2015 has witnessed an increasingly radical shift of policy in the housing sector by the Conservative Government. This year we will see how the proposed changes play out and the unintended consequences and legal issues that arise as a result.

The Housing and Planning Bill and the Welfare Reform and Work Bill currently in Parliament will in all likelihood be enacted and introduce, amongst other provisions, the extended right to buy, the 1% rent reduction and pay to stay in 2016. The Government’s commitment to reverse the re-classification of the sector may impact on the details of the legislation and regulation of associations generally, so lawyers will be busy throughout next year interpreting how the various changes sit together. In addition to this, the announcements last week in the Autumn Statement, from capping housing benefit for new social housing tenants in line with LHA levels to providing significant additional funding for starter homes and shared ownership, provide a further push towards home ownership.

Despite the lack of detail at this stage, a number of themes are emerging:

  • The need for housing associations to further diversify and take on a higher degree of commercial risk to provide greater cross subsidy for rented housing, if they remain committed to that tenure, even in reduced volumes. Legally, associations will need to ensure they are acting intra-vires and, where applicable, within their charitable objectives and finance covenants.

  • A greater strain on landlords’ resources and the services they provide caused by the rent reduction; the resources required to deal with the impact of Universal Credit and the extension of the Right to Buy. 2016 is likely to see a number of mergers in the sector and a push towards share service agreements, as better efficiencies are sought.

  • At the same time Housing Associations must prepare themselves for an increased proportion of leaseholders within their stock as more outright sales, shared ownership and extended Right to Buy leaseholders come onto their books. Careful drafting of leases, service charge provisions and adherence to the s.20 consultation process will be vital to prevent a further drain on resources.

  • Significant transactional increases under the Right to Buy are expected after the initial pilots. Since the pilots are not testing the portable discounts, there are likely to be considerable legal arguments over the effect of the proposed exclusions and the workings of the discount.

  • Many of these changes suggest a rise in litigation between landlord and tenant. This is at a time where there is a sharp drop in tenants receiving legal aid for housing cases, which increases the time and cost for landlords bringing action against litigants in person. The first Supreme Court case relating to the Bedroom Tax is due in March 2016 which will help establish what exemptions disabled adults will have, if any.

  • The introduction of starter homes as affordable housing may have an impact on the number of affordable homes being sold to housing associations by housebuilders. However, it is likely that maximum prices for houses will prove a bar to starter homes in high value areas and housebuilders may wish to retain the benefits of the housing association’s forward funding over a proportion of an estate and the spread of risk that this produces.

  • With so many changes has come uncertainty on the impact of associations’ credit ratings and their ability to charge their units. Proposed amendments to the Welfare Reform and Work Bill aim to protect the value of stock for borrowing purposes in the event of default. Lenders (and their lawyers) will be paying particular attention as to what is finally enacted.

  • Associations will also require legal advice as to how their regulator will be able to enforce the various changes. Amendments to the Welfare Bill provide that failure to comply with the rent reduction will not be, on its own, grounds for exercising powers under the Housing and Regeneration Act 2008. How will this be resolved? What ultimately will happen if associations do not comply with the “voluntary” Right to Buy Scheme?