Draft Regulation of Social Housing (Influence of Local Authorities) (England) Regulations 2017

James Duddridge Excerpts

Monday 6th November 2017 General Committees

[Alok Sharma]

The regulations say that local authorities will have representation of up to 24% of board members. In many cases, that will mean reducing the number of board members they appoint. Ultimately, this is about demonstrating that local authorities no longer exercise the same level of control over housing associations.

In developing the regulations, we have taken views from the National Housing Federation, the Local Government Association, the National Federation of ALMOs and a selection of housing associations and local authorities. The overall message from their responses was the importance of reclassifying housing associations as private sector as soon as possible. Housing associations and local authorities have a wide-ranging relationship, and we want that relationship to be maintained. The regulations will not change that.

The regulations will give local authorities and housing associations six months to make the necessary changes. In that time, local authorities will need to reduce their board membership to 24% of the directly appointed members by choosing which members should remain and which be removed. Housing associations will need to amend their constitutions to reflect the changes required by the regulations. After the six-month period, if action has not been taken, the regulations will overwrite contracts and constitutions to reduce local authority board membership to the required level and remove shareholding membership. The shareholding membership is to be distributed pro rata among the other shareholders, meaning that tenants will hold a larger share in the association.

In summary, the regulations go only as far as is necessary to allow the ONS to consider the reclassification of housing associations as private sector.

[James Duddridge (Rochford and Southend East) (Con)]

The Minister said that he had consulted arm’s length management organisations. I understand from the explanatory memorandum that ALMOs are exempted, mainly because they are on the balance sheet anyway. Listening to his other comments, however, it strikes me from a governance viewpoint that ALMOs should also fall in line, perhaps initially on a voluntary basis. Restricting local authority membership of their boards to 24% would give additional coverage of tenants.

[Alok Sharma]

My hon. Friend makes an interesting point, but I point out that ALMOs are owned by local authorities. The regulations relate to housing associations that have received a stock transfer; we are implementing them to show that they are effectively back in the private sector.

The regulations relate to only 100 of the 1,500 housing associations in the sector. They will not affect the current regulatory regime, which is a matter for the social housing regulator. Nor will they prevent the direct involvement and interest of local authorities in running housing associations, although they will limit that involvement to a reasonable level so that a housing association can be seen as a private entity. Housing associations will continue to build additional affordable homes and work with local authorities to meet identified housing needs. Subject to the ONS’s consideration and decision on classification in the light of these and other changes, we expect that approximately £70 billion of debt will be removed from the national accounts. I commend the regulations to the Committee.