Select Committee on Deregulation Third Report



THIRD REPORT

The Deregulation Committee has agreed to the following Report:—

PROPOSAL FOR THE DEREGULATION (DISPOSALS OF DWELLING-HOUSES BY LOCAL AUTHORITIES) ORDER 2001

Introduction

1. On 31 January 2001 the Government laid before Parliament the proposal for the Deregulation (Disposals of Dwelling-Houses by Local Authorities) Order 2001 in the form of a draft of the Order and an Explanatory Memorandum from the Department of the Environment, Transport and the Regions[10].

2. The proposed Deregulation Order would amend the Leasehold Reform, Housing and Urban Development Act 1993 ("the 1993 Act") to extend the time for the completion of housing transfers on a large scale voluntary transfer programme ("LSVT") to two financial years rather than the existing one.

3. The 1993 Act governs the sale or disposal of local authority housing to registered social landlords ("RSL"), principally housing associations. Where more than 499 dwellings are involved the housing transfer is designated as a LSVT and is regulated under section 135 of the 1993 Act. One of the conditions under section 135 is that LSVT housing transfers must be completed by the end of the relevant financial year - that is to say, the year in which the transfer is included in the Secretary of State's annual disposals programme.

4. The House has instructed us to examine the proposal against nine criteria and then, in the light of that examination, to report whether the Government should proceed, whether amendments should be made, or whether the order-making power should not be used[11].

We now report on the proposal against the criteria in Standing Order No. 141(5)(A) as follows:

Does the proposal appear to make an appropriate use of delegated legislation?

5. We conclude that the proposal may be proceeded with as delegated legislation.

Does the proposal remove or reduce a burden or the authorisation or requirement of a burden?

6. The current procedure for LSVT housing transfers takes place in five stages. At the first stage, which is usually in the autumn or winter of each year, local authorities are invited to submit applications for a place on the annual disposals programme. The disposals programme is formally announced at the start of the financial year in the spring. Following selection for a place on the programme, local authorities are required to carry out a tenant consultation to gauge whether the majority of tenants support the transfer. This ballot would normally take place in the spring or summer. Only if the tenants vote in favour of the transfer will the local authority proceed to agree the terms and conditions of the sale with the RSL.

7. At the start of the following calendar year the new landlord must obtain registration with the Housing Corporation. Subject to the transfer complying with the policies of the Department, the Secretary of State may consent to the transfer. Crucially, if consent is granted, the transfer must be completed before the end of the financial year.

8. Failure to complete the transfer within the financial year means consent cannot be given to the transfer by the Secretary of State in England or the Assembly in Wales. This results in the local authorities having to restart the process by bidding for a place on another transfer programme.

9. The Government argues that this procedure places many of the actors involved in the process under a considerable burden. These include consultants advising on housing strategy, financial institutions funding the transfer, lawyers dealing with the conveyancing, surveyors, the purchasing RSLs and local authorities.

10. The Government maintains that management planning and basic daily logistics become extremely difficult for these organisations who face increased costs as human resources have to keep pace with the workload. RSLs, because they all apply for funding at the same time, find that the terms of their loan may be adversely affected. By extending the deadline for completion, the Government believes that these problems will be alleviated and key activities can be spread out throughout the year rather than being compacted in February and March.

11. The requirements of the 1993 Act clearly place an administrative burden on businesses and local authorities. We conclude that the proposal meets this criterion.

Does the proposal continue any necessary protection?

12. The proposal would continue to require the Department to run the transfer programme for England. It would still be necessary for local authorities to apply for a place on the annual disposal programme. However, a successful place on the programme would not automatically guarantee a transfer. Local authorities would still need to consult their tenants in accordance with the statutory requirements of the Housing Act 1985. The transfer can only proceed if there is a majority vote in favour of the disposal. The consent of the Secretary of State to the transfer would also continue to be necessary.

13. The Department states that it expects authorities to continue to adopt its policy of completion of transfer within six months of a successful ballot. Failure to complete within this period could result in a requirement for another balloting of tenants. We believe that the proposal will not remove any necessary protection.

Has the proposal been the subject of, and do they take appropriate account of, adequate consultation?

14. In England a consultation paper setting out the Government's proposals was issued on 6 August 1999. Responses were requested by 15 October 1999. In Wales the Assembly was asked by the Secretary of State for Wales to conduct the consultation process on his behalf. A consultation paper was issued on 14 July 2000 and responses were requested by 31 August 2000.

