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Housing and Planning Act 2016
Impact of the changes on your governance and regulation
June 2016
The social housing regulator
Successful places
with homes and jobs
A NATIONAL
AGENCY
WORKING
LOCALLY
Housing and Planning
Act 2016 – changes to
regulation and
governance
Mick Warner
Deputy Director Regulatory
Operations
2 June 2016
The social housing regulator
Life was already getting
more complex for providers
Gone: core assumptions
about rented products
Gone: the grant/bank debt
funding model
Going: local government
funding
Complex choices for Boards
Opportunities and risks
A more cyclical model
The social housing regulator
2015/16 was quite a year
Right to Buy Summer Budget rent cut Reclassification
The social housing regulator
As a result the business model of
providers is changing
ASSETS
Right to Buy
New Develop-
ment
Diversification Housing Market Sales
Existing Stock
The social housing regulator
And the financing of that business is
becoming more complex…
LIABILITIES
Counterparty Risks
Liquidity
Existing Debt
New Debt Index Linked
Debt
Hedging Strategies
Accounting Issues
The social housing regulator
Some cyclical factors are helping
the sector…for now
The social housing regulator
Asset sales are increasingly
significant
0
200
400
600
800
1,000
1,200
1,400
Q12014/15
Q22014/15
Q32014/15
Q42014/15
Q12015/16
Q22015/16
Q32015/16
Q42015/16
Q12016/17
Q22016/17
Q32016/17
£m
Current asset sales value Fixed asset sale values
Forecast current asset sale receipts Forecast fixed asset sale receipts
The social housing regulator
The regulator’s attitude to sales
risk
Like all risks, they are owned and managed by boards
The regulator does not set risk appetite
We seek assurances that boards and organisations have the capacity
to manage their risks
And the skills to spot the risks that exist…
And have evaluated their mitigations in stress testing.
Where the regulator does not get that assurance then it will look to
engage with boards
The social housing regulator
Housing and Planning Act 2016
Three main changes for regulation
Monitoring the homeownership criteria
Housing administration regime
Deregulation
The social housing regulator
The Home Ownership Criteria
Still under discussion
Regulator’s role will be to collect information on compliance with the
criteria and report the results to the Secretary of State
Failure to meet the criteria will not open up the regulator’s enforcement
powers
The Secretary of State will decide how they use the information
The role of the regulator in individual complaints is under discussion
The social housing regulator
Housing administration
Delivers on a key recommendation from independent review of the
cosmopolitan case
Supplements the existing moratorium provision with a regime based
on administration for companies
The Act modifies normal administration for the sector, including
– an ability for the regulator (with SoS consent) to apply for appointment
of a housing administrator
– an objective to maintain social housing in the regulated sector
Better suited to providing a managed work out for the larger and
more complex businesses that some registered providers have
become in the unlikely event of insolvency
Will come into force once the Government has introduced secondary
legislation and scheme rules
The social housing regulator
Deregulation
Removal of the constitutional consents regime
Registration required for certain restructures
Removal of the disposals consent regime
Introduction of a notification regime for constitutional changes,
restructures and disposals
Abolition of the Disposals Proceeds Fund (DPF)
Amendment of the power to appoint board members and managers
The social housing regulator
Deregulation
Measures deliver on SoS’s commitment as part of the RtB deal to
deregulate to enable more active asset management…
…and aim to restore sector’s private corporations status
Providers will have new freedoms, but
– still need to have regard to charitable vires and loan agreements
– where providers actions put them in breach of our standards we will
respond appropriately and
– provider will need to ensure that they meet the new notification and
registration requirements
Consultation on registration criteria next month…
…followed by further details and guidance on notifications
Will continue to operate consents functions up to commencement of
the new provisions – implications for current mergers
The social housing regulator
Bringing it all together
Focus on ensuring we continue to deliver our objectives
To promote a viable, efficient and well governed sector able to deliver
homes that meet a range of needs
Post-consents our standards need to support our more responsive
rather than gatekeeping role
Four years after introducing the VFM Regulation Committee view is
that we need to strengthen our approach on VFM
Changes will build on 15/16 update
– focus on risk management remains
– Annual stability checks and In Depth Assessments will continue to
underpin proactive engagement
The social housing regulator
Key issues for boards and exec
teams to consider
What is the right strategy for our business?
Where do we want to be in 5 -10 years?
What do our charitable objects means for us in this new
world?
What is the right development mix for our business?
What is our home ownership offer for our tenants?
