Unintended consequences?

Implications: Reduced levels of house building Reduced provision of affordable housing Increased public borrowings Loss of innovation and growth in new housing products.

Analysis: The Housing and Regeneration Bill which is currently before Parliament contains proposals to increase the regulation of housing associations (Registered Social Landlords), the unintended consequence of which could be that such organisations are deemed to be “public sector”, and any borrowing by them has to be counted against the Public Sector Borrowing Requirement. Until the early 1980s, the large majority of social rented housing in the UK was provided by local authorities, using finance provided by central government. During the Thatcher government of 1979-1997, there was a consistent theme of limiting the activities (and funding available to) local authorities. Housing associations filled the gap in terms of provision of social (welfare) housing. From 1980 onwards, that housing was provided by a combination of government grant and private borrowings by housing associations. Housing associations are non-profit distributing organisations, some of which are charities. Their origins are mainly from community concern and voluntary activity, starting on a very local, small scale. Actually, the 1,500 housing associations which now exist control around £74bn worth of properties. They represent a hugely important market sector, both in terms of housing provision and opportunities for large scale lending by financial institutions, but most people still perceive them as small, local and voluntary. In addition to the huge increase in scale, the scope of their activities has widened. Much of the social housing stock owned by local authorities has been transferred to housing associations. In addition, they have expanded from providing solely housing for rent, to include other “affordable housing” products aimed at economically active people who aspire to home ownership, but are currently unable to reach the first rung of the housing ladder. Affordable Housing is now a spectrum of provision, including both social rented and “intermediate” products. Housing associations are regulated through a government body known as the Housing Corporation, which next year will be merged with another government agency and will be known as the Housing and Communities Agency. The two key roles of the Housing Corporation have been to provide government subsidy to housing associations (to be matched with private borrowings), but also to regulate the sector. This has been very successful, and only one RSL has become insolvent over the last 20 years. Furthermore, the assets and liabilities of that organisation were transferred to another, stronger organisation following the intervention of the Housing Corporation, as a result of which there was actually no default on loan repayments. Therefore, we have a large, well (and appropriately) regulated sector which plays a major part in the delivery of the government’s housing policies. However, the control freak tendencies of the government (or is it actually their civil servants?) are seeking to increase not only the levels of regulation but also the controls over the activities of housing associations. This is an element of the Housing and Regeneration Bill’s provisions. This increased regulation and control could lead to housing associations no longer being able to be seen as independent organisations, and becoming “public bodies”. As well as limiting scope for innovation and growth, that could also have the implication that all borrowings by housing associations would be deemed to be public borrowing, and thus fall within the Public Sector Borrowing Requirement. That would immediately put the British government in breach of its obligations to the European Union in relation to the exchange rate mechanism. All in all, we could be looking at unintended consequences with huge implications, not only for housing in the UK.