15. The Department conducted a comprehensive consultation with several organisations involved at all stages of a housing transfer. Included among those organisations consulted were local authorities, consultants, financial institutions, housing associations, lawyers and other representative bodies or individuals involved in the provision of advice or funding for the purchase of local authority housing, or of housing generally. The range of consultations seems to have been appropriately wide. In addition, several organisations who had not been consulted directly responded.

16. Respondents in England included forty-three local authorities, five consultants, four lenders, two RSLs, one law firm and nine other interested parties. In Wales three local authorities and three representative bodies responded.

17. The consultation document outlined three possible options:

  (i)  continue to run an annual bidding round for places on the programme, but allow programmes to last for two financial years rather than one;

  (ii)  continue to run an annual bidding round for places on the programme and automatically roll it over into the next programme if transfer has not been completed i.e. an open-ended process; or

  (iii)  allow authorities to apply for a place on the programme at anytime, and complete the transfer at their own pace.

The Department's preferred option was for the extension of the LSVT completion deadline by a full financial year (Option 1) and the consultation focussed on this option,although some respondents commented on the other two options.

18. Of the sixty-four responses received to the consultation process in England, forty- four supported this option and two made no comment. In Wales all six respondents supported the proposal and two made further suggestions.

19. Three respondents suggested that the programme should have two application dates per year and that from that point of entry the transfer should be completed in two years. The Government rejected this suggestion on the grounds that it would make it more difficult to balance the number of authorities going through a transfer process with budget constraints and organisation of the LSVT Pool would create no real benefits but increased paperwork for everyone. The Government also argues that authorities do not normally review their housing strategy twice a year.

20. The Chartered Institute of Housing, Halifax plc and the Council of Mortgage Lenders suggested that there should be a limited time to complete the transfer once a positive ballot had been received. Westminster City Council put forward the idea of a transfer date within two years of tenant approval. The Government rejected these suggestions. The Government maintained that delays in completion may be due to genuine problems such as difficulty in obtaining funding. The idea suggested by Westminster Council was also rejected on the grounds that there may be significant turnover of tenants in the period between the ballot and transfer and this could raise questions over the ballot and whether those tenants involved in the transferring process where the same as those who voted.

21. Trowers and Hamlins, the Council of Mortgage Lenders and Sunderland City Council raised concerns about the length of a two year transfer programme. The latter suggested that tenants may be confused if a transfer occurs 18 months after they were balloted. The Government response is that the option gives authorities the choice of transferring up to two years after being selected for the programme. The possibility of transferring in less than two years has not been removed; and the Department would in any case continue to expect a transfer to be completed within six months of a successful ballot.

22. Fareham Borough Council and Blaby Council favoured a three year transfer programme. The Government's response was that such a period would be too long and momentum would be lost.

23. Halifax plc and Trowers and Hamlin were concerned that the proposal would result in authorities transferring in February and March of the second year and therefore displacing the bottleneck effect to another period. However the Government rejected this theory on the basis that the proposal gives authorities the opportunity and time to roll over into the second year. They would be better able to control key decisions and there would be no need to delay transfer longer than necessary. Overall, we believe that the scope of the consultation was adequate and that the Department took appropriate account of the representations received.

Does the proposal impose a charge on the public revenues or contain provisions requiring payments to be made to the Exchequer or any government department or to any local or public authority in consideration of any licence or consent or of any services to be rendered, or prescribe the amount of any such charge or payment?

Does the proposal purport to have retrospective effect?

Does the proposal give rise to doubts whether it is intra vires?

Does the proposal require elucidation or appear to be defectively drafted?

24. The House of Lords Select Committee on Delegated Powers and Deregulation questioned whether the drafting of the Order exceeded what is required to achieve the apparent policy purpose and clarification was sought from the Department. In an exchange of correspondence, the Department subsequently undertook to modify the Order so that provision under section 135 for an annual disposals programme is clearly spelt out on the face of the draft Order in order to ensure the retention of any protection given to the tax-payer under section 135. We are satisfied with that outcome.

Does the proposal appear to be incompatible with any obligation arising from membership of the European Union?

25. We have no other concerns to raise under these headings.

Extent

26. The proposed Order would apply to England and Wales only.

Report under Standing Order No.141

27. We have concluded that a draft Order in the same terms as the proposal for the Deregulation (Disposals of Dwelling-Houses by Local Authorities) Order 2001, taking into account the drafting concerns of the House of Lords Select Committee on Delegated Powers and Deregulation, should be laid before the House.


10  Copies are available to Members from the Vote Office and to members of the public from the Department of the Environment, Transport and the Regions. Back
11  Standing Order No. 141. Back


 
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