Transfers, Contracts and Regulation: A New Institutional Economics Perspective on the Changing Provision of Social Housing in Britain

Abstract

Social housing policy in the UK mirrors wider processes associated with shifts in broad welfare regimes. Social housing has moved from dominance by state housing provision to the funding of new investment through voluntary sector housing associations to what is now a greater focus on the regulation and private financing of these not-for-profit bodies. If these trends run their course, we are likely to see a range of not-for-profit bodies providing non-market housing in a highly regulated quasi-market. This paper examines these issues through the lens of new institutional economics, which it is believed can provide important insights into the fundamental contractual and regulatory relationships that are coming to dominate social housing from the perspective of the key actors in the sector (not-for-profit housing organisations, their tenants, private lenders and the regulatory state). The paper draws on evidence recently collected from a study evaluating more than 100 stock transfer organisations that inherited ex-public housing in Scotland, including 12 detailed case studies. The paper concludes that social housing stakeholders need to be aware of the risks (and their management) faced across the sector and that the state needs to have clear objectives for social housing and coherent policy instruments to achieve those ends.

Keywords:

• Stock transfer
• policy evaluation
• new institutional economics

Acknowledgements

The authors are grateful to Duncan Maclennan, who provided ideas and inspiration in this area over a number of years. They are also grateful to Lynn Fisher, MIT, Marion Steele, University of Guelph, the Editors of Housing Studies and three anonymous referees, for their insightful comments on an earlier version of this paper. Otherwise, the usual disclaimers apply.

Notes

¹ Residual debt is where the valuation of the stock as a going concern (the price paid to the vendor) is less than outstanding housing debt on the council's balance sheet. Government became increasingly concerned that high debt, low rent, badly managed and poor quality property could not be tackled without transfer out of the sector and were willing to meet the residual debt through the national tax payer to make it happen.

² In practice, some transfers were significantly different in set-up from the standard model, for instance, because properties were non-viable or technically faulty and therefore the successor landlord would also be provided with public grant to build new homes, although this would normally include private debt as well. However, the resulting RSL would conform to the model once established.

³ Voids relate to empty properties that are ready to let and thus are a loss on potential rental income.

⁴ Non-technical arrears exclude outstanding housing benefit not yet received by the landlord.