The social housing regulator
What to expect
We don’t have the answer for your (or anyone else's) business
We seek assurance that boards and executives are managing the
business effectively and have a thorough understanding of their
risks
Where we have concerns that this is not happening it is reflected in
our regulatory judgements and we look to providers to remedy the
situation
Where they can’t or won’t respond then we look to use our power
proportionately to bring the provider back into compliance with our
standards
Impact of the changes on your
governance and regulation – a
lawyer’s perspective
Richard St John Williams
The devil is and will be in the detail
● Act received Royal Assent on 12th May 2016
● Made publically available on 24th May 2016
However still require:
● Secondary legislation
● HCA’s regulatory guidance
● Consultation on registration and restructures – May
2016 – 8 week consultation
● Still awaiting consultations on disposals and
notifications
Constitutional changes
● Need to wait to see Regulator’s guidance for the details
re. periods for notifying Regulator and content of details
● Responsibility on RPs though to:
• Notify FCA that it has informed Regulator of ToEs,
Amalgamations and conversions (CBS)
• Notified Registrar that it has informed Regulator of
conversion to CBS (Companies)
• Notify Regulator of changes to rules (CBS)
• Notify Regulator of changes to objects, Articles,
registered office and name (Company)
Registrations and restructures
● Regulator’s general obligations
● Completely new registrations
● 3 tiers for restructures:
• Will require formal registration under registration
criteria and revised registration process
• May require formal registration under registration
criteria and revised registration process
• Will not require formal registration under
registration criteria and revised registration process
● Need to think about future assessments, even if formal
registration not required
Local Authority board members
● Mechanism included to limit or reduce ability for Local
Authorities to exert influence over private RPs through
(i) appointing/removing officers; and (ii) exercising
voting rights
● DCLG to issue regulations
● Those arrangements will override anything entered into
contractually or within RP’s constitution
Removal of consent to dispose
● 2 duties to notify regulator – (i) transfer social housing (for all RPs); (ii) transfer land (for non-profit making RPs)
● For registered charities will need to comply with Charities Act requirements
● NHF is liaising with Charity Commission but unlikely to be any changes until at least Law Commission report on modernising the Charity law regime for the disposal of land has been published – due end of 2016
● Whilst report likely to recommend less burdensome regime, suspect need new Charities Act – so unlikely to be dramatic changes in the short to medium term
● Possible to convert to CBS
Converting CLG to CBS
● If a registered charity, ineligible to continue to be
registered with Charity Commission but will become an
“exempt charity”
● Converting doesn’t affect contractual arrangements but
need to liaise with principal third parties, such as
funders, pension trustees and local authority partners
● Liaise with HMRC
● Statutory mechanism and will involve adopting rules in
place of article of association; require members to be in
favour of the conversion
Financing opportunities and challenges
● Removes requirement for RPs to seek consent to
charge properties as security for finance raised
● Still need to bear in mind HCA’s regulatory framework
and in particular not putting social housing assets will
apply
● Remove s. 133 – properties built on stock transfer land
can potentially now be valued on MV-T basis (tends to
be higher) compared to traditional EUV-SH; however,
crucial point for negotiation with funders
● Anticipate increased scrutiny from funders and
potentially increased costs of compliance – particularly,
group structures and property disposals – possible
funders may require their own due diligence
Developing case for non-RP parallel
associations
● Establishing “parallel associations” to undertake activity
which RPs would previously have undertaken
themselves – perhaps attractive for future new build
affordable rent where no grant involved
● Because not registered with HCA social housing rent
reduction provisions, design standards and voluntary
right to buy will not apply
● Need to consider charitable status - but if charitable
and similar objects, charitable group members able to
support the parallel association – land transfers, loans
etc.
● Also, whilst wouldn’t be able to rely on RP relief could
rely on charity relief in relation to SDLT
A new insolvency regime (1)
● Ujima collapse is the only time Regulator had to use the statutory moratorium powers – allows 28 working days to identify rescue proposals and obtain approval of RP’s secured creditors.
● Cosmopolitan inquiry highlighted shortcomings of the moratorium arrangements – particularly those involving larger or more complicated RP businesses
● New supplemental arrangements within Housing and Planning Act – Regulator has two options available
● Simpler cases likely to continue with moratorium procedures
● More complex cases Regulator can apply to court to appoint Housing Administrator
A new insolvency regime (2)
● The Housing Administrator will have two objectives.
● Objective 1 - will be the usual administration objectives of rescuing the RP as a going concern or achieving the best results possible for the creditors as a whole.
● Objective 2 is to keep social housing assets within the sector.
● The first objective has priority over the second objective so that social housing assets can still be sold out of the sector to meet the liabilities to creditors.
● The Housing Administrator would have wide powers to run the RP including managing the properties, receiving the rents and dealing with the RP's assets and offers a means of taking a much more planned and co-ordinated approach to a complex insolvency than the appointment of receivers by each of the secured creditors and the ultimate liquidation of the RP's assets.
Contact
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Richard St. John Williams
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