
A final decision on whether to proceed with the merger, taking into account the feedback from consultation, will be taken by the boards of the two organisations in June.
If both boards agree to proceed, a new combined board and a new management team will be appointed who, by April 2020, will bring together the legal entities, the staff teams and the policies and procedures for the merged organisation.
Sussex Oakleaf provides a range of support services to people with mental health needs, those with a personality disorder and individuals at risk of homelessness.
It aims to empower people and promote independence by providing recovery-focused community wellbeing services, residential care, peer mentoring, housing support and volunteering opportunities.
It provides services across Sussex, including in Brighton and Hove, and has its head office in Burgess Hill.
Last year it worked with 1,356 clients. It employs 90 people, has 20 regular volunteers and has an annual turnover of £2.9 million.
BHT is best known for its work around homelessness but provides a range of services across Brighton and Hove, Eastbourne and Hastings, as well as elsewhere in Sussex, including care and support services, homes, advice and legal representation.
Its mission is to combat homelessness, create opportunities and promote change. Last year it worked with 7,946 clients and tenants, preventing 817 households from becoming homeless.
It employs 210 members of staff and has an annual turnover of £12.3 million.