Reclassification bill is very welcome, but action on Housing Executive right to buy a ‘missed opportunity’
There was a collective sigh of relief in Northern Ireland’s housing sector on Thursday says Justin Cartwright, CIH national director for Northern Ireland. However, the long-awaited legislation to address the reclassification issue was not everything we hoped for.
In 2015 the ONS reclassified housing associations in England as public bodies for national accounting purposes. This technical change meant that borrowing by housing associations would be counted as public debt.
The decision was made due to the level of government control over housing associations. At the time it was foreshadowed that the same decision would follow for the devolved nations; the level of government control over associations in Northern Ireland certainly exceeded that in England.
For Northern Ireland, the decision had the potential to undermine our mixed-funding regime. For every pound of public grant that goes towards new-build social housing, associations secure around another pound through private borrowing.
If this private borrowing is suddenly on the public balance sheet, social housing would have to compete more with other public services for funding, at a time when there are many calls on resources. There would be a real risk that the number of new homes would fall.
Governments in Britain responded with legislation to lessen their control over associations, so the ONS decision could be reversed. England secured reversal in 2017, with Scotland and Wales obtaining theirs in 2018.
Readers in Britain may be surprised that the equivalent legislation is yet to be passed in Northern Ireland. The reason for the delay is the collapse of the NI Executive in January 2017, which slowed the progress.
Now re-established, the Executive is rightly focusing on our regional response to COVID-19. However, it is also dealing with a backlog of legislation and ministerial decisions, including reclassification.
To date we have benefitted from a ‘derogation’ from HM Treasury – essentially a pause on associations’ debts being made public, provided that government is doing whatever it can to address the issue.
So last week we welcomed Minister Hargey’s announcement – that the Executive had agreed to address the issue by progressing the Housing (Amendment) Bill (Northern Ireland) 2020 with accelerated passage.
Part of the Bill will end the compulsory ‘right to buy’ / house sales scheme for housing associations, which has operated in Northern Ireland since 2003/04. This compulsion to sell homes to sitting tenants represents substantial government control over an association’s assets, so it must go.
However, the Bill does not end the right to buy for Housing Executive homes. This is problematic due to the common waiting list for all Housing Executive and housing association homes.
The scheme would become a ‘game of chance’, where an applicant’s ability to buy their home would depend on their allocated landlord being the Housing Executive or a participating housing association.
From a housing management perspective it could incentivise refusals, with prospective tenants who want the option of buying their home ‘holding out’ for a participating landlord. There are also potential equality implications, considering the different concentrations of housing association and Housing Executive stock in different communities, and therefore tenant profiles that vary by social landlord.
The minister has stated it is her "intention to consult separately on methods of entry to affordable homeownership which will include consideration of the future of the Housing Executive house sales scheme".
It is important to note that by historical standards, house sales remain small. So where the aim of the Bill is to protect housing supply, it can still do this, provided that the right to buy is ended for Housing Executive homes soon.