The smell of burning

The government’s quango toaster has been working overtime during the past two months.

Having announced the ‘toasting’ of the Tenant Services Authority, run by Peter Marsh, in June, the coalition revealed last Friday that the Audit Commission would be the next to be charcoaled. The government has suggested that the double whammy will save more than £50 million.

While most housing providers were expecting the commission, whose housing inspection function is run by Roy Irwin, to be cut down to size, news of its termination came completely out of the blue - and at a pivotal moment for the sector.

Its axing came halfway through consultation on the future of regulation in the sector. Social landlords were already struggling to cope with the tight timeline they had been given to submit responses to this review. In effect, they have two weeks to work out how the end of the commission fits into the picture and submit a considered response to government.

So what are the sector’s main concerns likely to be and what options are there for the future of regulation and inspection?

The first question concerns the impact the TSA closure will have on the financial stability of the sector and landlords’ ability to add to the £59.4 billion they have already borrowed.

Financial firestorm
This, after all, is why the review was launched in the first place. Danny Alexander, chief secretary to the Treasury, fired off a letter to housing minister Grant Shapps on 24 June stating that there should be a review of regulation. This came after Mr Shapps had already announced his intention to ‘toast’ the TSA. In the letter, Mr Alexander made the Treasury’s feelings clear stating that any changes must ensure ‘housing associations continue to command the confidence of lenders and can continue to attract investment at competitive rates’.

While there is undoubtedly concern about finance, both landlords and lenders seem relatively comfortable about the future - as long as no further nasty surprises lie in wait.

With the demise of the commission, the Homes and Communities Agency is seen by many as the steady pair of hands which will take over the regulation of finance and governance.

Karen Doran, senior policy advisor at the Council of Mortgage Lenders, says the CML does not have a favoured regulator in mind. Lenders, she says, have been ‘reassured’ by the terms of reference of the review.

These state that all TSA functions will be reviewed and recommendations will be made on whether they should be ‘retained, altered or eliminated’ and where they should be located.

Crucially for lenders, however, the terms of reference also make it clear that any changes must make sure that lenders are not given the jitters and that providers ‘can continue to attract investment at competitive rates’.

This is far from job done, though, Ms Doran states. There is still concern among lenders because ‘we are still some way from knowing what the final proposal’ will be. Lenders were particularly keen that any new regulator should be independent of government and have the same range of powers of intervention and enforcement currently open to the TSA, she added.

Given the difficult financial circumstances facing the sector - with the Communities and Local Government department staring at a budget cut of up to 40 per cent - Ms Doran says it is important for changes to be well thought through and implemented without standards of scrutiny falling.
‘It’s not as if we’ve gone through all the difficult years and it’s now “phew”, is it?’ she added.

It is this last point about the need for stability that is provoking the most concern. Everyone interviewed for this piece said they were concerned about the breakneck speed of change and whether the government has thought through the implications of the, as yet, uncertain new arrangements properly.

One senior housing source said it had taken more than a week to obtain the terms of reference for the review. ‘It has almost seemed to be a closed consultation,’ he said. ‘The sector should have some concerns about the way this has been carried out in contrast to previous inclusive reviews.’

What then of the future for inspection and consumer regulation? It is in this area that there is the most agitation.

Mr Shapps has already indicated that he is interested in the idea of tenant panels, which could hold all landlords in a particular area to account. Councils could also play a role in dealing with complaints and the housing ombudsman’s role is likely to be beefed up.

Independent inspection
The government indicated last Friday that the Audit Commission’s function will move to the private sector and councils will be free to appoint independent auditors. The local government ombudsman’s findings will also become legally enforceable.

The CLG says that there will be a ‘statutory framework overseen by the National Audit Office and profession’.

Gwyneth Taylor, policy director of the National Federation of arm’s-length management organisations, says it is vital that as much thought is given to the future of inspection and consumer regulation as finance.

She states that the NFA is concerned that the review ‘does not seem to be as worried about [consumer regulation] as we would hope it would be’.

While the NFA was interested in tenant panels she adds it is also important that ‘there is some kind of back-stop’.

‘We like the current performance standards [that landlords must meet],’ she states. ‘Don’t throw the baby out with the bath water. Keep the good things that the TSA has delivered.’

Nic Bliss, chair of the Confederation of Co-operative Housing, adds: ‘I think there is a big relationship between the governance, viability and all the service related stuff.’

When it comes to the regulation of housing there is now little, if anything, left to toast. At the moment landlords are desperately scrabbling round to work through the implications of the changes. In truth they can do little more than hope the government leaves them with more than a few crumbs of comfort.

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The deadline for survey responses is 25 August. Results and analysis will be published in Inside Housing in print and online on 10 September.

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