Deregulation: Housing’s own Big Bang?

Just over 30 years ago, the Big Bang deregulated the City of London, and things were never the same again. Soon, the City’s new position as a global financial centre was well established. Greed was good. Lunch was for wimps. And in 2008, the global financial crash eventually came, and then went. Now of course, Brexit looks set to undermine the City’s preeminence, but that’s another story. And three decades on, housing associations face their own deregulatory Big Bang. Will things ever be the same for them? 

Well … let’s take a deep breath, forget the hype, and have a look. Remember first of all that the only reason for deregulation is to shift housing associations back into the private sector – there was no great clamour for it to take place otherwise. When the pesky Office for National Statistics classified housing associations as public sector, deregulation was the only game in town to resolve that problem.

Our own deregulation certainly changes some rules of the game, but is it a Big Bang game changer? We can now sell property and merge with each other, without having to get prior consent from the regulator. Some local authorities will have less sway over transfer organisations.

These are new freedoms. Certainly, admin will be reduced, but we still have to notify the regulator promptly of what we’ve done. If the actions taken don’t find favour, then the big stick of an In-Depth Assessment is there, with the risk of a regulatory downgrade for the unwise.

Much of the relevant regulation remains in place. Charity law applies to most housing associations, and will need to play a larger part in their thinking from here on in. So too does compliance with employment, landlord and tenant, health and safety, data protection, equalities, and contract legislation. Lenders and ratings agencies are pondering how far they will step into the vacuum left by the retreating regulator. The Value for Money agenda hasn’t gone away. And if things go really pear-shaped, the regulator still has the powers of last resort to step in and close the show down, hopefully without too much fuss.

Behind that is the additional reality that politicians of all parties have long enjoyed pulling the levers of power for housing associations. In turn, associations have generally been obedient in delivering the policy of the day, with the present time no obvious exception to that rule. Today’s imperative is to build more homes, albeit not necessarily for the poorest in society, and albeit with very little grant. We can be fairly sure that new levers will come to political hands, as required. For instance, the idea of future rent increases being linked to development programmes is a new one, but could be a powerful inducement to ensure delivery of more new homes.

So, yes – mergers will be faster, and stock will change hands more easily, but the Big Bang it ain’t, at least not so far. In my book, the impact of deregulation has been overstated, certainly if taken in isolation from other wider changes the sector faces. If the – relatively modest – measures taken allow re-reclassification, then so much the better.

But the real game changers are already under way, quite separately. Benefit reform and austerity have yet to make their eventual impact felt, but will be devastating for many tenants and some landlords. The digitisation of services is, at last, moving ahead increasingly as part of ambitious transformation planning. The emergence of very large new housing groups, with huge financial clout, but the inherent risks of giantism, is another important development, spurring merger activity at all levels. The blurring of the lines between for-profit and traditional Registered Providers may also prove to be significant over the next few years. And finally, the extent of diversified activity by housing association can only continue to grow.

There are risks – deregulation may allow some clever new wheezes, as unsuspected loopholes come to light. We may even see some trying to achieve a kind of stealth self-privatisation, for whatever reason. Charity law will be a useful safeguard there.

The overall verdict then – housing deregulation is no Big Bang – hardly even a big deal. But the wider momentum of wider change is unstoppable, and ten years from now, the sector will be unrecognisable from today. There will be opportunities, risks, challenges, successes and disasters. Above all, good governance will be at a premium, without a regulator to second guess Board decisions. The big question for each and every Board – how can we use the new freedoms most effectively to manage our risks, deliver our values, our mission and our objectives?

This article first appeared on the Inside Housing website on 6th April 2017.

James Tickell is a Partner at Campbell Tickell. For more information or to discuss this article, please contact:

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