There is clearly a whiff of panic in the corridors of power as the fateful day of the Autumn review approaches. Osborne is scrambling about for sources of money as he tries to overcome the impact of the spat in the House of Lords over the cut to Tax credits. A report in Friday’s Financial Times said that George Osborne was considering “selling off the government’s stake in the housing association sector” to private investors. In fact the government does not have “a stake” in housing associations. It, and previous governments, gave them grant for building new homes, not loans like Councils. The total grant, said to be £44 billion, goes back as far as 30 years. The money has been spent. It does not exist. It is like the Monty Python parrot.
The government has denied any basis to the story. Yet clearly the Financial Times did not invent it. Government sources have been speaking to it. Indeed it points to different battling camps; those in favour of ‘radical change’ and a more ‘moderate’ wing.
It’s difficult to see how the government could fleece these organisations without entering a legal minefield. How could they sell this “stake” when the money has been spent? The only way that it could become an “asset” which the government could sell to an ‘investor’ (read financial vampire) would be to recoup it’s value, house by house, when a property was sold. But this would be retrospective legislation, imposing conditions on old grant after the fact. This would surely be subject to legal challenge.
Brendan Sarsfield of housing association Family Mosaic said:
“If government sold it to someone who is expecting a return, it either takes capacity out of the sector to build, or rents would have to go up to pay for it. It doesn’t make sense if they want to get us building, or get the benefits bill down. At the moment the grant just sits there and nobody expects it to be repaid. If that became an equity share the investors would want an annual return, and where is that going to come from?
In order to ensure that return, they might also want to say to us don’t build for poor people any more, act like property developers.”
Clearly a move such as this would be nothing other than asset stripping which would pose a big question mark over the ‘credit-worthiness’ of housing associations which have £76 billion of private sector debt.
Much confusion stems from the decision of the Office of National Statistics to reclassify Housing Associations as ‘public bodies’. The fact that the government knew this decision was coming was clear when David Cameron declared in parliament that housing associations ‘are’ public sector bodies, before the ONS declared them as such. (The government was “preparing their excuses beforehand”) Reclassifying them as public bodies makes no more sense that reclassifying a privately owned house as publicly owned when the owner has received government support with mortgage interest payments when they have been made redundant.
Facing both ways
The ONS decision was a nonsense. Housing Associations are private companies, mostly with charity status. Whilst they have had government grant most of their money is borrowed from private sector financial institutions. The problem for the government is that they are facing both ways. Minister Greg Clark has said that the government will ‘deregulate’ Housing Associations in order for them to be classified as being private sector bodies yet they are instructing them to sell their homes under ‘right to buy’ and telling them to cut their rent by 1% for four years. How can you deregulate them and tell them what rent to charge?
Clark’s written Ministerial statement of November 2nd said:
“This is purely a statistical change. Reclassification makes no material changes to the operation of housing associations, does not nationalise housing associations and the Government has no plans to impose new controls on the sector – including over spending or borrowing….Housing associations are voluntary organisations and we are committed to reflecting their historic voluntary ethos and strongly believe they should continue to be independent of the government.”
He goes on to say that the government “is committed to developing deregulatory measures to help housing associations to build more homes and help more people into home ownership.” Although we don’t know exactly what this ‘de-regulation’ will entail, the phrase “help more people into home ownership” expresses the essence of the government’s approach. Although the ‘voluntary agreement’ with the Quislings of the National Housing Federation was ostensibly about the extension of ‘right to buy’ there was much more in it as we have explained elsewhere (“Housing Associations capitulate over ‘right to buy’”). Chapter 3 of the agreement, in the words of one Housing Association Chair “appears to have introduced a wave of government policy into a voluntary deal, which has not been subject to a democratic process”. In brief it involves the abandonment of ‘social housing’. It said:
“As a general principle, we understand the government would like to see all newly built housing association properties incorporate an element which enables the tenant to become an owner (or part owner) over time.”
This is nothing less than the abandonment of the historic role of housing associations of providing ‘social rent’ homes. The government is also talking of greater ‘flexibilities’ for housing associations on who they take as tenants, meaning that they would be able to turn down poor tenants which Councils asked them to house.
Neither coalition government, nor this one, provides any subsidy for ‘social rent homes’. It is now ending the right of Councils to impose a certain percentage of ‘affordable’ homes on developers, and making it an obligation for Councils to include ‘Starter homes’ (20% lower than the market price). These will probably be deemed to be “affordable homes”.
There is a fundamental contradiction between ‘de-regulation’ and the maintenance of central government diktat over housing associations. For instance, the imposition of a 1% rent cut over 4 years, which won’t be implemented until next April, has already led to a wave of job cuts and announcements that housing associations will cut back on plans for new house building.
As we wait to see what form the ‘deregulation’ will take, what is clear is that the government has abandoned any support for ‘social housing’ and the extension of ‘right to buy’ to housing associations, together with the enforced sale of ‘high value’ council homes, can only lead to a decline in the quantity of the ‘social housing’ stock. We know that many housing associations, having signed the ‘voluntary agreement’ 1, are abandoning building homes for ‘social rent’.
Turning housing associations into property developers?
Clark has complained that “the sector’s heart is in developing properties for rent” whereas it showed little zeal for developing homes for home ownership”. He wanted the sector “going beyond the strict business of building and renting homes”, “to expand the mission by expanding the opportunities of home ownership even quicker”. In other words he wants housing association to act like property developers, commercial businesses.
The agreement says that the “freedoms and flexibilities” it is introducing “would have the potential to transform how housing associations operate, liberate them to operate more commercially”, or to put it another way, liberate them to abandon their role as providers of ‘social housing’. The consequences will be a deepening of the housing crisis as less and less genuinely affordable homes for rent are available for individuals and families forced into the expensive private rented sector, or living at home with their parents.
November 15th 2015
155% of the national Housing Federation affiliates signed up to it.