Housing associations and the Right to Buy Contents

9The HCA and regulation

The ONS reclassification and deregulation

106.The HCA (Homes and Communities Agency) has an important role to play as the Regulator for social housing. It works to ensure that social housing providers operate effectively to protect the public investment and ensure the provision of social housing. It monitors housing associations’ compliance with a regulatory framework, which has been revised following the Government taking steps to deregulate the sector. On 30 October 2015, the Office for National Statistics (ONS) announced that housing associations would be reclassified as public corporations.108 The judgement resulted from measures brought in by the Housing and Regeneration Act 2008 and effectively meant that housing associations, and their estimated £60 billion of debt, were now part of the public sector. The Government quickly made a commitment to deregulation of the sector to reverse the classification: in a speech on 5 November 2015 the Secretary of State said that the ONS decision was a technical matter and that the Government intended to restore housing associations’ classification outside the public sector.109 The Committee welcomes the commitment by the Government to deregulate housing associations and return them to the private sector. Housing associations’ strength is their independence and diversity. We encourage the Government to fully recognise housing associations’ status as private bodies.

Lender confidence through regulation

107.Deregulation must balance the priorities of giving enough freedoms to secure a non-public classification from the ONS with sufficient regulation to give lenders the confidence to fund continued development. Before the ONS announcement on reclassification, Paul Smee from the Council of Mortgage Lenders had told us that “lenders take the view that the sector is a well regulated one, that it is one in which they have had a lot of confidence over the years, and I do not detect any change across the lending community in their attitude towards the sector in the light of [the extended RTB].”110 However after the ONS announcement and the Government commitment to deregulate, there were some reports of concerns. For example the credit agency Moody’s warned that any deregulation would likely reduce lender confidence:

“The government is now signalling that it will respond to the reclassification by diluting the regulatory controls…Moody’s would view a weakening of these controls, if they diminished the strength of the regulatory oversight, as credit negative… [the reclassification] provides further evidence that the previously stable relationship between the HA sector and the government is becoming less predictable…which underpins Moody’s current negative outlook.”111

108.It is essential that balance between deregulation and provision of assurances to the lending community is achieved. Deregulatory measures should not weaken the assurances provided by the regulatory framework put in place by the HCA to protect private investments and allow development to take place. In this context, we endorse the conclusions reached by our predecessor Committee in the last Parliament in its report on the HCA’s Regulation Committee, in particular conclusions 3, 4 and 5 relating to financial viability ratings and the case of Cosmopolitan Housing Association.112

The regulatory framework

109.Greater independence for housing associations should facilitate innovation and is to be encouraged. However it should be balanced by a proportionate regulatory framework that ensures that the governance of private bodies spending public funds is robust. Fiona Macgregor, Director of Regulation at the Homes and Communities Agency, told us that:

“First, at the moment we do distinguish for how we regulate for those organisations who own fewer than 1,000 homes, and much more actively those who own over 1,000 homes. Secondly, we are considering whether we need to review the under-1,000 and move to something that is a little bit more nuanced in risk terms. You can have fewer than 1,000 homes but still have a reasonably risky business, and you can have more than 1,000 homes and have a very stable, safe business, depending on the activities that you are undertaking. That is something that we intend to revisit with the regulation committee during the course of next year.”113

110.The HCA must satisfy itself that its regulatory framework can take account of the multitude of different organisations that are encompassed by the term ‘housing association’. Smaller providers, such as almshouses, and larger, much more commercialised organisations place very different requirements on the Regulator. The Regulator should therefore adopt a framework based on judged risk rather than more arbitrary factors such as size.

Monitoring the RTB

111.Clause 64 of the Housing and Planning Bill sets out an obligation on the Regulator to monitor the RTB through compliance with the home ownership criteria. The Regulator would report compliance to the Secretary of State who may choose to publish details of any provider which was failing to meet the criteria. Beyond this ‘naming and shaming’ mechanism, it is unclear how the voluntary RTB will be enforced. Fiona MacGregor from the Regulator told us that “it will not be our role to enforce the Right to Buy, because clearly at that point it is not voluntary, but we will gather some information around sales rates and what individual organisations are doing.”114 By contrast, the voluntary deal proposed by the NHF says that “If a tenant were unhappy with the alternative offered…they would be allowed to appeal to the Regulator to arbitrate.”115 The role of the Regulator should be clarified especially with respect to monitoring the replacement of homes sold under RTB. The appeal process for tenants who are refused the Right to Buy should be spelled out so that all parties can follow an agreed process.

The HCA facilitating the delivery of new homes

112.The HCA’s role is not only that of Regulator: it also has a major role to play in supporting development of all types of homes and, in particular, in ensuring the capacity exists to allow additional homes to be provided. The HCA should explain how it plans to meet its responsibilities for supporting development of the new homes to be built as part of the policy, particularly in light of concerns over the availability of land and capacity in the construction industry, while taking into account the different needs of different areas.

109 Department for Communities and Local Government and The Rt Hon Greg Clark MP, ‘Housing associations and housebuilding’ speech to the Placeshapers Conference, delivered on 5 November, published 6 November 2015

110 Q17

112 The work of the Regulation Committee of the Homes and Communities Agency, Communities Local Government Committee, Second Report of Session 2013-14, HC 310

113 Q233

114 Q241

115 National Housing Federation, An offer to extend Right to Buy discounts to housing association tenants, October 2015, Chapter One, para 2, seventh bullet point




© Parliamentary copyright 2015

Prepared 8 February 2016