HCLG Select Committee Inquiry into the quality of social housing.

21 December 21

 

Written evidence submitted by Liverpool City Region (LCR) Housing Associations Group [RSH 019]

 

How widespread and serious are the concerns about the quality of social housing?

The most recent data from the English Housing Survey 2019-20 shows the social housing sector has the lowest percentage of homes that are failing to meet the Decent Homes Standard (12%) when compared with private-rented (23%) and owner-occupied stock (16%).

 

The vast majority of social landlords are not only meeting the requirements of the Decent Homes Standard but they are providing a product that far exceeds it.

 

With £billions invested in raising standards, comprehensive reactive and proactive maintenance regimes, sound asset management programmes that calculate component replacement lifecycles and a strong emphasis on meeting safety / compliance requirements, the offer from the sector, overall, is one of good quality.

 

The social landlords in the Liverpool City Region that have contributed jointly to this response are all confident our collective housing offer is of a good standard, from the physical condition of properties to the provision of housing management services.

 

The high levels of customer satisfaction consistently maintained across a range of measures and the high demand for properties bear witness to this assertion but we do accept the need for greater investment in often aging stock.

 

Yes, there is always room for improvement.  Yes, there are investment requirements to ensure the homes the sector provides contribute to carbon reduction targets / ambitions and yes, there is work to do to meet all prevailing buildings safety measures.

 

However, poor and unacceptable conditions are a rare exception rather than the rule and we work closely with customers to put these issues right, when they occur.

 

What is the impact on social housing providers’ resources, and therefore their ability to maintain and improve their housing stock, of the need to remediate building safety risks and retrofit their homes to make them more energy efficient?

The combined impact of building safety works / need to retrofit properties to make positive contributions to the carbon reduction agenda and improve the quality of living conditions for customers, is hard to quantify and will be dependent on several factors.

 

These will include the starting position of organisations and their previous investment in stock modernisation.  It will be dependent on the age and nature of their housing stock and prevalence of higher risk buildings.  It will be dependent on standards and timescales yet to be determined by central government.

 

Across our partnership of providers work is ongoing to share energy performance data against property archetypes and new technologies are being reviewed in conjunction with Liverpool John Moores University, however, there is no uniform estimate of the average cost per property and this is replicated across the sector as a whole.

As an indicative example, one of our providers with circa 13,500 units in management has conducted and independently verified study which indicates £300m will be required to meet its zero carbon targets.

One area of certainty and commonality, however, is that the total costs are beyond current financial resource and potential borrowing capacity of most, if not all social housing providers and will not be met unless supplemented with significant central government funding.

 

A national study by Inside Housing in November 2020,estimated the cost of decarbonisation measures to the social housing sector to be £104bn (average mean of costs per property).  This does not take into account any buildings safety works.

 

The legal requirements placed on the sector will, quite rightly, take precedence over all other investment priorities but the question is – what gives?

 

All organisations party to this response have indicated there will be inevitable impacts on their development programmes and plans to deliver much needed supply of new homes.

 

This has the potential to severely impact supply and if coupled with an unfavourable rent settlement in 2025 would make the government’s target of 300,000 new homes per year even harder to achieve.

 

There will be impacts on the ability to deliver wider estate regeneration projects and place shaping activities.  There will be impacts on the ability to meet wider home improvements outside legal requirements and this is before any new obligations under a revised Decent Homes Standard are confirmed.

 

There will also be impacts on the ability of organisations to continue to provide the excellent range of services that go beyond the landlord function and deliver immeasurable savings to the public purse.

 

This includes activities to promote routes into employment or training and housing support services that prevent the need for intervention of primary / secondary health and social care providers.

 

Is the current regime for regulating social housing fit for purpose?

As the Consumer Standards within the Regulatory Framework have remained unaltered since 2012, the time and case for change is long overdue.

 

The fact that the Standards have remained untouched by two iterations of the Housing Regulator does, however, demonstrate that they are in part effective and have played a role in maintaining high standards of service delivery and performance within the sector.

The system of self-assessment against the current standards backed-up by periodic inspection and graded approach to Regulatory judgements has worked well.  The gradings are clear and easy to understand for customers, lenders and all stakeholders.

