Insolvency Act 1986 Part A1 Moratorium (Eligibility of Private Registered Providers) Regulations 2020
(Limited Text - Ministerial Extracts only)
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Lord Greenhalgh
That the Regulations laid before the House on 29 June be approved.
The Minister of State, Home Office and Ministry of Housing, Communities and Local Government (Lord Greenhalgh) (Con)
My Lords, the purpose of these regulations is to disapply the moratorium powers under the Corporate Insolvency and Governance Act 2020 for private registered providers. A separate housing moratorium of 28 days already exists to support them should they get into financial difficulty.
The Corporate Insolvency and Governance Act 2020 introduced a range of measures, both permanent and temporary, to assist businesses. The Act gives companies the flexibility and breathing space they need to continue trading during this difficult time. The regulations being considered today relate to the moratorium provisions contained in that Act. The moratorium measure gives struggling companies a breathing space in which to explore their rescue and restructuring options, free from creditor action. During the moratorium, no legal action can be taken against a company without leave of the court. The measure ensures that companies that are struggling are given the opportunity to survive.
Private registered providers of social housing already have special arrangements for dealing with financial difficulties. These arrangements are set out in the Housing and Regeneration Act 2008 and the Housing and Planning Act 2016. This regime already includes a 28-day moratorium to allow a provider in difficulty, working with the Regulator of Social Housing, to resolve its problems. The arrangements we already have in place, combined with the economic regulation of the sector by the Regulator of Social Housing, make this new moratorium unnecessary.
Under powers within the Corporate Insolvency and Governance Act 2020, these regulations disapply the moratorium powers within that Act to private registered providers. This averts the potential of having two routes that a private registered provider in financial difficulty could follow. This could lead to having two moratoria operating alongside each other, which could be conflicting. This could undermine the ability of the Regulator of Social Housing to support a private registered provider facing financial difficulty, thereby limiting its ability to protect tenants. We seek to avoid this situation.
The housing association sector benefits from a record of no loss on default, meaning that no lender has lost money because of a private registered provider failure. This is important, because it allows private registered providers to borrow cheaply to build the homes we need. Ultimately, that strong financial performance protects tenants, because their homes are not put at risk.
While financial problems are rare, the housing association sector has changed significantly in recent years. The level of private finance has grown from £48 billion in 2012 to over £80 billion in 2020. That is why it is vital that we maintain a clear and robust regime to support a private registered provider facing financial difficulties.
These are straightforward regulations. They are necessary to maintain arrangements that allow the Regulator of Social Housing to effectively support a private registered provider in financial difficulty. They ensure there is a clear regulatory framework that applies to a private registered provider in financial difficulty. This will continue to safeguard investment in social housing and protect tenants. I commend these regulations to the House.
Lord Greenhalgh
My Lords, we have had an interesting and very wide-ranging debate on the regulations before us today. I thank noble Lords on all sides of the House for their contributions. I shall take this opportunity to provide some further detail on the points that have been raised.
I thank my noble friend Lord Naseby and the noble Lord, Lord Wood, for their support for the reforms of the insolvency regime and for recognising that this is very much a tidying-up exercise. I will have to write to the noble Lord, Lord Wood, on the detailed points that he raised with regard to the insolvency regime as that is not in my current brief.
Many noble Lords talked about cross-contamination. Private registered providers will have both social and private housing, and they asked how the two regimes will work in parallel. I point out to the noble Lord, Lord Wood, the noble Baroness, Lady Kramer, and my noble friend Lord Holmes that the insolvency arrangements we have in place through housing legislation reflect extensive engagement with the Regulator of Social Housing, lenders, private registered providers and their representative bodies. The regulations that we are considering today ensure that those arrangements remain unaffected by the new moratorium provisions through the Corporate Insolvency and Governance Act. I assure my noble friend Lord Naseby that there will be no deleterious impact on housing associations such as Peabody.
The noble Lord, Lord German, and my noble friend Lord Naseby raised the matter of scope. This statutory instrument focuses on insolvency arrangements in England and on providers registered with the England regulator. It applies to all private registered providers in England—those that are registered now and in the future—and my understanding is that both Scotland and Wales are considering this.
I thank the noble Lord, Lord German, for pointing out the missing £20 billion, and the noble Baroness, Lady Grender, for spending it very quickly. There is a disparity but it is between the borrowing that is available —£100 billion—and the borrowing that has been drawn down, which is £80 billion, so I am happy to clarify that point.
The noble Baroness, Lady Falkner, raised the issue of the viability of private registered providers. I point out that the Regulator of Social Housing is working closely with providers to monitor and support the sector through the very difficult impacts of Covid-19 on both its finances and service delivery. Hitherto, the sector has no loss as a default record. We will then get the early warnings if there are any issues. The sustainability of the sector will be helped by the commitment of some £12 billion to build affordable homes between 2021-22 and 2025-26, which is the biggest single cash investment in affordable housing for a decade.
The noble Baronesses, Lady Falkner and Lady Bowles, and the noble Lord, Lord Bhatia, raised the issue of the protection of renters in rent arrears. I highlight that the Government have brought forward a number of measures to remove the immediate risk of tenants being evicted or becoming homeless. Tenants who are unable to pay rent will continue to be protected by the three-month notice period for evictions, which was introduced through the Coronavirus Act and will last until 23 August 2020.
I will write to the noble Baroness, Lady Grender, on her points, specifically the reasons for this SI being debated rather than the recent one that was laid before Parliament.
All tenants remain liable for their rent. Those who can afford to pay should continue to do so but should contact their landlord if they are struggling. We have introduced an unprecedented financial support package, including the furlough scheme and changes to universal credit to help people to continue to pay their living costs, including rental payments, and to prevent them accruing rent arrears. We have been clear that there is a need for housing providers to offer support and understanding to tenants at this difficult time.
These regulations are necessary to maintain arrangements that allow the Regulator of Social Housing to effectively support a private registered provider in financial difficulty. This will continue to safeguard investment in social housing at unprecedented levels and protect tenants. The noble Baroness, Lady Wilcox, asked whether I could comment on what the impact would have been had this not been put before the House today. I am afraid I cannot give an opinion on the counterfactual, but I am assured that no further legislation is required.
In conclusion, the disapplication of the moratorium introduced by the Corporate Insolvency and Governance Act 2020 means that only one moratorium is available to private registered providers, avoiding the potential of two moratoria being in play together. Through housing legislation, the moratorium ensures the regulator has the tools it needs to maintain lender confidence and, as far as possible, protect tenants should a potential insolvency occur.
Before I end, the noble Baroness, Lady Bowles, had a forensic analysis of the provisions. Under the housing administration scheme, the first objective, to protect creditors, takes priority over the objective to retain social housing, but her points were so detailed that I will have to write to the noble Baroness further. This is an essential bit of tidying up and I commend it to the House.