Government proposals to extend the right-to-buy scheme to housing associations could undermine charity law that goes back centuries and would mean seizing assets of independent charities, the House of Lords heard this week.

Baroness Hollis of Heigham, a Labour peer and the chair of Broadland Housing Association, was speaking in a debate about the Queen’s Speech. She questioned the “legal basis of the government’s right to seize the assets of independent charities, given that they will have to unpick myriad overlapping laws that go back centuries”.

She said: “Housing associations are charities, not public authorities. Their £60 billion mortgage debt is not on the public accounts any more than landlords’ mortgages are. They are independent charities, many of which are a century old, financed often by gifts from local benefactors.

“Would we accept the government asset-stripping Eton or Winchester to fund academies? Perhaps the NHS would like the endowments of medical charities to pay for the drugs bill. Or perhaps we would accept National Trust assets being used to restore this Palace of Westminster. Consult your lawyers—that is my advice.”

She also said that “councils, council tenants and the desperate on waiting lists will be asset-stripped to fund huge discounts for those who are already better off and better housed than they are, simply to change their tenure, adding not one extra home”.

She added that housing associations have taken the strain from a lack of housing. She said: “Mostly they are charities, some with roots going back to 19th-century philanthropy, and they are framed by charity legislation going back to the days of Elizabeth I.”

Baroness Hollis concluded by saying: “I hope that this Bill never makes it to the Lords. If it does, I hope that this House will take it apart.”

Lord Greaves commended Baroness Hollis’s speech, he said: “We look forward to the housing Bill coming to this House, at least in a chronological sense, if not in the sense of its contents. I would advise the government, if they ever listen to me, to look very carefully indeed at that speech, reprint it and get lots of advice on it.

“It referred to a huge number of the problems that the Bill will have, if reports are true, and the debates that will take place on it here, as well as the problems that the government will have in persuading us that they are right on these matters.”

The Housing Bill, which gives tenants of housing associations the right to buy their homes at a discount, would force housing associations to dispose of assets at below market value. Housing associations are mostly a type of exempt charity called community benefit societies, but some are registered charities.

While it would not directly affect most of the voluntary sector, it indicates a willingness to direct charities how to use their assets. NCVO has previously raised concerns over the Bill.

'Legal and practical objections'

Lord Best, crossbench peer and a former chief executive of the Joseph Rowntree Foundation, echoed these views. He said that there are “some serious legal and practical objections to this policy”.

He said: “In the 1980s this House very firmly rejected the extension of the right to buy to charitable housing associations, principally on the grounds that government should not be ordering independent charitable bodies to dispose of their assets to the benefit of some tenants of today but at the cost of diminishing the charity’s capacity to help others in need in the future.”

Labour Peer Baroness Warwick of Undercliffe also raised concerns about the implications of these proposals on charities.

She said: “Preserving charity assets is a principle that has been in place since Elizabeth I, and the Government really need to exercise caution in undermining it. It is difficult to understand how a Conservative government could support a policy that essentially places the government in a role that should be the preserve of independent boards.”

A 'package approach'

Lord Bates, minister of states, defended the proposals by saying they are “part of a package approach”, adding “we recognise and believe that there is something quite fundamental in people having the ability to take a stake in society through owning a home”.

He continued: “We talk about social mobility; it starts with people being able to take a stake in society and have a home of their own, which they can draw an income from in retirement and pass on to their children, should they so wish. That is a fundamental principle that we want to protect.”