 

This is especially true for regulation of the ‘Economic Standards’.  Given the size, complexity and variation of social housing providers operations, the number of cases of serious financial failings have been few and far between (for non for profit providers), demonstrating a firm grip on financial management and maintaining viability.

 

The seldom used intervention powers for the Economic Standards are also set at the right level and are enacted at appropriate and proportionate trigger points but carry enough gravitas to encourage sound and effective governance at the organisational level.

 

Where the current regime works less well and is in need of modernisation is the area of ‘Consumer Regulation’, where a ‘reactive’ rather than ‘proactive’ approach exists.

 

The fact that the Regulator is unable to actively collect data to demonstrate compliance with the standards, coupled by the high bar set by the ‘serious detriment’ standard means that intervention is difficult. 

 

Having said that it is true that the Regulatory Notices and accompanying downgrades have created a welcome focus on compliance and maintaining standards across all homes in the sector.

 

The balance between the two sets of Standards remains lopsided and is difficult for customers to understand.

 

Our comments on the proposed changes to the regulatory regime, contained in the Housing White Paper are outlined below.

 

How clearly defined are the roles of the Regulator of Social Housing and the Housing Ombudsman?

The Memorandum of Understanding that was developed between the Regulator and the Social Housing Ombudsman in September 2020 sets out to clearly define the roles of the parties.

 

The document makes it clear that the Regulator of Social Housing’s role is to provide assurance-based regulation of the Regulatory Standards that minimises interference and so far as possible, is proportionate, consistent, transparent and accountable.

 

It is not the role of the Regulator to investigate complaints or to mediate between a landlord and residents.  This function is the domain of the Social Housing Ombudsman, whose role is to:

 

  • Resolve disputes involving members of the Scheme, including making awards of compensation or other remedies when appropriate, and
  • To support effective landlord-resident dispute resolution by others

Whilst the definitions are clear, it is easy to see how the commitments to improved communication, co-operation and information sharing may lead to a perceived ‘blurring of the lines’.

 

The Social Housing Ombudsman’s ‘Systematic Framework’ published in March 2021 may add more weight to this perception, whereby:

 

“The Ombudsman may conduct further investigation beyond the initial complaint or landlord to establish whether any presenting evidence of service failure is indicative of a systemic failing.  Where this is the case it will be referred to the appropriate regulatory body”

 

This could be perceived as straying into the territory of consumer standards regulation.

 

From a landlord’s perspective the greater partnership working between the two bodies makes sense and is welcomed.  This is also in tune with a more proactive approach to consumer regulation, as set out in the Housing White Paper.

 

To avoid misdirection of queries and to provide a better service to customers, however, there may be work to do on improving information that is available to the public on the roles of the parties and the correct route to follow to raise concerns.

 

Does the current regime allow tenants to effectively resolve issues?

As a Group of providers we would put a strong case forward to say the internal practices deployed by each organisation for making, investigating, responding and importantly learning from complaints are robust and work well.

 

The complaints processes are well-publicised, are accessible and offer fair, transparent and consistent routes to redress / resolution.  The vast majority of complaints received are dealt with via internal processes and customers usually receive a full response, on average, within 10 working days.

 

All of the LCR providers that have contributed to this response comply with the requirements of the Housing Ombudsman’s Complaint Handling Code, issued in July 2020.

 

When complaints have exhausted the internal mechanisms, things become less efficient and less effective.

 

At present the need to wait 8 weeks or have a complaint referred by a ‘Designated Person’ once the internal process is exhausted, before being accepted by the Social Housing Ombudsman is too long.  We know there is provision within the Building Safety Bill to address this issue and we welcome this direction of travel.

 

We would also suggest the investigation process from the Housing Ombudsman could be improved with a greater level of open dialogue with providers, to add context rather than a desk top approach.

 

Do the regulator and ombudsman have sufficient powers to take action against providers?

The recently strengthened powers of the Social Housing Ombudsman now means there is a comprehensive range of measures that can be deployed to address landlord failings.  The closer working relationship with the Regulator of Social Housing also gives a clear route for escalation, if required.

