Deal or no deal?

Originally posted on September 28 on Inside Edge 2, my blog for Inside Housing

As the clock ticks down to 5pm on Friday, what should really count in the momentous decision to be taken by housing associations?

My first thought was this is like the ‘offer he can’t refuse’ scene in The Godfather. Vote No to the ‘voluntary’ deal on the Right to Buy and you may not wake up in bed next to the head of your favourite horse but you will be inviting Osborne to do his worst in the spending review in November.

Then I thought of the BBC. Looked at in terms of narrow self-interest it seems a no brainer. Better, surely, to strike a deal on the most generous terms you can now than wait for the government to impose the same thing on much worse terms later. That’s exactly what the BBC did before the Budget when it ‘voluntarily’ swallowed the cost of free TV licenses for the over-75s in return for an increase in the license fee.

My next thought was more cynical. Isn’t the NHF a bit like the Premier League when it signed the deal with Sky that excluded the rest of football from its TV billions? Even Sky didn’t make the other clubs sell their best players to pay for it.

And then I came back to the comparison that defenders of housing associations in the House of Lords spent the Spring and early Summer making: the complaint that this is the biggest seizure of charitable assets since the dissolution of the monasteries. Except that as far as I know the monastic orders did not voluntarily agree to the seizure provided they received full compensation paid for by the forcible sale of convents.

The fact that there are so many comparisons that can be made to fit the circumstances is, I think, an indication of the complexity of the issues at stake. This is not a simple yes and no choice but one that relies on a judgment about the future consequences of each.

The NHF clearly believes this is the best deal it can get in the circumstances. Extending the right to buy was a clear Conservative manifesto commitment so housing associations have to live with it while protecting their independent status. And the offer document indicates that this is as much about protecting housing associations’ independent, private sector status and remaining the government’s preferred development partners as it is about the right to buy. Vote No and you could be reclassified and Policy Exchange will privatise you. Vote No and forced council housing sales will happen anyway but the money will go elsewhere.

Critics argue that Greg Clark is only making this offer because he knows how difficult it will be to get legislation through parliament. It’s quite possible that the government would be forced to buy off the House of Lords with concessions and exemptions very similar (maybe even better) than those in he offer document.

Certainly, my first reaction reading his speech to the NHF conference last week was this was a classic case of ‘good cop-bad cop’. Deal with me, argues Clark, because those nasty other Tories don’t like you much:

‘I’ll be completely candid, there are some who say that to achieve the transformation we need requires a fresh start – that the housing association sector has taken us so far but might not be the right partner for the future…That for the transformation in housing we seek we should look elsewhere. To councils through the devolution agenda, to private developers, to our own agencies in government and to new entities.’

Against that, Clark has come in for some Conservative criticism about proposing something that waters down what was in the manifesto. His insistence that this ‘changes nothing’ about the right to buy and the need for supportive articles on Conservative Home to clarify that it will ‘remain compulsory’ are indications of that. Perhaps criticism of both parties to the deal is a sign that this is a real compromise.

Except of course for the timing and nature of the vote. The talks have been going on all summer and yet the deal just happens to be announced during the NHF conference in Greg Clark’s speech. The letter to NHF members tells them that the deadline is determined by the legislative timetable but the House of Commons does not reconvene until October 12. That is 10 days after the deadline for voting and just happens to be the Friday before the Conservative party conference.

While the NHF claims that the deal is all about preserving the future of housing associations as independent businesses, the boards of those businesses get just eight days to come to a considered view on one of the most momentous decisions in their history. There is no way that is enough time for boards to consult tenants and other stakeholders or to come to take advice about the implications for charity law etc. Andy Winter of BHT argues it makes a mockery of the NHF’s own code of governance.

And then there’s the vote itself. Good practice on votes of any kind, from a strike ballot to the European referendum, demands at the very least a simple question worded in a neutral way and a secret ballot that does not identify who voted which way. The NHF invites anyone voting for Option B to sign an undertaking that they understand ‘that the alternative is that the Government will bring forward primary legislation…to compel you to sell your properties’ and asks for names and signatures at the bottom of the ballot paper.

Given the voting system is determined by size of stock, the result looks like a foregone conclusion. Rumour has it that the largest housing associations were squared in advance and some of them were of course calling for the right to buy long before this.

All of which leaves housing association board members with an unenviable choice. Vote Yes to back the NHF, bank exemptions and concessions that look as good as you’re going to get and shore up your position with government. Vote No and you could end up with a worse deal imposed through legislation, be locked out of future government funding and possibly be nationalised and then privatised.

But if you do vote Yes you will be complicit in stripping local authorities of their most valuable stock in what amounts to large-scale compulsory stock transfer. The backlash from Labour councillors and opposition parties has only just begun and one Conservative MP attacked the idea over the weekend.

Housing associations will be required to build replacements for the homes they sell but the offer document makes clear that ‘in order to facilitate this, the definition of a replacement home would be broad and include the development of Starter Homes, shared ownership homes and other part rent and part buy models’. I have no doubt that many will do everything they can to ensure that the replacements are like for like and social rented and preserve their social purpose of providing homes for those who need them most. However, this effectively legitimises the approach already laid out by Genesis and endorses a move up market and away from meeting the needs of the poorest households for associations that want to make it.

However, there are no guarantees that the money from forced sales will be enough to cover the cost of discounts. I’ve blogged before about the potentially over-optimistic assumptions in the plan and a recent report from Shelter warned of a potential £2.45bn a year funding gap. The offer document acknowledges this when it floats the idea of introducing an annual cap on right to buy discounts.

Then there’s the London problem. The government is under heavy pressure from the Conservative mayor of London to keep the money raised from forced sales within London. That’s understandable given the scale of housing need in the capital but it will leave a big shortfall in money to fund discounts elsewhere.

And what if it’s even worse than that? Local authorities that have resisted stock transfer may see this whole affair as proof that they were right to fear the consequences of losing control of their homes. However, if they can hold their noses long enough, one way out might be to go for stock transfer now to avoid forced sales later. That would further reduce the money available for discounts still further.

Given all that, housing associations might be wise to remember that the Yes option on the ballot paper only says that ‘the government will not bring forward primary legislation this Autumn’. And there are no guarantees about what will happen in the spending review in November.

But for me this is a decision that should be about more than self-interest. Perhaps it’s no more realistic to expect the National Housing Federation to act in the interests of housing rather than just housing associations than it is to expect the Home Builders Federation to lobby on behalf of housebuilding rather than just housebuilders. Both are trade associations acting on behalf of their members.

Yet a powerful reminder of the wider issues at stake emerged on the same day that the deal was announced. The latest homelessness statistics from the DCLG show that there are now 67,000 households in temporary accommodation including 99,000 children, up 16 per cent in the last year and 36 per cent since 2010. The number of families with children in bed and breakfast for longer than the six-week legal limit is five times what it was in 2010. According to Shelter’s analysis, the 20 local authorities that stand to lose the most stock through forced sales have 159,000 families on their waiting lists. Under this deal, that queue is about to get even longer.