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Written Statement - Response to the Consultation on the Regulatory Reform of Registered Social Landlords

Carl Sargeant, Cabinet Secretary for Communities and Children

The Welsh Government has committed to bringing forward a Regulation of Registered Social Landlords (Wales) Bill.  In May, I published a consultation on our proposals for regulatory reform.  The responses were supportive of the need for legislation and the proposed reforms outlined.  Today I am publishing a summary of the consultation responses.

On 29 September 2016, the Office for National Statistics (ONS) published the outcome of its review of the statistical classification of Registered Social Landlords (RSLs) in Wales. The review concluded RSLs are public market producers and are reclassified to the Public Non–Financial Corporations sub–sector, for the purpose of national accounts and other ONS economic statistics.

At August 2017, RSLs in Wales provided around 141,000 affordable social rented homes. Meeting the Welsh Government’s current target of 20,000 new affordable homes is dependent on a significant contribution by the RSL sector which, in turn, requires the sector to continue to have the freedom to use private sector borrowing to augment the Welsh Government’s social housing grant funding and other funding programmes.

The classification of RSLs in Wales as Public Non-financial Corporations will increase Public Sector Net Borrowing because private sector market borrowings taken out by the newly reclassified public sector RSLs (currently, on average £200 million per year) will score as a charge against Welsh Government budgets.

If RSLs remain classified as Public Non-financial Corporations funding for housing would be competing with other Welsh Government priorities. It is likely this would result in fewer new affordable homes and limited options for the Welsh Government to maximise the positive contributions RSLs make to the communities in which they work, including significant local employment and economic benefits. It would also result in uncertainty for stakeholders, including funders who have made long term commitments to funding an independent RSL sector.

Unless we take action which would enable ONS to reverse the reclassification and return RSLs to the private sector, our plans to address the shortage of affordable homes in Wales will be severely compromised.

The ONS review in Wales identified indicators of central and local government controls which led them to conclude RSLs should be reclassified.  These are mainly powers applying to RSLs, principally set out in the Housing Act 1996, including the provisions inserted by the Housing (Wales) Measure 2011.

The Welsh Government is therefore bringing forward legislation for the regulatory reform of RSLs to remove or amend the relevant powers. Once this is done, ONS would be able to consider reclassifying RSLs in Wales to the Private Non-Financial Corporations sector, thus mitigating the impacts and budgetary concerns set out above.

The removal of controls does not mean that the sector will be unregulated. We have already taken steps to revise and strengthen our approach to regulation and a new regulatory framework has been operating since January 2017.  

The summary of consultation responses is available at: https://consultations.gov.wales/consultations/regulatory-reform-registered-social-landlords

This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Assembly returns I would be happy to do so.