Highlights in Housing 2015/2016

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A lot happened (and didn’t happen when it seemed likely to) in the Housing sector last year. In this issue we look at the key developments of 2015 and look at what is likely to come in 2016.

Key Developments in 2015

New Regulatory Framework for Social Housing Providers

Early in 2015, the Homes and Communities Agency introduced changes to the Regulatory Framework for social housing providers. These included:

  • changes to the Governance and Financial Viability Standard (G & FVS);
  • introduction of the G & FV Code of Practice;
  • changes to the Rent Standard; and
  • changes to the General Consent.

The changes required different degree of changes for providers of social housing with some only having to package existing information on asset and liability registers on top of existing analysis and management arrangements. While others have been required to change their approach from Board level downwards to demonstrate to the HCA that they are meeting the new standards.

Since its introduction, the HCA has been implementing the new standards by issuing a number of regulatory judgements through which different social housing providers have suffered downgrades in relation to governance and financial viability. The interaction of the social housing regulator with social housing providers indicates that it expects the latter to learn from these situations and apply such learning to risk management and control frameworks.

New CDM in Force

The regulatory framework affecting health and safety on construction sites was changed with the Construction (Design and Management) Regulations being replaced and the Approved Code of Practice withdrawn. Some of the changes include the CDM being applicable to all projects irrespective of whether they were notifiable, changes of key roles with the CDM Co-Ordinator replaced by the Principal Designer and an enhanced role for clients in relation to health and safety responsibilities.

For housing this meant Registered Providers had to update their internal policies to align with the obligations imposed by the new CDM Regulations. Similarly, for any developments as clients ensuring that they fulfilled their duties in terms of making the necessary appointments.

New Procurement Regulations

In February the Public Contracts Regulations 2015 were approved and put into effect. These brought a number of changes in relation to the processes that can be adopted to set up and award public contracts for works and services, establishing new thresholds, dealing with smaller procurements and advertising requirements, among others.

In the housing sector, the changes brought new opportunities which housing associations could utilise in their procurement processes as well as codified versions of a number of key procurement principles previously established in cases law.

As 2016 gets underway it seems less likely that procurements will have started under the old 2006 Regulations and so even those parts of the new Regulations that were not retroactive are now in full effect.

Pay to Stay Consultation: compulsory to voluntary?

The Department for Communities and Local Government launched a consultation on the topic of Pay to Stay: Fairer Rents in the Social Housing Sector. It was the Government intention to introduce a policy from April 2017 in England to enable housing association to charge rent according to the means of tenants on the basis that not all social housing tenants should benefit automatically from subsidised rents.

According to the Government decision social housing tenants with a household income of £40,000 and above in London, and £30,000 and above in the rest of England will be required to pay an increased level of rent if their rent is currently being subsidised.

However, following a reclassification of housing association as public by the Office of National Statistics, which added £60 billion of debt to the national balance sheet, the Government made a u-turn. This means that while pay to stay is likely to be introduced on compulsory basis for local authorities, it will be voluntary for housing associations.

Rent Cut and Housing Benefit Cap

In its Summer Budget the Government announced that social rents are to be reduced by 1% each year over the next 4 years. Previously, social housing rent could increase by 1% more than inflation. The Treasury indicated that the proposed rent cut could save £1.45 billion. However, housing associations reported that the loss in income will prevent at least 27,000 new homes from being build. The Chief Executive of the National Housing Federation said that this was compounded by the enhanced right to buy.

Many Registered Providers have responded by reviewing and changing their plans for stock management and development schemes. Some properties and schemes on which the figures added up before the cut are now regarded as unsustainable on a social rent model which is putting pressure on what remains the core business activity for many in the sector.

In the Autumn Spending Review, the Government announced that housing benefit for new tenancies will be limited to Local Housing Allowance Rates. Even though this change will be implemented from April 2018, it could have significant consequences for tenants and housing associations alike. The rates that will apply will depend on the tenant’s situation for example some tenants may only be entitled to rates equivalent to shared accommodation. For other tenants such as those in specially adapted properties which demand higher rents this may be problematic and the Government has not said whether there will be exemption depending on the situation of the tenant or the property.

