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The Housing and Regeneration Act 2008 gave the HCA certain powers, in particular consent powers over disposals of social housing (which has always been the case, one way or another) and power to appoint managers (rarely used) in the event that an RP finds itself in difficulties.
Coupled with this, decisions in recent years have been made that effectively class RPs as public bodies for the purposes of procurement and judicial review.
Despite the fact that these matters are not new, the ONS decided to review its classification of RPs, and has decided, retrospectively, that they are in fact public bodies.
When making its decision, the ONS did not take into account factors such as the recent rent cut announcement, the introduction of “pay to stay” or the current, voluntary RTB agreement.
The biggest impact is that the reclassification has added £60bn on the national debt. In terms of practical effects for RPs, these seem to be few at present and should have no effect on their operational matters.
There is of course the possibility of funders reviewing the situation, however nothing has changed in terms of RPs loans. RPs may wish to review their loan covenants, but not perhaps because of the reclassification but because of how the future might look.
The reclassification does not give the government any new powers over RPs and no borrowing controls are imposed on RPs. And Moody’s has confirmed that it would not view RP debt as being guaranteed by the Government as a result of it being on balance sheet
The plan is of course to reclassify RPs as private as soon as possible and there are a number of ways in which this can be achieved. Primarily, this is likely to be by way of a level of deregulation on the HCAs powers, such as a relaxation of the consent regime and the HCA’s powers to appoint officers to RPs.
The implications of the RTB agreement and arrangements are also likely to need to be analysed.
How will the potential deregulation look? It would seem that the likely deregulation (or perhaps more accurately a relaxation of current regulation) will take the form of a watering down of the HCA powers to appoint and changes to relax the consents regime.
The question that funders may be asking themselves though is whether fewer controls have implications in terms of security and loan covenants.
In the event that the HCA waters down its powers of appointment, is it likely to retain some sort of step in rights; perhaps for mismanagement or serious performance issues? What will happen to an RP over which any retained powers are exercised? Will the HCA wish to maintain a register of potential ‘rescuers’?
Although there are few practical effects from the reclassification, it has raised a number of questions and the answers will no doubt be eagerly awaited.
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