The now infamous ‘deal’ between the National Housing Federation and the Government over the right to buy could be an important turning point in the history of housing associations and of social housing.
Many people on Boards say they have voted for the deal with a heavy heart, thinking they had no real option, that it makes sense for their organisations financially, that there will be one for one replacement of homes sold, and that they were fearful of being reclassified as public sector organisations (therefore much less able to borrow to build) if the Government went ahead with its legislation. It is clear to me, however, that some of the bigger associations voted for it with some enthusiasm because RTB sales bring in money to fund development, because the deal might lead to further deregulation, for example in rent setting and allocations policies, and, to be generous, because they have to anticipate emerging Government policy and do the best they can (next post is likely to comment on Cameron’s speech today). In my more cynical view some of them are quite happy to take another step towards getting out of the business of running social housing.
There are many arguments against the deal.
First, despite the claims that the ‘voluntary deal’ brings with it some important concessions, Secretary of State Greg Clark is insisting that the deal will deliver exactly the same as the legislation would have done. It is probably worse than that because the option of securing amendments to the legislation as it went through Parliament has been given up.
I think associations have misjudged the Government. As Clark told the Guido Fawkes blog, “If they [housing associations] want to extend the right to buy to more people that is all well and good. My bottom line is that their proposal must match up to the ‘Right to Buy’ manifesto commitment and if they want to do it voluntarily they can start implementing it right away. There will be no compromise on introducing ‘Right to Buy’.” I suspect that the deal will become part of the regulatory framework and will be enforced through compliance – the Government will not allow it to be genuinely voluntary.
Second, associations have alienated local authorities big time. Most obviously this is because the deal will be funded by £billions of forced housing sales by local authorities – ‘asset stripping’ according to CIPFA. Associations seem indifferent to this – ‘nothing to do with us’ – what team players they are! Some councils, especially those with valuable property, will be hit so hard it will become impossible for them to meet their statutory duties. The defence that there will be ‘one for one’ replacement really does not hold water: it will never be ‘like for like’ and in the same area.
Councils’ annoyance is not only at forced sales but at the associated risk that housing associations might become free to set their own allocations policies and free to convert more social rent properties to other tenures. Councils depend on nominations to associations to meet their housing obligations. On top of forced sales, the loss of nominations is a big blow. Indeed, Philip Glanville, cabinet member for housing at Hackney Council, told Inside Housing that these relaxations were ‘as bad as the wider deal itself’, so that ‘You start questioning what housing associations are for if they’re inviting all these changes.’ In my view associations have been suckered into a trap: they think they can look after themselves knowing full well that it is at the expense not just of councils but of social housing as a whole. But they are making enemies and councils are enraged.
Third, the result is not as cast iron for the deal as NHF are spinning: the big developing associations held most sway and smaller associations were swept away in the voting methodology. There is a growing divide between large associations, especially London’s G15, and the small and medium sized associations over the future of the sector. Even the Conservative Leader of the LGA, the pragmatic Lord Gary Porter, said “I think [the NHF proposal] could be the start of the end of the Nat Fed……. I think the G15 [group of London’s largest landlords] are getting their own way. A lot of the smallest providers, particularly the specialist providers, have been left out in the cold by the Nat Fed.” The debate about the values and purpose of housing association, and whether they should do more to stay true to their roots (meeting housing need) will become even sharper.
Fourth, the deal may or may not protect them from the thing they dread: reclassification as public sector bodies. People who really understand these things say that a voluntary deal will not necessarily ‘save’ associations from being reclassified. There is not much difference between acceding to coercion to do the Government’s bidding, agreeing a system that may have to be backed up by statutory regulation, and having to comply with legislation. Our own Monimbo debated the issues involved earlier in the week on Red Brick.
Fifth, some associations seem to think that the deal will somehow make the Government nicer to them in future. ‘We scratch their back…….’ They should think again. The BBC thought they had bought some goodwill when they did their deal on the licence fee, agreeing to fund the concessionary licence fees out of their own income, only to find the Government saying it will make no difference to the negotiation on their Charter renewal. The Government plainly has its eye on housing associations’ balance sheets, and they will be back for more, starting today with a new planning policy that exclusively promotes home ownership.
And sixth, they seem not to have thought it all through, with the Charity Commission and others, like the rural associations, considering legal challenges. Previous attempts by the Conservatives to extend the right to buy to housing associations suffered because of the problems caused by charity law: making the scheme theoretically voluntary does not remove these issues.
The reason that this an important moment in the history of housing associations and not just another policy change is not so much financial as cultural. Normally in any big row with Government, associations have argued for what is best for social housing in general and what will help alleviate housing need in particular. This time, meeting housing need never got a mention. The arguments concerned the future ‘independence’ of the sector, generating extra income to support development – of homes which are rarely affordable in any common usage of the term. This may well go with the grain of Government policy, but most housing associations are charitable and they are meant to stand up for the poorest.
I can see parallels between large housing associations and the demutualisation of the building societies. A movement that had built up over many decades spied a potential golden future, the chance to become real players. Instead of doing a solid job collecting people’s savings and lending people money to buy homes, they wanted to eschew their traditional role and become banks. They were arrogant enough to think they would be better at it than the traditional institutions. Some people made money along the way but ultimately it was a disaster and they nearly all got gobbled up. The losers were the original beneficiaries, people wanting mortgages. Many big housing associations want to give up their historic mission of meeting housing need and to become developers instead. Wimpeys with a caring touch. They are less bothered by what they produce and for whom than they are about number and turnover.
A battle in the campaign to save social housing has been lost, but the war continues.