Significant changes proposed to housing association constitutions

Last week on 14 September the Government published draft regulations on the constitutional make-up and voting rights of housing associations.  This could have significant implications for both registered providers and local authorities, if approved.

The draft regulations reduce local authority influence over housing associations and complete the Government's legislative changes aimed at getting housing associations reclassified by the Office for National Statistics as private, not public bodies.

They affect housing associations with local authority representation at board and shareholding membership level. These are mainly (but not exclusively) LSVT associations.

The key proposals in the draft Regulation of Social Housing (Influence of Local Authorities) Regulations 2017 are:

• local authority representation on the boards of housing associations must not exceed 24% of the boards
• local authorities will lose their voting rights as shareholding members of housing associations
• previously held local authority voting rights will be re-assigned pro rata among the remaining shareholding members.

The effect of the regulations is to reduce local authorities influence at board level and remove it entirely at shareholding membership level. So, for example, the "golden votes" seen in many stock transfer associations' constitutions will cease to exist.

The regulations will apply to ALMOs that are registered with the Homes and Communities Agency as registered providers, but not to wholly owned and controlled subsidiaries of local authorities.

The draft regulations are due to be debated in both Houses – a process that could take some time to conclude.  They will come into effect the day after they are approved, and housing associations will have six months to implement the necessary rule changes. After that the regulations will automatically overrule any provision in any contract (e.g. an LSVT transfer agreement) or constitution (rules or articles of association) to the contrary.

Clearly, the proposals raise issues that both associations and local authorities need to start thinking about now in order to be ready to meet any changes that are required.

If you would like to discuss any aspect of the proposals, please don’t hesitate to contact Matthew Waters.