Balancing act
Current challenges in regulating social housing
GOVERNANCE
Image: Istock
Andrew Cowan
Head of social housing, Devonshires Solicitors LLP
Gemma Bell
Partner, Devonshires Solicitors LLP
If you give an angler a rubber mallet instead of a rod, is it fair to berate them for failure to catch fish? A blunt analogy perhaps, but the reality of the current powers of the Regulator of Social Housing (RSH) is that they are now inadequate for regulating an increasingly complex sector.
A more nuanced approach
Compare the current social housing landscape to the sector 15 years ago. Alongside the reduction in the RSH’s statutory role and powers resulting from devolution and deregulation, it is not surprising that cracks have appeared in the current co-regulatory model.
While the RSH has established specialist teams to address issues as they have arisen (for instance around specialist supported housing), it is having to respond quickly to regulate effectively in line with sector changes. For example, a number of for-profit registered providers (RPs) will soon pass the 1,000-unit threshold, requiring the RSH to undertake a very different model of In-Depth Assessment for RPs with non-traditional funding and corporate structures.
Moving with the times
Innovation is one our sector’s great strengths. This was clearly shown in response to five-year rent cuts and reductions in grant funding, with the creation of more complex funding arrangements and diversified commercial structures.
RPs face challenging times in meeting significant investment needs, balanced against delivering new supply and managing political and regulatory risk. New and innovative models are already being created to help meet these requirements. As in 2017/18 with the wave of viability ‘regrades’, we can expect to see a greater focus on RPs maximising capacity and challenging long-held thinking about their asset bases and operating structures. Just as RPs will need to balance competing priorities, so too will the RSH in relation to its different regulatory objectives
“The key reforms on consumer regulation seek to rebalance the pendulum. As the RSH has itself admitted, it has swung too far in one direction, with an over-emphasis on economic regulation.”
Providing the right tools?
The regulatory reforms proposed within the Social Housing White Paper will help to address some areas where the RSH’s powers are currently insufficient. For instance, the proposed ‘look through’ power, which will give the RSH greater authority to require information and co-operation from third parties, will allow greater transparency and control over potentially fraudulent payments made out of the sector.
The new regulatory model will continue to be assurance-based and co-regulatory. However, with the new tool of ‘consumer inspections’, the RSH will need to clearly map out where assurance ends and investigation begins.
The key reforms on consumer regulation seek to rebalance the pendulum. As the RSH has itself admitted, it has swung too far in one direction, with an over-emphasis on economic regulation. As this was a response to the government’s own priorities at the time, this (as with rent cuts) is a good example of the movement of political risk.
The recent consultation by the RSH on the proposed Tenant Satisfaction Measures (TSMs) has, we understand, gathered more than 1,000 responses, suggesting some work may be needed for them to be a meaningful regulation tool. In particular, concerns have been raised about the balance between subjective and objective measures, and whether certain TSMs (e.g. around neighbourhood contribution) are appropriate for all providers.
Some of the TSMs could potentially be affected by issues which extend beyond the RSH’s remit of regulating landlord services. They will be particularly susceptible to gaming – reflecting how the sector has responded to previous similar attempts. To counter this, the RSH will need to tread a fine line between meaningful statistics and its flexibility to respond. It also needs to give RPs the ability to innovate – one of the key motivators for the establishment of the current regulatory regime.
Time for change
While the draft Social Housing (Regulation) Bill clauses published in March help to provide greater clarity on the shape of the RSH’s new powers and remit, the timetable for the implementation of these changes is still unclear, and the devil will be in the detail of their implementation. The RSH will need to carefully balance its competing objectives and set out a clear approach to maintaining a co-regulatory, assurance-based approach. Ensuring it has appropriate skills and capacity will also be essential to allow it to provide regulation which is fit for the future.
