Forged in a new mould

I ended my previous article on the Tenant Services Authority’s proposed new regulatory arrangements by commenting that they open up exciting new opportunities for registered social landlords (Inside Housing, 18 December). With more flexibility around group structures, I suggested that we might see groups headed up by PLCs, profit-making registered providers, social enterprise companies, or non-housing charities.

These new freedoms, and the move away from prescriptive regulation, could mark a turning point in the social housing sector’s ambitions and self-perception. Some organisations seem likely to align themselves to the corporate world, adopting a code of governance based on the principles of the combined code, and possibly looking to establish a listed company at the head of their group.

Others may start to regard themselves more and more as social enterprises, and perhaps focus increasingly on non-housing (but community and regeneration-focused) activities. And could the changes lead to more integration between housing and non-housing charities? This could be driven by large non-housing charities hoping to set up their own registered provider subsidiaries, or by traditional RSLs looking to join forces and form groups with non-housing charities delivering complementary services.

In addition to what existing social landlords might do, there are other radical changes on the horizon.

Profit-making registered providers

For a start, we will finally see the first profit-making registered providers emerge. We know that some social landlords are interested in the idea, but we are also receiving enquiries from those outside the sector who have identified this as a new area of opportunity. It will be interesting to see who promotes the first one.

We know from the legislation that profit-making registered providers will be subject to slightly less regulation (for instance, the TSA will have no remit to control their constitutional changes or restructures, and will not be able to remove or appoint officers or employees as part of a regulatory intervention).

We also know that they can have any objects and any corporate form, provided they are an English body and provide (or intend to provide) some social housing in England. They will also need to meet registration criteria set by the TSA, but the consultation document indicates that these will be fairly limited.

Put simply, the applicant will need to show that it meets the financial viability requirements within the governance and viability standard at the point of registration and for a period of time thereafter. It will also need to show it can meet (or demonstrate a reasonable path towards meeting):

• the governance requirements of the governance and financial viability standard;
• the requirements on tenant involvement and empowerment;
• the service delivery standards.

There is only one special criterion proposed for profit-making registered providers, and that is that it must agree assurances with the TSA to prevent the inappropriate leakage of public funding to any unregistered organisations.

This change alone could make the social housing world very different.

Cross-domain regulation

Second, if all goes to plan, Professor Cave’s aspiration to have all social housing providers regulated by the same body will come to fruition. All those local authorities with retained stock will be registered automatically. Where an arm’s-length management organisation has been created, it will be the local authority and not the ALMO that is registered, although the TSA has observed that it will need to develop good working relationships with ALMOs if this is to work.

Again, not all the same rules will apply to local authorities as to what were formerly registered social landlords. This is partly because local authorities are constitutionally quite different entities (subject to direct democratic accountability), and partly because they are already subject to the local performance framework.

The legislation would in some respects apply differently to local authority registered providers, and they would not be subject to the governance and viability standard.

It will be interesting to see how this works in practice. Local authorities and the TSA will need to develop a direct working relationship for the first time. Where an ALMO has been set up, dialogue will need to be tripartite. And all this comes alongside the many other changes afoot in the local authority social housing sector. While the idea of one regulator for the whole sector has a certain logic, it will not be a simple one to implement.

Brave new world

All in all, there is much change on the horizon. Added to which, the TSA will soon have a handful of new enforcement powers at its disposal, which it says it will use to focus on the ‘worst performing providers’ during 2010/11. Assuming the agency is not axed by a new government before it gets a chance to get up and running, the next couple of years should be interesting times indeed.

etarran@trowers.com