In 2015, the Smith Institute produced a paper on the evolving relationship between local authorities and housing associations in the south and south west. Both LAs and HAs acknowledged that things had moved on considerably since the heyday of LSVTs, when the degree of cooperation and collaboration was probably at its closest.

Now, with deregulation and changing funding models it was noted that the relationship between the two relied less on shared experience, having moved onto a more commercial footing. Nonetheless, the paper’s author argued that the overwhelming feedback from LAs and HAs was that there remained a need – and a desire – to maintain a constructive working relationship.

So, why bring this three year old paper up now? Because the last official connection between local authorities and LSVT registered providers was removed when section 93 of the Housing & Planning Act 2016 came into force last autumn, meaning that local authorities will no longer have any direct influence over the running of a registered provider. Putting aside the detail of what that means in practice, how is the removal of local authority influence likely to affect future relations with RPs? If the Smith Institute paper is anything to go by, there is clearly sufficient good will in the tank between the parties – but how long can this survive the new commercial reality?

Removal of local authority influence

The regulations stipulate that no more than 24% of RP board members can be made up of local authority officers; if this percentage is exceeded then the local authority must nominate which members are to stand down; if it fails to do so then the rest of the board must decide. The presence of a local authority officer at a board meeting is no longer required to make it quorate; local authority board members no longer have voting rights; and a unanimous decision now only requires a 75% majority vote. Finally, if the registered provider’s constitution requires that local authority consent is needed for a constitutional amendment, this provision is no longer valid. RPs were given six months to amend their constitutions and to put the regulations into effect – and this six-month period ends on 15 May 2018.    After this date, the regulations will override any contractual rights of, or obligations to, the local authority and any associated RP rules.

How does this affect relations between local authorities and registered providers?

Most of the affected registered providers are English LSVTs and the majority appear to have embraced this change with enthusiasm. Given the changed regulatory landscape, many RPs are having to be considerably more innovative and flexible when meeting their current challenges, so the removal of any potential brake on future mergers, consolidation exercises, or funding routes will be welcome. On the other hand, smaller RPs might find themselves more exposed to the growth ambitions of neighbouring RPs and be unable to rely on local authority votes to retain their independence. However this regulation does solve another problem at a stroke – the anomalous position of local authority officers on boards of RPs that have grown to a size where their stock straddles several local authorities and where only a proportion of it can be attributed to a LSVT.  Regardless, the die is cast and this regulation ensures that the ONS objective of moving registered providers from the public to the private sector has been achieved.

Common cause

As the CIH noted in its 2017  ‘Building Bridges’ guide, there remains considerable common ground between local authorities and registered providers in what they are both trying to achieve but there remains scope for better understanding of the constraints under which both are operating. Local authorities rely on RPs to help them meet their statutory housing obligations but welfare reform and funding cuts mean that RPs are more cautious about their tenant base. In terms of available development land, LAs and RPs have traditionally worked closely when allocating land for affordable affording with the necessary consents. With RPs introducing a more commercial mix of housing into the equation, and LAs to start building their own housing, negotiations over available development land and planning permissions may become somewhat strained. Nonetheless, there remains considerable common cause between the two and, unless the business model for RPs undergoes further, more radical change, the implementation of section 93 should be seen as progress and not a detriment.

About the author

Carol Matthews Partner

Carol is a social housing lawyer and specialises in all non-contentious aspects of social housing law including corporate and governance issues, group structures, all property-related matters and housing management.