The recent decision by the Office of National Statistics to reclassify Housing Associations as public sector bodies appears to fly in the face of the recent actions of the Government to move towards the de-regulation of Housing Associations.
What does the announcement mean for Housing Associations?
Below are a few views on the subject.
The announcement by the ONS means that the debt of all Housing Associations is now part of the national debt. At this moment in time the day to day running of Housing Associations is not affected. The impact of the ONS's decision is more of an issue for the Government as it increases the national debt by a further 4% at a time when it is seeking to reduce the debt.
The Government could use this announcement as an opportunity to nationalise Housing Associations and sell off their assets. This might be an attractive option to the government as such sales could generate huge Capital Receipts for it and thus reduce the national debt. However, there are many issues to overcome with this option not least: many associations are charities, there are often restrictions on use of housing stock via planning, nominations rights and management of existing tenancies. How would these issues be overcome? How attractive would they be to pension companies/private landlords?
So far the Government has indicated that it intends to reverse the decision made by the ONS and continue down the route of de-regulation. How it will do this is open to debate at the moment. There are many different views being banded around in the media.
The sector is so diverse rents, land and building costs differ throughout the country and so the reaction to de-regulation and the appetite to continue to grow will differ from Association to Association.
Many Housing Associations have already started to diversify by developing for outright sale to then plough back profit into its charitable arm. Some have set up private rental companies to allow market rent. Some have gone into student accommodation to help support development of Affordable Housing. For most Housing Associations this will become a necessity in order for them to continue to grow and develop without government subsidy. There are many ways that this is being achieved including Joint venture arrangements and setting up of private companies.
Some Housing Associations will decide that a merger with a larger organisation might be the better way forward particularly where the inclination to develop has been lost or where the various changes mean that development is no longer viable.
Some smaller and medium sized HA may look to enter into Joint Venture arrangements with other HA's, house builders or private landlords in order to deliver growth whilst maintaining their independence.
Medium to larger Housing Associations will look to diversify through setting up companies to deliver outright sale properties, retirement homes and lettings agencies.
There is also the unknown impact of the Right to Buy which is due to come into force next year which will have an impact on growth. For some the interest in Right to Buy from tenants might be huge but the uptake small. The Government is still to provide information as to how this is to be implemented. The Pay to Stay legislation will also have a significant impact on some associations with some tenants being unable to stay in property.
On the other hand the Governments suggestion that Housing Associations will be able to choose different tenures might be a good opportunity for Housing Associations to ensure dwellings are fully utilised. The co-operation of local authorities in achieving this flexibility will need to be assured somehow and market forces within each area will determine how successful this might be.
No matter what happens it is likely that the traditional Housing Association set up to provide accommodation for those unable to rent or purchase in the open market place is under threat. Change is inevitable and whilst it is difficult to plan right now there are steps that can be taken and are being taken by Associations to safe guard its place in the housing market .