Consumer Complaints

The Homes and Communities Agency (HCA) published its Consumer Regulation Review 2014/15, through which it outlines its experience of consumer regulation and its approach going forward in dealing with consumer complaints.

The HCA emphasised that it exercises its duty in accordance with the legislation and the co-regulatory approach. Failure to meet a consumer standard may arise from an individual event but it is a judgement of failure at corporate level. The social housing regulator says that it can use its powers where it judges that a standard has been breached and there are reasonable grounds to suspect that the failure has resulted in serious detriment to a registered provider’s tenants.

The findings of this report indicate that there is an increase in engaging with the HCA in relation to its role of dealing with consumer complaints. The type of issues that have been dealt with are broad, which shows that registered providers of social housing need to consider the consumer standards carefully and the processes that they have in place in respect of each standard. Some of the issues considered include; health and safety, gas safety and asbestos.

ONS Reclassification

The Office for National Statistics at the end of October 2015 announced that it had concluded that what it calls Private Non-Financial Corporations (i.e. Registered Providers) should be reclassified as public. This reclassification was based on the legislative and regulatory changes brought about by the Housing and Regeneration Act 2008.

Some of the issues that the ONS considered include the Government’s powers regarding the following:

  • consent powers over an on disposals of social housing assets;
  • powers to direct the use of disposal of proceeds;
  • consent powers over disposals of housing stock following a registered provider’s de-registration with the HCA;
  • consent powers over the voluntary winding-up, dissolution, and restructuring of a registered provider; and
  • powers over the management of a registered provider, in particular the power of the HCA to appoint managers and officers to the provider.

The immediate effect of this change is that it has added £60 billion of housing sector debt on to the national balance sheet. The new year is already seeing steps to undo that change not by reducing the debt but by changing the regulatory regime to make the ONS change its assessment.

Civil Injunction for Anti-Social Behaviour

The long awaited new civil injunction for anti-social behaviour came into force on 23 March 2015.

The new injunctions are governed by part 1 of the Anti-Social Behaviour Crime and Policing Act 2014 and replace the old anti-social behaviour injunctions made under s.153 Housing Act 1996, commonly known as the ASBI.

The key differences between the injunctions relate to the ability to include positive requirements to compel perpetrators to address underlying problems of anti-social behaviour and the ability to seek injunctions against those under the age of 18.

The reasoning behind the changes to the previous legislation was to try to avoid criminalising children and to try to address anti-social behaviour by treating the root of the problem rather just the symptoms.

Applicants and the courts appear to have got to grips with the new regime and there have been no reported cases yet relating to the injunctions, from a housing perspective.

However, it appears that the use of positive requirements are not as forthcoming as the government anticipated with many applicants citing budget restrictions and difficulties finding an appropriate supervisor to oversee compliance as reasons for not seeking such requirements.

Right to Buy

The manifesto commitment to extend Right to Buy to Registered Providers was a cause for great concern for some Registered Providers and many doubted whether the proposed mechanism for compensatory payments for properties sold off at a discounted price would work well enough to allow replacement homes to be built.

When immediate compulsion seemed likely a deal was struck between the government and representatives of the housing sector for the extended right to buy to be adopted on a voluntary basis without becoming a matter of statutory compulsion.

The Planning and Housing Bill provides for the extended right to buy to be implemented on a voluntary basis. How this is to be implemented is not explained further. Perhaps a significant provision is the mechanism to fund discounts to tenants. In this regard, the Bill provides that the Secretary of State (or the Greater London Authority for dwellings in London) “may make grants to registered providers in respect of right to buy discounts”.

Projections for 2016

De-regulation, De-regulation, De-regulation

The reclassification of housing association as public by the Office for National Statistics was perhaps one of the biggest surprises of 2015 for the government. As a result many officials including Ministers have indicated that this will be reversed as soon as possible. To date the details are yet to be published but the Housing and Planning Bill is likely to be used as the method to deliver the Government’s de-regulation package.

