It is interesting to note that the social housing regulator in England and Wales intends to bring in "tough new rules to prevent asset stripping of social homes by for-profit providers" (Inside Housing 29 October 2012). By all accounts this seems to be part of a drive by The Homes and Communities Agency regulation committee to regulate high risk ventures at the instance of unregistered parent companies. The concern south of the border relates to the apparent uplift in valuations which occurs when the same property changes tenure from that of a social rented property (where the market valuation is lower) to one being sold for private sale on the open market. Resulting profits may not be ploughed back into social homes but may be retained by the for-profit provider.
To what extent this concern is shared by the Scottish Housing Regulator is as yet unknown but it is a timely reminder to charitable registered social landlords involved in or contemplating development models to be mindful of their charitable objects where the end use is for mid-market renting ("MMR"), which is a type of affordable housing.
Where MMR property remains in the ownership of the registered social landlord ("RSL") (and is leased to the RSL subsidiary) any exit strategy which requires the disposal of a unit would in all likelihood be to repay the debt or if not the RSL's charitable status would require that the proceeds be re-invested for the same charitable purposes i.e. affordable housing.
The wider issue is the extent to which the Scottish Housing Regulator can control unregistered group members whose activities threaten or could have the potential to threaten the regulated members of the group. Current Scottish Housing Regulator Guidance is fairly comprehensive but with the increasing use of unregistered non charitable subsidiaries to deliver affordable housing developments, we should be mindful of underlying objects and purposes.