Housing Stock Transfer – Alive and Well?

Housing Stock Transfer –Alive and Well?

With the introduction of self-financing, there was some uncertainty about the future of stock transfers. This has changed with the long-awaited draft guidance issued for consultation by DLCG (consultation ended on 2nd September). The actual stock transfer manual is due out in late September. This article considers the key changes in the draft guidance and whether transfer is a realistic housing option in the future.

What are the main changes in the new guidance?

The new draft manual is much smaller – it deals more with principles than detail
The overall aim is reducing the financial impact of transfer on the public purse
Local authorities must submit a business case for transfer consisting of five elements: the strategic case, economic case, commercial case, financial case and management case;
Stringent cost benefit analysis tests to be met;
The valuation is to be based on the HRA self-financing debt, a 3.5% real discount rate, a proportion of VAT Shelter proceeds to be incorporated into the valuation and there is no allowance to offset setting up costs against the valuation.

These are significant changes aimed at reducing, as far as possible, any government overhanging debt write off. However, their impact will mean that it is harder to achieve a viable business plan and hence councils may be looking for existing registered providers to work in partnership to achieve a viable transfer and create a sound business case for transfer.

Is Stock Transfer still a realistic housing option for the future?

The fact that a new stock transfer manual has been produced with the inclusion of overhanging debt write off indicates that there is still a willingness in government to consider transfer where a council can demonstrate a strong business case for pursuing it and has involved its tenants. However, the thrust of the key changes included in the manual is clearly to reduce the impact on the public purse of any proposal as far as possible. This is likely to make transfers more difficult to stack up financially for the new landlord.

Therefore, as a result of the changes proposed in the transfer manual, the profile of transfers may alter as follows:

Greater involvement of existing ALMOs or existing housing associations may be needed in order to maximise the financial benefits
More emphasis and creativity required on trying to build on the economic benefits of transfer and the wider social impact
Larger numbers of estate transfers (possibly led by tenant groups under the updated Right to Transfer regulations) to existing social landlords.

What is absolutely clear, however, is that if a council or new landlord does wish to propose transfer under the proposals set out in this draft manual, they will need to push ahead very rapidly by carrying out an option appraisal involving their tenants. The DCLG will require initial applications to proceed to formal tenant consultation by the late autumn with the intention that consent will be given early in 2014 in order that tenant ballots and transfers can be completed by the end of March 2015.

Colin Woods, Associate Director and Liz Anderson, Senior Consultant
Liz can be contacted on 07833 469476 or email: liz.anderson@altairltd.co.uk
Colin can be contacted on 07521 857359 or email: colin.woods@altairltd.co.uk