What will the ONS’s decision mean for Wales?

The blog was first published on Welsh Housing Quarterly’s website on the 29th of September 2016.

Housing associations in Wales, Scotland and Northern Ireland are to be reclassified as part of the public sector, the Office for National Statistics (ONS) announced today (October 29). The announcement will come as no surprise to those who work in the social housing sector. Since the ONS announced reclassification of English housing associations in October 2015 it had seemed almost inevitable that a similar decision would be reached for the devolved nations. With the ONS now having made its decision, we can turn our attention to examining what the decision means for Wales and for the social housing sector in particular.

There is no doubt that the Welsh Government will be put under considerable pressure to ensure that housing associations in Wales are returned to the private sector as quickly as possible. Community Housing Cymru (CHC) has already released a statement calling on the Welsh Government to take action to ensure that the ONS’s reclassification is overturned. With housing associations set to be subject to public sector borrowing rules, CHC’s members may find it difficult to borrow money to assist the Welsh Government in reaching its 20,000 homes target. The Welsh Government may also come under pressure from the UK Government to reverse the ONS’s decision, with the Treasury eager to see the borrowings of Welsh housing associations, some £2.3 billion, removed from the national debt. It therefore seems likely that the Welsh Government will respond to this pressure by attempting to ensure that housing associations in Wales are returned to the private sector.

Given the similarity between the reasons given by the ONS for its reclassification of both Welsh and English housing associations, the Welsh Government may be tempted to adopt the same approach as the UK Government. In England, the UK Government deregulated the social housing sector through the Housing and Planning Act 2016. The Act reduces the control of the UK Government and the Homes and Communities Agency over the sector. English housing associations will no longer require the consent of the regulator before disposing property or making constitutional changes. The powers of the regulator to appoint managers to housing associations have also been tightened. If the Welsh Government were to legislate so as to reverse the ONS’s decision, we may well see similar changes in Wales.

Such changes would provide the sector in Wales with opportunity. For example, if the Welsh Government reduced its consent requirements for housing associations seeking to make constitutional changes, this may provide a greater opportunity to innovate with regard to how they structure their organisations. However, the Welsh Government would not necessarily lose all its control over the sector with regard to these powers. In England, whilst the Housing and Planning Act 2016 removed the need for associations to receive the Government’s consent before making constitutional changes, they must still notify the regulator if such changes have been made. If the regulator is not satisfied, following such changes, that a housing association complies with registration requirements, the regulator is permitted to refuse to register the housing association in its amended form as a registered provider of social housing.

The ONS’s decision presents the Welsh Government with a further problem. Whilst being classified as part of the public sector will reduce the ability of Welsh housing associations to borrow money from the private sector, there is a risk that deregulation could also have a negative impact. Deregulation may increase the perceived risk of the social housing sector in Wales to lenders. This might see the cost of borrowing increase for Welsh housing associations, limiting their ability to assist the Welsh Government in reaching its 20,000 homes target. Striking the right balance between appeasing the ONS and the financial sector may be a tough ask for the Welsh Government.

It appears that deregulating the social housing sector in Wales will not be an easy task for Welsh Government. These difficulties are not just limited to balancing the concerns of the social housing sector, lenders and the ONS when enacting legislation. The Welsh Government will also require the support of one of the opposition parties to see any deregulatory legislation through the Assembly, complicating an already challenging juggling act.

Whilst balancing these concerns would appear to be a difficult task, the process of amending the statutory basis for social housing regulation would appear to provide the Welsh Government with an opportunity to simplify the law in Wales.

At present the statutory basis for social housing regulation in Wales is to be found in the Housing Act 1996. The Act is a piece of Westminster legislation that has been amended on a number of occasions by subsequent legislation at Westminster and Cardiff Bay. As a result it is very difficult for anyone lacking access to expensive online legal databases to gain an accurate understanding of the law that underpins regulation. If the Welsh Government does decide to legislate so as to deregulate the social housing sector in Wales then this would seem to be a perfect opportunity to consolidate the law, improving access to the law in Wales.