Light touch regulation

Now the Tenant Services Authority has published its statutory consultation paper, housing providers can start to understand what may be in store from April 2010.

What kind of regulator does the TSA plan to be?
The TSA seems committed to co-regulation, which it sees as self-regulation with a backbone of intervention on a ‘by exception’ basis.

How will that work?
In the TSA’s opinion the key ingredients are:

• Clear regulatory expectations: meaningful, non-prescriptive, national standards. Six national standards have been proposed, each focusing largely on outcomes: tenant involvement and empowerment; home; tenancy; neighbourhood and community; value for money; and governance and viability.
• Locally agreed standards, developed with tenants.
• Boards taking responsibility for meeting standards, engaging in honest and robust self-assessment. Tenant scrutiny of performance, external validation, independent audit and peer review are also encouraged.
• Providers giving transparent performance information to tenants.
• Where possible, allowing providers to correct problems, and take responsibility for self-improvement.
• Ultimately, regulatory intervention (when self-correction fails).

Does this really mean less prescription?
The proposed standards are succinct. For instance, the governance section of the proposed governance and financial viability standard contains just one paragraph on required outcomes and four specific requirements. It is not expanded upon by a code of practice.

As far as codes of governance are concerned, the TSA simply requires that the provider must adopt and comply with an appropriate code of governance, give reasons for the choice, and explain areas of non-compliance.

The TSA says that a reduction of the regulatory burden is a key part of its plans. As such, it proposes not to publish (at least in the first instance) any codes of practice to support any of the national standards.

What’s more, all of the following will be cancelled: the Regulatory Code and Guidance; 54 of a total of 58 current circulars; all Good Practice Notes.

Obsolete guidance
This is obviously a big change for the sector, and a lot of guidance that is currently quite central to how housing associations operate would disappear. For example:

• Good Practice Note 3. This deals with maintaining standards of probity and Schedule 1 (such as, the statutory prohibition on payments and benefits to employees and board members).
• Good Practice Note 5. This - together with Schedule 1 - deals with payments to board members and sets parameters for what is acceptable.
• Good Practice Note 11. Good Practice Note 11 sets out a number of rules on group structures. For instance, if you are a housing association in a group, you must have a housing association parent. It also prescribes a number of specific provisions that must be included in subsidiary and parent constitutions.

While Schedule 1 is unlikely to be widely mourned, and often causes difficulties in practice, GPN 3 and the general determinations have provided a useful structure to help with tricky issues. Decisions about, for example, non-contractual benefits and payments towards gifts and corporate events can all be dealt with under the framework of a general determination. And while the detailed provisions of GPN 11 restrict some types of innovation, the clear requirements for parents to control their groups have often been regarded as useful in helping to ensure that groups operate cohesively.

In future, decisions about probity, benefits, and remuneration will have to be made from first principles, applying the constitution, general fiduciary duties and charity law (where relevant).

Boards will need to decide for themselves what is legal, prudent and advisable. At present, many governance policies and standing orders simply link into TSA guidance notes. In their absence, providers will need to consider the underlying principles and adopt replacement policies and governance documentation to fill the gaps.

Broadbrush approach
More generally, this new approach is less about specific requirements and more about broad expectations (for example, ‘to have effective governance arrangements…’).

It may therefore be harder for providers to predict the TSA’s likely view on particular decisions and strategies and, ultimately, whether regulatory intervention is likely.

On the other hand, these proposals open up exciting new opportunities. For example, the TSA anticipates much more flexible possibilities for groups, including non-housing association parents.

The consultation indicates that there will need to be arrangements (perhaps including some ring-fencing) to ensure that the TSA has effective and enduring regulatory assurances. Subject to that, all sorts of structures might be possible.

Therefore, we may yet see groups headed up by plcs, profit-making registered providers, social enterprise companies, or non-housing charities. All of which means that existing groups may find the time right to reconsider their own future plans. The next column, in the new year, will take a look at the TSA’s enforcement powers and registration criteria.

etarran@trowers.com

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