Striking the right balance: The future of social housing regulation

Published by Jon Land for 24dash.com in Housing and also in Featured

Eyelids normally droop at the mention of social housing regulation – but not anymore. Thanks to the radical policies ushered in by Eric Pickles and Grant Shapps, the regulatory landscape as we know it has changed irrecoverably.

The new game in town is how to ensure England’s eight million social tenants can be assured of decent living standards through co-regulation with their landlords. Anita Pati investigates what could be a tricky balancing act.

The Coalition Government’s localism agenda, where state power is devolved to local level, has stoked most of the fire behind the reformation of the regulatory regime. Plans are being cemented in the Localism Bill shuffling through parliament at time of writing. A hands-off, light touch regulator and more self- or co-regulation is the new direction of travel.

There is more onus on tenants to take part in regulation with greater emphasis on local mechanisms to scrutinise performance. At the end of last month [September], a consultation on ministerial directions to the social housing regulator closed which set out a revised Tenant Involvement Standard as well as directions on tenure and mutual exchange.

These directions boost tenant scrutiny powers in monitoring their landlords, and introduce a tenant cashback scheme where tenants can share in any savings made from managing their own repairs. This is against a backdrop of six national Tenant Services Authority standards introduced last year that have attempted to prioritise the consumer.

But this direction in itself, which housing minister Grant Shapps further amended over the summer break, has added to mounting alarm within the sector. Abigail Davies, assistant director of policy and practice at the Chartered Institute of Housing, says the CIH is “very concerned” about, “the growing desire of government to use regulation to implement policy initiatives… just at a time when the housing minister regularly states his desire to address consumer issues in housing.”

She says: “This creeping desire of government to exercise control in this way leads us to wonder how long landlords and tenants will continue to value and have faith in the consumer standards – which is a shame given that currently they are broadly supported throughout the sector.”

Davies adds that increased powers to direct the regulator via the secretary of state “can lead to unnecessary micro-management of the sector, especially when used to implement government-favoured initiatives like tenant cashback.”

One has to track back years to understand today’s regulatory picture. But the trajectory towards lighter touch regulation could be said to have begun in 2007 when Professor Martin Cave, in his report Every Tenant Matters, proposed the principle of co-regulation. This is where social housing providers rely on codes of practice and voluntary benchmarking but with a “backbone” of regulator intervention in exceptional circumstances.

In June 2010, new housing minister Shapps announced a review of the role of the TSA and the social housing regulation framework. In a speech at the 2010 Chartered Institute of Housing conference, Shapps said he wanted to: “cut out unnecessary inspection - decentralise power... reduce bureaucracy... and save money,” because “restrictive regulations haven’t worked”.

His subsequent October 2010 review of social housing regulation in England confirmed this stance: proactive economic regulation of social housing providers would continue but a more localist approach would be adopted to monitor consumer standards.

Not only would the TSA be abolished with its regulatory function transferred to a committee at the Homes and Communities Agency by April 2012, but co-regulation would be enhanced with greater tenant scrutiny of performance, ideally through tenant panels, and more landlord freedoms.

A January 2011 impact assessment estimated that transferring the TSA function would save approximately £200,000 per year in administrative burdens on social housing providers.

The Audit Commission would join the bonfire, with routine inspections no longer taking place and the regulator free to commission inspections from the open market. From July 2011, the TSA’s inspection regime replaced the assessment measures of the Audit Commission’s Key Lines of Enquiry or KLOE methodology.

However, in practice, the TSA’s inspection regime has already fallen off prompting concerns that tenants may be left in uninhabitable conditions. It has only conducted 10 inspections since April 2010, most of which were legacy inspections from the Audit Commission’s programme, with no inspections carried out since September 2010.

The TSA says it expects providers to ensure they are meeting the standards and their own obligations to tenants within the co-regulatory framework. But an Audit Commission spokesman said since April 2010, it had not received any actual TSA requests for inspections and had raised significant concerns about eight housing providers.

In line with the regulator now taking a “backstop” role, the Localism Bill says the regulator should only intervene if there are reasonable grounds to suspect that the failure has or will result in “a serious detriment to the registered provider’s tenants or potential tenants”. Or, according to the TSA, where a provider is “seriously failing TSA standards or regulatory requirements”.

The ‘serious detriment’ threshold was being debated in Parliament at time of writing and has proven controversial. There is not yet a clear definition of serious detriment although the TSA will consult on this in the autumn. Would it mean the regulator would only intervene or use formal enforcement powers to prevent gas explosions or lack of heating in the winter while neglecting other standards?

Davies says such a high threshold before intervention will result in a “great dilution of the consumer role” and “calls into question whether the other standards are really expectations and who will be the backstop for tenants to ensure landlords deliver.”

