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.
According to the decision, housing associations that are private registered providers – registered with the Homes and Communities Agency – are now classified as Public Non-Financial Corporations. Housing associations are public, market producers, the ONS stated, and the ruling will be backdated to 2 July 2008, the date of enforcement of the 2008 Act.
The ONS ruling stated that, as a result of the Act, the government has consent powers over disposals of social housing assets, and power to direct the use of disposal proceeds, as well as powers over the management of a registered provider through the HCA.
This amounts to government control of the bodies under the European accounting regulations, leading to the reclassification.
The £60bn estimated increase in national debt as a result of the decision is “a very approximate initial estimate”, the ONS said.
The next Public Sector Finances bulletin, scheduled for release on 20 November, will provide further information on the impacts of this classification decision on both public sector net debt and net borrowing, and the reclassification will be incorporated in economic statistics as quickly as is practical.
Terrie Alafat, chief executive of the Chartered Institute of Housing, commented: “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.”
She added that the government had been clear that it intended to bring in measures that would see housing association reclassified as private bodies as soon as possible.
“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.”
Credit ratings agency Moody’s said the reclassification would not change its approach to the sector, although vice president Roshana Arasaratnam added: “The review highlights the ongoing unpredictable operating environment for housing associations, which underpins our current negative outlook on the sector.”
Moody’s currently rates 43 housing associations in England.
