16.11.15
Osborne considers selling off public stake in social housing
A massive housing shake-up could see Whitehall selling off its stake in housing associations in a multi-billion-pound effort to privatise the sector’s debt and revive the national market.
The Financial Times reported that officials privy to chancellor George Osborne’s plans argued that the more radical the changes, the higher the odds that housing associations will “reinvent themselves” by borrowing more and taking greater housebuilding risks.
And given the housing associations’ £133bn net assets in 2014, of which taxpayers contributed £44bn in capital grants, the potential decision to try to sell off this investment (which is technically made up of interest-free debt) would represent one of the government’s largest privatisations.
But, according to the paper, some officials believe that a more modest deregulation of housing associations would be best to ensure lenders remain confident – given that their private investment is vital to fund construction schemes.
Despite these tensions, the foundations for reform had already been laid last month after the Office of National Statistics (ONS) reclassified housing associations and some for-profit housing bodies as a part of the public sector.
The move – a result of legislative and regulatory changes brought about through the Housing and Regeneration Act 2008 – risks adding £60bn to the sector’s net debt.
The government, supported by the National Housing Federation, fought back with a threat to introduce deregulatory measures in the Housing Bill to reverse the issues raised in this decision. The Bill has recently passed through a second sitting at the House of Commons last week and will undergo the committee stage tomorrow (17 November).
Shadow housing minister John Healey MP also said at the time that the decision was a blow to the chancellor and undermined the basis for the voluntary Right to Buy deal announced in October.
But given this new classification, selling off grants and putting an end to governmental control over the sector could reduce public sector debt by more than £100bn.
Labour’s Richard Burgon MP, shadow Treasury minister, said these alleged plans – joined with this weekend’s decision to sell off Northern Rock’s mortgages – confirm that Osborne is keen on “selling off everything he can lay his hands on” to push through the Spending Review next week and “keep his leadership bid on track”.
“The rumoured privatisation of housing associations, which largely house people on low incomes, further proves George Osborne is again putting political games ahead of a proper strategic plan for our public finances,” he added.
(Top image c. Richard Stonehouse/PA Wire)