Any problems, it is hoped, will be dealt with via what has been dubbed a “democratic filter”. This means tenants not satisfied with their landlord’s complaints process will have to approach local councillors, MPs and tenant panels first – whose roles would be enhanced – with no direct access to the housing ombudsman from 2013. At present, tenants can and do complain directly to the ombudsman.

Alistair McIntosh, chief executive of consultancy Housing Quality Network, says: “The real problem the [new HCA] regulator’s got is… it’s got all these incredible powers it’s inherited from the Housing Corporation and the TSA, such as shutting housing associations down, sending managers in – the powers of a superhero but they can only use them when serious detriment is proven.”

He says in the early stages: “The HCA regulatory committee will be bombarded with complaints and it will be very difficult to identify those that are serious detriment and need to be taken further.

“Everyone under the sun can knock on their door and claim serious detriment – environmental health officers will be saying there’s big health hazards at housing association properties, the ombudsman, individual tenants, MPs, councillors, tenant panels… There’s no discretion for the HCA regulatory committee here.

“And proving serious detriment will be like passing through the eye of a needle – as I understand it there are few legal precedents,” he says, adding that “harm to many” is likely to be the threshold.

“It will be difficult for the regulator to intervene on anything but the most extreme cases by which time frankly it’s too late to stop things going wrong,” says Phil Morgan, consultant and former TSA executive director of tenant services, who, perhaps unsurprisingly, feels the new regulatory regime is stuttering. “When Grant Shapps decided to make the TSA toast he didn’t really have a clue what it meant in reality – he just wanted a dead quango,” he says.

Morgan says: “(Shapps’) largely spurious split of economic regulation from consumer regulation with the latter being dealt with through complaints has not worked.

“In the end, even he had to accept that complaints needed some anchor back in the regulatory regime but because he was so obsessed with keeping the TSA dead he then raised the bar for intervention to ‘serious detriment’ in the Localism Bill.”


However, the National Housing Federation’s policy leader for regulation and service delivery John Bryant does not believe the serious detriment clause is cause for concern. The NHF, he says, agrees with the “backstop approach” to consumer regulation.

“I don’t think it’s going to make a huge amount of difference in practice because although the regulator hasn’t in theory had a backstop function up to now, in practice it has tended to keep its powder dry and only intervened with serious problems,” he says.

Bryant also questions the very independence of the HCA regulatory committee by harking back to the old regime under the Housing Corporation:

“One of the problems with having the investment agency and regulator in the same organisation was that associations would be very wary about affecting their investment money and of doing anything that would upset the Housing Corporation.”

He says if the Housing Corporation started becoming too demanding, “associations might be reluctant to kick up a fuss because they’d be afraid it would affect their investment income”. He is concerned that this could happen again.

And questions remain as to what action the regulator would take if a successful developing housing association fell down on its service delivery – would there be a conflict there? “There could be a tendency to look the other way at breaches of regulation,” he says.

Despite the Government attempting to put in safeguards, Bryant believes: “They could do more to protect the independence of the regulatory committee – it’s too easy for the secretary of state to remove members for political reasons.” He wants the HCA regulatory function to have an independent legal identity so that it is distinct from the rest of the HCA in potential court cases.

Another criticism is there will be no direct access to the housing ombudsman for irked tenants. What if tenants living in unsatisfactory conditions have no joy with their landlord, have an unsympathetic councillor or MP and don’t want to divulge personal information to fellow tenants?

Bryant says: “This system is entirely misconceived and we don’t agree with this so-called democratic filter. It’s an unnecessary barrier in the way of tenants who have a complaint and runs counter to the direction of travel on ombudsman services generally.”

He says tenants will lose control of their complaints as they are referred through various parties. He understands that complaint routes will be easily stymied because “there will be regulations that stop you shopping your complaint around”.

There are mixed views about tenant panels’ ability to regulate. HQN’s McIntosh believes, if managed well, panels “will do a good job”. Bryant says that “on the whole, the direction of travel there is quite positive” because housing services will not be micromanaged and will be delivered to please tenants rather than the regulator.

But Kevin Gulliver, director of the Human City Institute, a think tank on urban communities, says the concept of tenant engagement, including their use on scrutiny panels, has turned tenants into market research participants rather than genuine stakeholders. “It’s a bone of contention,” he says. “It’s quite good that tenants are called customers but it’s still quite a false term as tenants don’t have a huge amount of choice – they can’t withhold their rent, for instance,” he says.

And the CIH’s Davies echoes this concern that tenants’ real powers are being eroded in the name of empowerment:  “We worry that use of tenant panels as one of the gatekeepers to access to the ombudsman will push existing tenant panels – which have recently grown in strength and capacity to work on scrutiny across the whole landlord’s business – back to just scrutinising complaints, and thus ironically weaken the role of active tenants.”

So it seems this autumn, regulatory issues will be very much alive and kicking. Those in the sector that doze through its developments may find the eventual ramifications less easy to ignore and even harder to ignore for the tenants.

This feature originally appeared in the September edition of 24housing magazine.