England: Housing associations reclassified as public sector by ONS



ONSThe Office for National Statistics (ONS) has classified housing associations in England as public non-financial corporations, leading to an estimated £60 billion increase in public sector net debt.

The review by the ONS was in response to latest international guidance in the 2010 European System of Accounts, which came into force in September 2014, and the impact of the Housing and Regeneration Act 2008, which established the Homes and Communities Agency. It has not been linked by the ONS to government plans to extend the Right to Buy to housing associations.

Its detailed verdict was: “Private registered providers (PRPs) are units which provide social housing and are registered with the Homes and Communities Agency.  This includes all housing associations registered with the Homes and Communities Agency.

“ONS assessed the statistical classification of PRPs in accordance with internationally agreed rules in the European System of Accounts 2010 (ESA 2010) and accompanying Manual on Government Deficit and Debt 2014 (MGDD 2014).

“It was judged that all PRPs should be considered as institutional units as they have the ability to incur liabilities and hold assets on their own accounts, enter into contracts, and exhibit sufficient decision making autonomy.

“ONS also concluded that PRPs are subject to public sector control due to, amongst other things; HM Government consent powers over disposals of social housing assets; HM Government consent powers over constitutional restructuring of PRPs’ constitutional documents; and HM Government powers over the management of PRPs.

“Consistent with conditions described in ESA 2010, PRPs were also judged to be market producers.  Based on these conclusions, “private registered providers” of social housing in England will be reclassified as public non-financial corporations (S.11001) from 22 July 2008.”

The verdict is a major blow to the sector and adds further pressure to the complicated negotiations that are continuing on the Housing and Planning Bill which has its second reading shortly.

The ONS statement said: “In very simple terms, ONS determines whether organisations are in the ‘public’ or ‘private’ sector and whether they are ‘market’ or ‘non-market’ producers.  For example, an organisation producing output for sale is likely to be a ‘market producer’ and may therefore be a ‘public corporation’ or ‘private corporation’, depending on whether the government has significant and specific influence over its activities. Government bodies are another example of public sector organisations.

“In assessing whether an organisation is public or private, a fundamental question is ‘does government exercise significant control over the general corporate policy of the unit?’. The international guidance defines control as the power to determine general corporate policy, and this can be exercised through the appointment of directors, control of over half of the shareholders’ voting power, through special legislation, decree or regulation.”

It added: “These assessments are made purely for accounting purposes: it is important to note that these classification decisions do not affect the legal ownership or management structures of organisations.”

Terrie Alafat, chief executive of the Chartered Institute of Housing (CIH), said: “This decision means that government finances will now have to be adjusted to incorporate the finances of 1,300 different, often charitable organisations. This could have significant implications both for the sector and for the government itself. The government has already been clear that it intends to introduce measures that see housing associations become private bodies again as soon as possible, which CIH welcomes. But in making these changes it is important that the government creates a framework that still allows housing associations to meet housing need, respond to their tenants and meet their funders’ requirements as well as ensuring that historic public investment in the sector is protected.

“We would argue that both housing associations and council housing are affected by government accounting rules that don’t apply in the rest of Europe. CIH believes the government should now review these rules, which will help to ensure a new framework that maintains housing association independence as well as safeguarding the interests of tenants, the use of public money and the interests of funders.”

David Orr, chief executive at the National Housing Federation, said:“We are disappointed that the ONS has decided to reclassify housing associations as public bodies. Reclassification could mean fewer new homes are built at the time of a national housing crisis.

“We therefore welcome the government’s commitment to take the necessary steps through deregulatory measures in the Housing Bill to address the issues raised in this decision. Our deal on a voluntary Right to Buy is an example of how the sector and government can work together to strengthen the independence of housing associations.”



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