Anthony Hilton: The truth about Conservative plans for housing associations

Shadow Chancellor John McDonnell missed a trick at the Labour party conference yesterday.

Instead of causing only mild outrage by hinting at the possibility of a financial transactions tax, he might have threatened to nationalise the entire financial sector without compensation

Imagine the stir that would have caused.

Or perhaps not. A threat of this nature provides the context for current talks between the Government and the housing associations but has raised barely a murmur.

The slightest hint of intervention from a Labour Opposition that will not be in power for at least five years dominates the headlines.

Actual direct interference by the Conservative Government to threaten the viability and independence of a sector that builds a quarter of the nation’s homes passes without a mention.

A feature of the election manifesto was that a Tory Government would give tenants the right to buy properties they rent from housing associations. This upset the associations because the cut-price homes to be offered for sale belong to them not the Government — a detail that seems not to have troubled the writers of the manifesto.

They simply saw it as an easy way to bribe a gullible electorate — and it worked.

Housing associations provide homes for families who cannot afford to buy or even rent, and create thriving communities.

The sector believes the more properties it is forced to sell at a discount under Right To Buy legislation, the fewer it will have to rent to the thousands of homeless families still on waiting lists.

It has a point. No independent research has yet supported the Government’s contention that each house sold would be easily replaced by an equivalent new build.

Given this background, it was a surprise to hear Communities Secretary Greg Clark say in a speech to the National Housing Federation he had the outline of a deal in which the federation would voluntarily support a Right To Buy policy it was expected to oppose.

He suggested that, if this deal is supported by a vote of the full membership to be held by the end of this week, that there would be no need for Government to legislate.

It is easy to see why a voluntary deal would suit Clark but harder to see why the associations would fall into line.

The Government has a majority of only 11 and some of its backbenchers are already unhappy with this policy, which they think will make the housing crisis worse not better.

Getting the legislation through the Commons could turn into an embarrassing struggle. The Lords is also likely to give it a mauling.

The surprise is on the other side: why would the housing associations agree? The explanation is perhaps a big stick being swung in the background. No public threats have been made but it has apparently been made clear to the sector’s representatives that the Office for National Statistics might decide to reclassify the associations as public bodies. This might be more likely if they refused to do the Government’s bidding.

Such a reclassification would result in the assets and liabilities of the associations going on the public-sector balance sheet, and that would effectively mean the nationalisation of the charitable assets owned by the associations — almost 2.5 million homes worth £60 billion or more.

There would then be little to stop the Government launching a massive privatisation programme to sell off the houses and loans to private owners. Such a policy might prove wildly popular, for a short time anyway, with those buying cheap homes but would put an end to the housing association movement in England.

To borrow from The Godfather, the Government’s proposed voluntary deal is an offer they can’t refuse.

But even this capitulation may not be enough because, troublesome though it is, the Right To Buy programme is potentially far less damaging than a proposal in George Osborne’s last Budget that the rents on social housing should rise by 1% less than inflation every year.

It has been estimated that if this becomes permanent policy, it will suck a crippling £50 billion from the sector over the next 30 years — money which would otherwise have been available for homebuilding.