The logical endpoint of this trend could be the privatisation of housing associations
On Friday, the Office for National Statistics published its pivotal review of the national accounting status of housing associations, reclassifying them as public bodies. Long anticipated by the social housing sector, the ONS decision moves the collective £60bn of debt which housing associations have accumulated to build affordable housing for decades, onto the national balance sheet to fit in with the European System of Accounts.
The ONS review is based chiefly on changes stemming from the Housing and Regeneration Act 2008, which was passed by the last Labour government. Changes relate primarily to the disposal of social housing assets and winding-up of housing associations.
But the ONS review doesn’t consider shifts in the social housing terrain announced by the government since the General Election in May, although these might receive attention at a later date.
These include the extension of the Right to Buy to housing associations, currently agreed voluntarily with the government, ‘pay to stay’ in social housing by better-off tenants, imposed rent reductions, and time-limiting social tenancies – all examples of direct government interventions that conceivably confirm the ONS decision.
The National Housing Federation (NHF), the representative body for housing associations, has warned that the ONS reclassification represents greater state control of associations, and could limit their borrowing from the private financial sector to support their house-building programmes into the future.
The political fallout from the ONS decision will precipitate Treasury action to mitigate the effects of raising the national debt by around 3-4 per cent ahead of the Comprehensive Spending Review on 25 November. Housing association debt will now be considered in the same way as other public sector debt; notably that of local authorities.
Any additional private borrowing to support desperately needed new homes will add to the UK’s national debt at a time when chancellor George Osborne has pledged to be back in surplus by 2019.
Successive governments since 1988 have deployed the housing association sector as a means of transferring council housing and leveraging large tranches of private investment into social and affordable housing without taking a hit on what used to be called the Public Sector Borrowing Requirement.
Since 2010, the previous and current governments have been set on fundamentally reshaping the social housing in England. The replacement of public investment in social housing by minimal public funding of the ‘affordable’ rent programme, and emphasis on the social housing regulator, the Homes and Communities Agency, as a champion of ‘VFM’ and consumer standards, have both ironically pushed housing associations towards a more commercial approach.
This trend may now reach its logical endpoint in that housing associations may need to be privatised to dispose of the £60bn debt that will appear on the public accounts from next April. Former Policy Exchange director Alex Morton, who is now installed in Number 10 as an advisor to the prime minister, has championed ‘setting housing associations free’.
The government’s initial response to the ONS decision, reported in social housing trade magazine Inside Housing, has been to pledge to bring forward measures to allow housing associations to become private bodies again ‘as soon as possible’. This suggests a period of de-regulation to overturn the ONS reclassification rather than nationalising then privatising association assets.
The result will be high-stakes poker between Number 10 and 11 over the next year or so to determine the fate of a sector that predates council housing and has its beginnings in late 19th century philanthropy.
Social tenants, those on waiting lists and the homeless will seemingly be left with their faces pressed against the window pane as power politics shapes the future of the sector they depend upon so deeply for housing and community support.
Kevin Gulliver is a contributing editor to Left Foot Forward and a director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research. He writes in a personal capacityLike this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.