The HCA’s new regulatory regime will focus on landlords’ governance and financial viability. Ian Davis and John Maton from Trowers and Hamlins explain.
On 1 April the Homes and Communities Agency’s new regulatory committee took over from the Tenant Services Authority as regulator of the social housing sector. On 27 March the TSA published the revised regulatory framework for social housing, which will govern the way in which it regulates.
The new regime draws a sharp distinction between ‘economic’ and ‘consumer’ standards, with rent being shifted into the former category. The HCA committee will enforce the economic standards, but will not take action in respect of the consumer standards unless there is evidence of ‘serious detriment’ to tenants.
This is a dramatic change in emphasis from the early days of the TSA, when tenants and service delivery were at the forefront of its mission as regulator.
If the regulator is as hands-off as it says it will be, landlords’ boards will need to consider for themselves the relative importance they give to such consumer matters in the context of the many pressures that they and their tenants will face.
The key message implicit in the new framework is that the regulator’s focus will, more than ever, be on good governance and financial viability, in the broadest sense. This will mean providers regularly assess their performance and consider ways in which services and delivery may be streamlined and improved.
In relation to the economic standards, the biggest change from the TSA’s 2010 framework is the revised value-for-money standard. It is not quite as prescriptive as in the original draft, but is still a much more exacting standard than before.
The new standard expressly requires boards continually to assess the performance of all their assets and resources. They will also be required to publish a ‘robust self-assessment’ each year, which sets out how they are achieving value for money. This assessment must enable stakeholders to understand the return on assets measured against the housing association’s objectives, and evidence value-for-money gains that have been and will be realised.
The structure gives flexibility to the landlord to set its own goals and to measure efficiency of performance in relation to them, but it should not be forgotten that this standard reflects the greater emphasis on efficiency that was expressed by the government in its 2010 review of regulation.
In the past, the sector has been highly responsive to changes in the regulatory regime and housing providers will no doubt undergo some significant changes over the next few years. They will adopt different strategies: they may diversify beyond housing or concentrate on core business. Some will take advantage of the new VAT exemption or change service delivery models. For many there will be a continued focus on stock rationalisation and for the sector generally we predict a renewal of merger activity.
Ian Davis is a partner at Trowers and Hamlins, John Maton is an associate at the same firm