The Law Commission published its report on Technical Issues in Charity Law in September 2017 following a public consultation.
The likely long term consequences of the ONS decision to classify housing associations as part of the “public sector” are, as we have said in our recent e-briefing, not going to make any practical difference. However, the Government has said that it will introduce deregulatory measures into the Housing and Planning Bill that will lead to housing associations being classified back as private sector bodies. Bearing in mind the ONS reclassification was based on the Housing and Regeneration Act 2008 and the Localism Act 2011 and not the recent rent reduction and “pay to stay” proposals, it is unlikely that the Government will be able to persuade the ONS to change its mind without coming to a new long term deal over the future direction, regulation of and control over the housing association sector. The current “fudge”, with the Government saying it wants to deregulate but in reality imposing more and more controls, is fast becoming untenable.
The new deal will likely need to address the fundamental areas of regulation by the HCA, rent control and restrictions over asset management for housing associations.
A New Regulatory approach
When “Regulator” is mentioned, many charitable housing associations immediately think of the HCA and forget their charitable status with the oversight by the Charity Commission (directly, where they are registered charities and indirectly via HMRC if they are exempt). What if the regulatory relationship with the HCA was much more like the relationship between registered charities and the Charity Commission?
This would be a much reduced HCA with materially less resources and a limited ability to maintain any ongoing supervision of housing associations going through “business as usual”. It would concentrate on its backstop role for housing associations who find themselves in material difficulties. Protecting tenants’ interests may end up being left to security of tenure provisions, the Ombudsman and the fact they are the charitable beneficiaries, for whose benefit many housing associations exist.
The HCA may well still be able to help preserve the “non-default” status of the sector as far as lenders are concerned. To do so, they may need to accept that housing associations in financial difficulties may, when there are no other options, have to sell social housing assets on the open market to repay indebtedness – something that we have got perilously close to on one or two occasions in the recent past.
A recent question on everyone’s lips has been what the government’s new rent control regime will look like after the proposed four years of reductions. What if there was no rent control beyond market rents and, instead, Universal Credit was the primary mechanism for downward pressure on future rent rises, leaving tenants having to decide between paying an increased rent or buying food and other essentials? It may be the government becomes less interested in overall rent levels and just takes an interest in what the welfare benefit bill is – controlled by payments to benefit claimants and the relevant caps. Housing associations would then be left to determine their own rents according to their (mainly) charitable purposes and their own vision for who they serve. How could housing associations then use these freedoms to develop a range of housing products and services to meet the differing needs of those they seek to support? However, in some geographic areas, we need to recognise that some housing association rents could not be materially increased due to them being in low rental areas.
Asset Management Freedoms
In its response to government on the VRTB proposals, the NHF lobbied for housing associations to be given asset management freedoms over their properties when they become void. What if government was to take up the offer and do away with the current requirements on housing associations to obtain HCA consent for any void that is taken out of social housing? This is particularly relevant bearing in mind the importance placed by the ONS on asset management freedoms within its reclassification decision. Would housing associations be willing to pay off any associated grant on these properties as the price for greater asset freedom? The ability to decide to “flip” social rented properties to market rent or for sale without any regulatory consent in order, say, to support an enlarged development programme would truly give housing associations the keys to determine their own destiny.
As far as future credit ratings and reassurance to funders is concerned, watering down the role of the HCA could lead to the risk of more expensive borrowing. However, this may be more than made up for by the assurance of wider rental and asset management freedoms.
All of this is based on housing associations realising they could be leaving the quiet backwaters of a highly regulated sector and sailing out into choppier waters. There, they will be much more exposed to commercial pressures but will still have the freedom to determine their social purpose and how they are to remain distinctive and serve the disadvantaged. This is the reality in which many social enterprises and charities operate and would be the appropriate place for a thriving and independent housing association sector. This simply leaves the question of who is going to house the poorest in society if housing associations convert good quality, low rent housing into market rent and sale. Are we ready to face this “new reality”?
This is an opinion piece written by Peter Hubbard , Senior Partner of Anthony Collins Solicitors, but written in his personal capacity. For further senior executive support and advice to housing associations, please contact a member of the team at Anthony Collins Solicitors.
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