Regulatory Judgements can go up as well as down!

Catherine Romney and Sue Harvey explore the reasons behind the recent spate of Regulator for Social Housing (RSH) upgrades. 

Shifting our gaze

At Campbell Tickell we know how to live. We spend one morning a month pouring over the English social housing regulator’s latest spreadsheet of regulatory judgments (RJs). We pay particular attention to downgrades of Governance and Viability, pulling out the common themes from the accompanying reports to feed into our work supporting clients to prepare for Inspections (previously known as In-Depth Assessments).  

Over recent months we have been excited to spot a batch of promotions to the top grades of G1 and V1 in the monthly spreadsheets. In the interest of balance, and also to help those clients seeking to improve their grades, we took a closer look at the actions highlighted as contributing to the increased regulator confidence. 

Of the 171 Regulatory Judgements published between November 2023 and March 2024, 13 involved upgrades from the ‘compliant but requiring some attention’ G2s and V2s to the top G1s and V1s. 

Seven associations shifted from G2 to G1, taking on average just over two years to achieve that result. Six associations shifted from V2 to V1, taking on around a year on average. 

Chart 1: Governance and viability data November 2023 – March 2024 

To note: Data table in the appendix for a numerical version of the chart.

The hard work behind the success 

Our analysis points to the hard work by associations that sits behind achieving promotion to the valued top grades. 

Multi-layered actions deliver G1s 

We can see that the seven G1s were achieved after the RSH recognised the outcomes of multiple and intertwined actions. The common themes identified in the published RJs are: 

• Leadership – refreshed Board and / or executive team; rebalanced Board skills and experience; better Board understanding of performance monitoring. 

• Governance – simplified group structure; reduced range of activities; Board training and development; committee responsibilities clarified; strengthened oversight of financial planning; improved reporting to the Regulator. 

• Strategy – investment in existing stock prioritised; better consideration of risk versus return; external review of operations; all merger due diligence issues actioned. 

• Risk and Controls – improved board oversight of risk management; strengthened internal controls; gaps in assurance addressed; greater control of conflict of interests; improved management of health and safety risks. 

• Service Delivery – sustained service improvement; improved customer outcomes; strengthen customer engagement. 

• Data – better stock condition data; improved assets and liabilities register; greater accuracy, timeliness and presentation of data. 

V1s driven by simpler plans 

 The RSH has stated publicly that it views a V2 as a stable position, but that a Board should always strive to achieve a G1. Perhaps associations only invest in achieving a V1 if the V2 is driven by a single issue that can be resolved relatively simply and quickly, rather than a major strategic decision such as to focus on building new homes.

Our analysis suggests that the six V1s were achieved via faster and simpler action plans than their governance equivalents, which is not to underestimate the work involved.  

Once again we’ve identified the common upgrade themes and they are: 

• Financial planning – updated stock investment costs; aligned assumptions with rent policy. 

• Funding – secured new finance; reduced exposure to interest rate volatility; reduced future borrowing requirements. 

• Assets – updated capital programme; asset disposal; fire safety programme completed; clarification of liability for safety works. 

• Development – reduced or reprofiled development programme. 

• Financial sustainability – increased headroom against covenants; reduced reliance on non-social housing income. 

Looking forward to C grades

As if this wasn’t excitement enough, CT is now assessing the new Consumer grades each month and we will shortly be publishing our analysis of the themes emerging from the first handful of published grades. It will however be many months until we see the second round of C judgments and therefore learn something of the actions required to drive better grades. 

Further insights and resources

1. Lessons from the first round of inspections: CT Director, Catherine Little, and Policy & Research Officer, Nina Cilins share the lessons learned from a recent roundtable discussion about the first round of inspections under the new regime, which came into play in April 2024. They also share some top tips for the sector. Read the blog. 
2. Self-assessment tool: This new tool (downloadable as an Excel document)  has been carefully designed to assist organisations in preparing for self-assessment against the social housing consumer standards in place from April 2024. Download the consumer regulation self-assessment toolkit. 

Campbell Tickell offers expert, tailored and practical support to clients to help them understand and comply with regulatory expectations. Find out about our consumer regulation support.  

To discuss any issues raised in this article email: Catherine.Romney@campbelltickell.com or  Sue.Harvey@campbelltickell.com 

Appendix: Data table for chart 1

• *Average time to upgrade excludes one outlier for each of Governance and Viability. 
• **Maximum time to upgrade is the outlier excluded from the Average calculation. 
• *** As far as we can establish, from RSH published Regulatory Judgement spreadsheets.