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Matthew Bailes has served as Chief Executive of Paradigm Housing Group since September 2015. Paradigm manages over 16,000 homes and ...more

Let’s take a leaf out of Gordon Brown’s book and take rent-setting out of the hands of politicians

Comment30.10.23by Matthew Bailes

If the politicians are in charge, they will make short-term choices that are driven by political benefits, not what’s best for social housing, writes Matthew Bailes

Picture: Hiran Perera

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If the politicians are in charge, they will make short-term choices that are driven by political benefits, not what’s best for social housing, writes Matthew Bailes #UKhousing

“A new Labour government would be well advised to look at creating a genuinely independent social housing regulator,” writes Matthew Bailes #UKhousing

In 1997, four days into a Labour government, then-chancellor Gordon Brown announced that he was handing control of interest rates to an “independent” Bank of England. His reasons were very clear: he wanted to make interest rate policy “free of political manipulation”, to “create a stable climate for long-term economic growth”.

Some, including the opposition Conservative Party, challenged the move at the time. But the change has endured and barely anyone thinks that handing power back to the politicians is a good idea.

While on one level it was a watershed moment, on another, the underlying logic was not new. For example, most of the regulators set up to deal with newly privatised industries were, and still are, largely free of direct political control. The reason is simple: politicians cannot be trusted to prioritise long-term goals over short-term political advantage.

As a result, putting the politicians in charge almost inevitably puts off investors, which (at best) means that they will demand higher returns. Ultimately, this means consumers need to pay more or get a worse service.

Ostensibly, there is a now a consensus that we need a strong ‘independent’ social housing regulator. Housing secretary Michael Gove has reversed the (extremely foolish) decision to do away with consumer regulation made by an earlier version of this government in 2010. The main critique from opposition parties is that he is not going far enough.

“A new Labour government would be well advised to look at creating a genuinely independent social housing regulator”

A genuinely independent regulator would be “free from outside control, not subject to another’s authority”. This would be a reasonably accurate description if applied solely to the regulator’s role on the governance and financial viability of private registered providers, because it gets to both set and police standards in this space.

However, the yardsticks on pretty much everything else are controlled by the secretary of state, by virtue of his powers to direct the regulator on the contents of its standards. As a result, it will be Mr Gove and his successors, not the ‘independent’ regulator, who get to call the shots on standards concerning the quality of housing stock, resident involvement and even how providers train their staff.

Crucially, the secretary also controls the standards on rents. His directions are binding and not even Parliament gets much of a look in. The regulator still gets the job of enforcing the standards, although its independence in this respect also risks being questioned thanks to Mr Gove’s enthusiasm for naming and shaming providers and the expanding remit of the Housing Ombudsman.

There are two quite big problems with this. First, there is a narrow issue around classification of the sector for accounting purposes. Put simply, the greater the level of government control, the more chance there is that the Office for National Statistics will classify housing associations as public sector bodies, adding the small matter of £100bn to public sector borrowing figures.

This government has been there before, thanks to the Right to Buy, and wisely decided to back off. However, it is not at all clear that it has learned its lesson. It seems to me that the latest legislative changes mean that the issue is now, once again, finely balanced.

The second and bigger problem is precisely the one Mr Brown was talking about in 1997. If the politicians are in charge, they will make short-term choices that are driven by political benefits.

The evidence that this risk has crystallised is wide-ranging. For example, the government has broken its own commitments on rent increases in five out of the past seven years, despite an acute and growing shortage of affordable housing. The current ‘commitment’ ends in 2025, but the government has not yet got round to consulting on an alternative.

“It will be Mr Gove and his successors, not the ‘independent’ regulator, who get to call the shots on standards concerning the quality of housing stock, resident involvement and even how providers train their staff”

Underlying rent policy is also a mess, thanks to a series of incoherent policy initiatives also authored by politicians. There is no plan on how to get to zero carbon or how the necessary work will be funded. There is not even clarity on the standards that will need to be obtained by 2030.

Inevitably this is having precisely the effect that Mr Brown was worried about. Investors are increasingly anxious about uncertainty over rents and the commercial risks providers have taken to try to generate more reliable income. Providers are similarly concerned and are pulling in their horns. The net result is more expensive debt and less investment in new and existing stock – exactly the opposite of what is needed.

There is no chance of this government changing its mind in the year or so it has left in office. But a new Labour government would be well advised to look at creating a genuinely independent social housing regulator.

The issues are not easy (particularly on rents and therefore housing benefit), but it will be much harder to deliver the step change in investment that is desperately needed unless the next Labour government follows in the footsteps of Mr Brown: by getting out of the way.

Matthew Bailes, chief executive, Paradigm