Regulator fires risk warning ahead of changes to standards

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government, Regulation

The Homes and Communities Agency's (HCA) regulation committee says it plans to amend aspects of the regulatory framework to take account of the increasingly “complex” environment social housing providers are now operating in.

Speaking at the National Housing Federation (NHF) annual conference, committee chair Julian Ashby said the sector was becoming much more of a “mixed economy” with for-profit providers registering with the HCA, housing associations creating unregulated parents and diversifying into more commercial activities and the presence of joint ventures and special purpose vehicles.

He also warned landlords that the current environment carries more risk for them to manage.

“This is a significantly more risky environment and the risk is increasing,” he told delegates. “You will need an iron grip on treasury management and covenant compliance,” adding “the regulator is not asking landlords to avoid risk but to manage it more effectively”.

However, he said with just over £40bn of grant attached to the book value of the social housing stock at £110bn, there was still a great deal of capacity for the sector as the market value of the stock stands at around £250bn.

“Boards need to have a grip on these emerging risks particularly welfare reform and the need to understand the risks of diversification.” He also said landlords need to deliver improvements in value for money and governance.

Mr Ashby said the framework standards would need amending on ring fencing, disposals and rents. Ring-fencing concerns the risks associated with ‘unregulated parents’ and their potential adverse effects on the core business of a housing association, while consents reform was around not-for-profit providers transferring stock to for-profits. “We need to protect the public value in circumstances where assets are transferred to not-for-profits.”

On welfare reform, Mr Ashby warned landlords they would need a different relationship with tenants if they were to be successful in keeping arrears down.

He said: “If you talk to any of the associations involved in the direct payment demonstration projects about what they need to know about tenants and the relationship they need to have with tenants to secure rents, it’s different to the one they’ve had before. It takes a lot of preparation to get ready for that. Some will be slower on that and it will have an impact on their businesses. It will be a mixed bag and we’ll keep a beady eye on it, talking in robust terms to those making a hash of it.”