Some of the de-regulatory measures likely to be introduced include:

  • removal of all requirements for Registered Providers to obtain consent from the HCA to dispose of land (effectively abolishing most if not all of the General Consent);
  • removal of requirements for consent regarding winding up, dissolution or restructuring of a Registered Provider;
  • removal of powers to direct the use of disposal proceeds (potentially consigning parts of the capital funding guide to the dustbin of history);
  • removal of powers by the HCA to appoint managers and officers to a Registered Provider (making that regulatory oversight less robust than that of the Charity Commission which can take over the running of a charity in just that way).

Data Protection: General Data Protection Regulation

The Data Protection regime as we know it in the UK is likely to be overhauled following agreement in Europe to introduce a new General Data Protection Regulation.

Some of the forthcoming changes include:

  • Enhanced rights for data subject – which includes easier access, right to data portability, clarified “right to be forgotten” and the right to be informed when your data has been hacked;
  • Clearer and modern rules for business – which includes a single set of rules for all businesses who sell goods or services to European consumers, one stop shop for supervision, a risk based approach to avoid burdensome obligations and rules which encourage innovation such as data protection by design and privacy friendly techniques; and
  • Reducing red tape for SMEs – this includes scrapping notifications, being able to charge a fee for access where requests for access are unfounded or excessive, exemption from having a Data Protection Officer if data processing is not a core business activity and no obligation to carry out impact assessment unless there is a high risk.

The Regulation is not likely to enter into force until 2018, however, data controllers and processors including in the housing sector need to be aware of the changes and incorporate any adjustments that would have to be made in their long term planning.

Changes to Freedom of Information Act: applicable to Housing Associations?

The Government announced that the Freedom of Information Act 2000 (FOIA) is to be reviewed and set up a new Commission on Freedom of Information for that purpose.

Simon Hughes in 2014 had said that a code of practice would be published to ensure that private companies performing public functions would have FOIA requirements in their contracts, which would also apply to housing associations although that did not come to fruition. More recently Eric Pickles has said that a Conservative government would force housing associations to comply with FOIA.

Once the Commission concludes its work, it will be interesting to see what provisions, if any, are made whereby private companies performing public contracts have obligations under FOIA, which may also extent to housing associations.

How this plan to treat Registered Providers as more like public bodies will sit with the deregulation agenda to make them less like public bodies remains to be seen.

The Housing and Planning Bill

This is set to be the Government’s key piece of legislation that is likely to affect social housing in a number of ways including:

  • extending the right to buy;
  • providing scope for the Government to bring in de-regulatory measures through secondary legislation; and
  • starter homes.

Government Policies Affecting the Sector

2015 already gave us an indication how Government policy is likely to affect the housing sector with announcements about the rent cut, capping housing benefit and pay to stay.

The full impact of these will become clearer in the course of 2016 especially since there does not seem to be coherence between the different policies and what the Government is trying to achieve. For example, with introducing the extended right to buy the Government argued this was to remove the unfairness faced by housing association tenants compared to their counterparts who rent from local councils. However, as the pay to stay policy likely to be compulsory only for council tenants it seems that the unfairness argument may crop up again with some social housing tenants asked to pay to stay and others not.

With the rent cut, it will be interesting to see whether the Government will stick to this decision in light of ONS reclassification. Similarly, with capping housing benefit there are already calls from some housing associations that this also creates unfairness especially in certain schemes such as extra care. Whether any exemptions will be introduced it is not yet clear.

Response from the Sector

Whilst 2015 may have been a challenging yet interesting year for social housing, 2016 may turn out to be even more so. The challenge may be determining how the changes will affect each Registered Provider and keeping pace with all the changes and u—turns. Similarly, there may be a push for efficiencies increasing the likelihood of mergers.

At the same time, so far 2016 promises to offer more freedoms to Registered Providers in terms of how they utilise their stock, diversification and generally how they are run. If the de-regulation agenda is introduced offering Registered Providers a lot of scope, this could mean that more interesting times are yet to come.

We will continue to update our blog on all issues mentioned and new developments throughout the year. If you have any questions or would like advice in relation to governance and data protection contact Daniel Milnes, for ASB related issues contact Bethany Paliga and for development contact Lucy Worrall.

Nat Avdiu

About Nat Avdiu

Nat Avdiu is a Paralegal in the Contracts and Projects team at Forbes Solicitors. Nat provides updates for clients on a range of issues including: governance, data protection and freedom of information, procurement and charity law.
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