All posts from: February 2012
For-profit arms, registered non-profit companies, unregistered profit-making parents, entirely for-profit housing associations - the days of the simple, traditional social housing provider look to be coming to an end.
As Julian Ashby, who will chair the Homes and Communities regulation committee, says, the sector is going to be a lot more complex in future.
For this reason, committee members with experience of other sectors, such as Jane May, who has sat on the board of Ofwat, have been recruited to help the regulator cope with the changing face of the sector.
The Communities and Local Government department has hedged its bets by leaving two of the six committee positions vacant, allowing it to appoint relevant members as specific, unforeseen challenges, arise.
More surprisingly the CLG has decided to appoint members for just 12 months initially, instead of the two to three years as originally planned.
This has already caused a few grumbles from professionals hoping for the regulator to provide certainty in a rapidly changing sector operating in an era of austerity and economic unpredictability.
There is a fine line between the CLG leaving the regulator room to be flexible and it giving the impression that it does not know what the committee’s approach should be, or even worse, that it does not trust the committee it has appointed.
From April 1, all eyes will be on the committee, with many in the sector sceptical about its ability to provide robust regulation. The shortening of committee members’ terms, designed to allow the committee to adapt to changing circumstances, could simply send the message that we may not get the stable regulation the sector needs.
Swan Housing Group became the latest housing association this week to reveal its response to the challenges of a new financial model for housing.
SHG has been awarded the 11th largest allocation under the affordable homes programme - £38 million - despite only having 10,000 homes. Indeed it does not even appear in the top 60 largest associations by stock owned, according to the Tenant Services Authority.
SHG then, is punching above its weight.
In order to deliver its ambitious 1,500-home plan it has set up a new non-registered vehicle to manage its profit-making arms and avoid regulation.
The organisation is adamant that the vehicle will allow it to ringfence risk and that there is no threat to the core housing association’s finances.
Inside Housing has now learnt that there are around half a dozen other landlords looking at the same sort of model.
The TSA has yet to develop its strategy for regulating organisations that have non-profit, non-registered companies sitting alongside profit-making, non-TSA regulated entities.
The question of whether and how risk is ringfenced in profit-making arms is likely to be a talking point in the sector over the coming months.
It is important to recognise that simply putting risky activity in a non-registered entity does not mean it is not risky.
If an organisation has bid for development money on the assumption that it can raise a specific amount of cross-subsidy from profit-making activities, it needs those profit-making companies to perform. If they don’t, the organisation could fail to deliver its affordable homes programme -and therefore could fail to receive its grant allocation.
The increased ability to benefit from profit-making arms has great potential for bringing rewards to the sector and could be essential in a landscape with vastly reduced government grant.
But, as in all private business, the prospect of reward carries the risk of failure, and the TSA needs to ensure associations’ core activity of building and maintaining much needed affordable housing does not come under threat.
Grant Shapps’ attempts to use new regulatory standards for landlords to promote his tenant cashback policy appear to be coming unstuck – because of localism.
The Tenant Services Authority’s revised regulatory framework for England requires landlords to ensure tenants have the opportunity to carry out repairs. This particular standard was included on the orders of the Communities and Local Government department.
Landlords were initially annoyed by this and felt the government was seeking to use regulations aimed at maintaining standards for tenants in order to implement policy through the backdoor.
That feeling remains, but the sector has relaxed as the penny has dropped that the regulator will not be able to enforce tenant cashback standard in reality anyway.
Under the new regulatory framework, the regulator will only intervene on consumer issues in cases of ‘serious detriment.’ Instead most consumer cases which can’t be resolved by a landlords internal complaints department will be considered by a tenant panel, MP or councillor.
‘Serious detriment’ has not been defined clearly, but the TSA has said it refers to action that is likely to cause harm to tenants.
Not ensuring tenants can do their own repairs is hardly likely to cause them harm – so the tenant cash back requirement is essentially unenforceable and meaningless. This point has been made by the G15 group of housing associations in London, which in its response said it ‘questions the value’ of including the requirement in the framework.
After months of lobbying, debates and shock government defeats in the Lords it seems the Welfare Reform Bill will be pushed through amid controversy over use of parliamentary procedure.
The government’s decision to seek financial privilege to prevent Lords from insisting on their amendments has prompted howls of protest from the upper chamber. Lord Richard Best says there is no point in having a revising chamber if the Commons can simply use procedures to restrict it from having a say.
The ironic thing about this use of financial privilege, which is usually invoked for money bills involving major public expenditure, is that the government has been at pains to stress that saving money is not the sole motivation for the bill.
Employment minister Chris Grayling said in the Commons on Wednesday that the debate over the £26,000 total benefits cap ‘is not simply about the financial aspects’ but about fairness. The financial privilege move risks giving the impression that the hit on the public purse is the main aim of the policy and severely dents the coalition’s claims that combating unfairness is its primary objective.
While the coalition was overturning the Lords amendments and seeking to use privilege to railroad the bill through, Labour put forward its own last-ditch attempt to force changes to the way the benefits cap will be set. Labour called for an independent body to set different caps across the country according to local circumstances.
This idea has some merit, but lost credibility as Labour refused to say the level at which it thought the cap should be set, insisting it would be a decision for the new body.
It was also not able to say whether it would retain the overall level of savings from the cap (around £305 million) or seek to reduce them.
Labour was perhaps mindful of the fact that if a regionalised cap was introduced, but with the same overall savings level, benefit levels would be effectively reduced in low rental value areas, the party’s heartlands.
The bill therefore did not receive adequate opposition in the Commons, while opposition in the Lords has been effectively nullified by privilege.