Sixth Report Contents

Appendix 1: Draft Regulation of Social Housing (Influence of Local Authorities) (England) Regulations 2017

Additional information from the Department for Communities and Local Government

Q1: In the EM, you say: “The Housing and Planning Act 2016 contained a package of deregulatory measures (in sections 92, 94 and in Schedule 4) aimed at reducing public sector control over private registered providers to enable the Office for National Statistics (ONS) to reconsider the classification of private registered providers.” Is the sole reason for these Regulations the issue of the ONS’ classification of private registered providers, and the related issue that their future borrowing will be added to the deficit? In preparing the Regulations, did the Government give consideration to the underlying issue of whether, for policy reasons, local authorities should nonetheless be able to exercise substantive control over such providers?

A1: The only reason these regulations have been introduced is to seek ONS to reclassify housing associations to the private sector. In preparing these regulations, we have ensured that these only go as far as we have to, to reclassify housing associations. In developing these regulations we have been mindful of the overall working relationship between local authorities and housing associations seeking to ensure we do not disrupt the relationship. Local authorities remain able to influence housing associations through the various contracts and other agreements jointly negotiated.

Q2: You have said that DCLG remains mindful of the overall working relationship between local authorities and housing associations, and has sought to ensure that it does not disrupt that relationship. However, in the EM, you say that, as a result of the Regulations, a local authority will be able to nominate board members only to a proportion representing 24% of the total board membership; and that, while this will still allow a local authority to be represented on the board and to participate in any voted business, it will prevent it from blocking any voted decisions (as this may be considered to constitute control). How do you reconcile these two statements?

A2: It is essential that housing associations and local authorities continue to work together to provide homes for those in housing need by use and improvement of existing stock and the provision of new homes. These regulations do not impact on that fundamental principle. The regulations do prevent local authorities from blocking constitutional change on their own within a Large Scale Voluntary Transfer but do not prevent them from taking part in the debate or Board decision. The role of all Board Members, including those from a local authority, is to take responsibility for directing the activity of the Association, ensuring it is well run and delivering the outcomes for which it has been set up. The role of a Housing Association’s Board is to ensure delivery of the association’s objects, set strategic direction and uphold the association’s values.

Q3: In the EM, you also say: “No formal consultation has been carried out for these regulations. We have taken views from the National Housing Federation, Local Government Association, national federation of arm’s length management organisations, a selection of private registered providers and local authorities.” Why was there no formal and public consultation? Did DCLG not see a case for taking the views of tenants of private registered providers?

A3: These regulations will not affect all housing associations, we estimate around 100 out of the total of 1500 may be impacted. They will mainly apply to those where stock has been transferred from a local authority. Where a transfer has occurred tenants voted for that transfer to take place and the promises made around stock improvements as a result of the transfer. The housing association through contracts with the local authority will still need to deliver on these promises. Given the small number of housing associations impacted and that the tenants have already voted for the transfer we did not feel a full consultation was required.

Q4: In the EM, you also say: “8.4 In respect of local authorities, the points made by consultees specifically related to retaining oversight of the activity of a private registered provider and allowing a local authority officer still to be able to be appointed chairperson of the private registered provider … 8.5. In this instrument we have sought to retain a local authority role within these organisations whilst meeting the objective of reducing local authority control over these private organisations … “ How many local authorities offered comments? What were the majority views on the issue of retaining oversight of the activity of a private registered provider? And does the local authority role provided for in the Regulations accord with those views, or not?

A4: Only two local authorities offered comments and, in both instances, the overall message was for housing associations to be classified as private sector and to continue building. One specific comment from a local authority related to the ability of a local authority representative being chair of a housing association. We have ensured that these regulations do not prevent that.

These regulations relate to direct appointments by a local authority to a housing association board. Through these regulations, we have ensured that local authorities maintain oversight on the activity of the housing association without being able to block constitutional change. Through our engagement with housing associations, it was made clear that the relationship between the local authority and association changes as the organisation matures. Housing associations and local authorities will usually have a wide-ranging relationship through planning, housing management etc. and these regulations do not change this. Housing associations are able to appoint to their board representatives from local authorities where these appointments have been undertaken through an open and transparent process.

Q5: In the EM you also say: “The instrument provides for an exemption where the private registered provider is also an arm’s length management organisation. Arm’s length management organisations (ALMOs) are established by local authorities to manage their housing stock. The rationale for this exemption is that these organisations were already classified to the public sector. This exemption means that ALMOs may continue to have more than 24% of board members nominated by local authorities and their shares will be held by local authorities.” Can you confirm that Grenfell Tower in the LB of Kensington and Chelsea was managed by an ALMO?

A5: Grenfell Tower in LB Kensington and Chelsea was managed by Kensington and Chelsea Tenant Management Organisation (KCTMO). KCTMO was first established as a Tenant Management Organisation in 1996 taking over management responsibilities for the totality of the social housing stock in the RB of Kensington and Chelsea. In 2002, KCTMO gained ALMO powers and took over the responsibility for financing investment in housing, including major capital works to bring the properties they managed up to Decent Homes Standard. The Council still owns the properties and remains the legal landlord; as well as retains responsibility for strategic housing policies and homeless people. These regulations only relate to ALMOs that are also registered with the Regulator or Social Housing. There are only eight ALMOs that are regulated, KCTMO is not one of them.

Q6: More generally, will the implementation of the changes proposed in these Regulations have any impact on the application of safety requirements to housing stock managed by private registered providers?

A6: These regulations have no impact on the requirement of housing associations to meet safety requirements in their stock. Housing associations need to meet all applicable statutory requirements and are regulated under the consumer standards by the Regulator of Social Housing. The Home Standard published by the Regulator states that registered providers shall meet all applicable statutory requirements that provide for the health and safety of the occupants in their homes. Failure to meet this standard means that a housing association is in breach of regulatory standards.

22 September and 3 October 2017

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