Currently creaking its way through our stunned government is the Housing and Planning Bill 2016. It was returned to the House of Lords in May 2016 for consideration of Commons amendments – a kind of governmental ‘ping pong’. Buried within the clauses of this bill is a clause very relevant to social housing.

When the bill was first introduced there was a clause relating to what would happen to social housing in the event of the company behind the social housing scheme going bust. The intention was that retaining the social housing stock within the regulatory system was essential – in other words tenants needed to keep their homes – and that would the priority of any intervention in such circumstances.

The clause was introduced off the back of the near-collapse of Cosmopolitan Housing Group in 2012 when the company suffered liquidity problems. At the time Cosmopolitan ‘came within a whisker’ of having its social housing stock seized by lenders. At the last minute a rescue deal brokered by the social housing regulator – the Homes and Communities Agency (HCA) – was put together and Sanctuary Housing Group stepping in to save the homes.

From the tenants point of view the Sanctuary deal ensured they remained in their homes with their rents and rights protected by the regulatory framework. From the industry’s point of view lender confidence was maintained and they did not become victim to the increased interest rates that would follow the collapse of a large borrower in the sector.

The original clause in the Bill made sense for tenants and was praised by housing charities. However in April it was reported that Ministers were set to change the Housing and Planning Bill following concerns that a new system of managing Housing Association insolvencies would lead to lenders asking social landlords for more security.

Following pressure from within the industry the wording in the bill was changed and the primary purpose of the clause would now be to safeguard creditors’ interests, rather than ensure social homes remained in the sector. Speaking at the time about the new amendment, Lord Beecham, stated that although the sale of social housing stock would be a matter of last resort: ‘the objective to service creditors takes precedence over the objective to keep social homes in the regulated sector’.

This means that once the bill becomes law thousands of social homes could potentially be at risk of being sold off on the open market should a major registered provider of social housing collapse. Compounding this issue a series of recent mergers have created ever larger and more complex group structures within the social housing sector which are by definition unwieldy and unlikely to be able to respond quickly to rapid changes in financial circumstances.

Undoubtedly, should another company find themselves in the situation Cosmopolitan found themselves in the HCA would do all it could to save the social housing. However, with the wording in the Bill as it currently stands, this would not be possible if other options, including market sale of the homes, would provide creditors with a better outcome.