Irish housing associations (‘approved housing bodies’) have had their finances reclassified so that they are part of local government, causing consternation in the sector at the threat of greater state control. This article is a response to this decision from a UK perspective, where housing associations recently faced a similar problem that has since been resolved.
When first told about Ireland’s decision to change the accounting status of its Approved Housing Bodies I got hold of the wrong end of the stick. In the UK, I’ve been part of the debate about the similar status of housing associations here, and naturally assumed that something similar was happening in Ireland. I thought that the independent status of AHBs must be under threat, and that the Irish government was fighting off a decision by the Central Statistical Office to reclassify them as part of the government sector. Little did I realise that the actual situation was almost the reverse of this.
In the UK, the argument arose because of growing regulation of the HA sector, the government’s ability to intervene if an association goes bottom up, and its plans to force associations to sell stock under a new ‘right to buy’. Faced with reclassification and HAs’ £66 billion of borrowing becoming part of government debt, the government backed down on several of these issues. The UK’s National Statistics Authority has duly reversed its decision for English and Scottish associations, the existing housing sales scheme in Northern Ireland being one of the remaining obstacles there.
How astonishing then, to see that in Ireland the CSO plans to reclassify some of the larger AHBs on what, in UK terms, looks like a very flimsy basis. The system for funding and regulating these AHBs is not dissimilar to that for associations in the UK (at least before the massive growth of private finance in the 1990s), and there appear to be no new threats in Ireland to tighten it or introduce new requirements like a compulsory sales scheme. It very much looks like the CSO taking a decision which, at best, involves no challenge to Eurostat’s rules and, at worst, looks like meekly conceding a rule change which on the face of it appears completely unnecessary.
Why is that so? In my view, under Eurostat pressure the CSO has convinced itself that larger AHBs are doing the job of local government, and that this means they have to be treated as local government bodies in financial terms. But in reality the EU is full of examples of independent, non-profit bodies fulfilling a quasi-government role, while still sitting happily in the non-profit, non-government sector for accounting purposes. The UK housing associations are the obvious and nearest example, but similar bodies in (say) the Netherlands and France also come to mind.
How did CSO arrive at its assessment? It seems to have taken into account a range of factors that would be considered normal in the public sector’s relationship with non-profit bodies that it is funding: the money itself, the requirement to provide low-rent units to meet the housing needs of low-income tenants, and issues like complying with design requirements. But in the UK similar requirements and more were imposed for years with no threat of reclassification, and indeed have survived the decision to put housing associations back into the non-profit sector. Admittedly in England tenants receive part (but by no means all) of the subsidy towards their rent through housing benefit, but associations have to deliver sub-market rents in order to get capital grant and the grant is intended to fill the gap.
Although English associations now rely increasingly on private finance, this is less the case in Scotland and Northern Ireland and of course it was much less so when the growth of the movement first began in the 1970s.
Does it matter? Well in England, especially, the housing association sector saw reclassification as an existential threat. Although it initially brought no change in funding or regulatory arrangements, it was seen as opening a door to government involvement which associations wanted to keep firmly shut. After all, if government sees an organisation as being an arm of itself, the temptation to tighten controls, involve itself in management and protect itself from perceived risks is that much more likely than if the same bodies are seen as independent non-profits which can – if the worst comes to the worst – be allowed to go bottom up. Furthermore, if all their funding is now ‘government’ funding, why would they be exempt from any future cuts? And what government would allow them to borrow privately without imposing limits, as every euro they borrow now counts towards public sector debt?
The same fears apply, of course, to AHBs in Ireland. This is even more the case as they were not merely classified as part of the public sector but as local government bodies. AHB funding is now in direct competition with other government spending priorities, which means that future funding may well be under threat.
There is yet another oddity to Ireland’s position, as it separates out the larger AHBs, which necessarily operate in a more business-like way, from the many smaller AHBs which are less reliant on government. But the latter are doing the same public service (on a smaller scale) as the large AHBs. They will also be deterred from growing, fearing that if they do so they’ll be sucked into the government realm.
Yet on the face of it, this response to Eurostat goes too far the other way. Couldn’t the CSO have merely told Eurostat that they’d reviewed the operation of AHBs in comparison with similar bodies elsewhere in Europe who have non-profit status, and found nothing out of the ordinary? Why did they think that Eurostat was forcing them to go so far, and why did the government not respond that AHBs are not controlled as if part of government and receive substantial income from their rents? Admittedly I’m looking at this from the other side of the Irish Sea, but from here it very much looks like stabbing yourself in the back.
Original article: Housing Ireland