 

It could also be argued that the publication of complaints handling performance data from September 2020 onwards, also acts a sufficient deterrent for landlords and encourages them to be more vigilant.

 

Where the Social Housing Ombudsman does make determinations against landlords, they are duty bound to comply with them as part of their membership of the scheme.

 

On the whole, we would say the Ombudsman’s powers and the way in which they are used is pitched at the right level.

 

The Regulator of Social Housing’s approach to intervention, enforcement and use of powers would also appear to be proportionate and the emphasis on self-improvement is welcomed by the sector.

 

The Guidance Notes produced by the Regulator and the principles they contain are also clear and easy to follow.

 

We understand that despite changes identified in the Housing White Paper the overall approach is to remain risk based and co-regulatory which is also welcomed by the contributors to this response.

 

We do note, however, that there are no definite timescales available for review of the Regulatory Standards and the legislation that will be required to introduce new powers and move Consumer Regulation onto the same footing as Economic Regulation i.e. a proactive rather than reactive approach.

 

Greater clarity in this area would be appreciated and we look forward to seeing the legislation indicated as forthcoming by Government.

 

Will the reforms proposed in the social housing White Paper improve the regime and what progress has been made on implementing those reforms?

Changes to the Regulatory Standards and the ways in which they are enforced have been muted for some time now, dating back to the Housing White Paper 2017 and then the Housing Green Paper 2018 and now another White Paper 2020.

 

Whilst we appreciate the initial thinking of the Regulator set out in the ‘Reshaping Consumer Regulation:  Our principles and approach’, the Queens Speech 2021 did not contain a Social Housing Bill and legislation required to bring about definitive change is still not scheduled.

Ahead of the legislation we are as a sector and group of providers are taking proactive steps to embrace and enhance transparency and accountability principles, as outlined in the Housing White Paper in our reporting to residents and involvement structures.

 

The White Paper does not to address the key issue of improving supply of social housing, addressing stigma associated with renting in the sector, giving tenants a national representative body and voice but the proposals on regulatory reform are viewed in a positive light by the sector.

 

The issue is we do not know ‘when’ or ‘if’ they will be delivered?

 

The proposals to remove the ‘Serious Detriment Test’, routine inspections to show compliance with the Consumer Standards, a core set of Tenant Satisfaction Measures for all social landlords, a published Code of Practice on Consumer Standards, the need to have a Designated Person responsible for oversight of the Consumer Standards, inter alia, are all good practical measures for improvement.

 

In terms of progress, knowing that the proposals being considered are sensible and should lead to improvements to the regulatory regime is good, having no firm timetable for introduction is not.

 

What changes, if any, should the Government make to the Decent Homes Standard?

Having remained unaltered since its introduction in 2006, the Decent Homes Standard is out of touch with modern building facilities / technologies and customer expectations.

 

The current Standard has many faults, non-exhaustive examples including the need to cross reference with the Housing Health and Safety Rating System (itself outdated and does not set a high bar for property improvement), distinctions between ‘key’ and ‘other’ building components, over-reliance on age alone of components to determine decency etc.

 

The case for change is clear and this has been made through the ongoing consultation  with core and non-core participants.  The second phase of the consultation is concerned with ‘how decency should be defined’.

 

As the contributors to this response have and continue to play an active role in the above consultation and to avoid duplication, we would direct Members of The Select Committee towards the publicly available summaries from this consultation exercise, for further detail.

 

Should the Decent Homes Standard be amended to include energy efficiency and other means of mitigating climate change, and if so how?

At present the Decent Homes Standard is silent on the Energy Performance Certificate (EPC) rating that is required in each social rented property.

 

EPC’s give an indication of the likely fuel costs and C0₂ emissions from a property and are easily understood by customers.  They include a range of ‘no regret ‘measures that are known to improve a property’s environmental performance and would be simple to incorporate into a nationally applied standard.

 

A minimum EPC rating should be included in the revised Decent Homes Standard for retrofitting of existing properties and new builds and dates by which this is to be achieved, in line with the aspirations outlined in the Government’s Clean Growth Strategy i.e. Band C or above.

 

We would anticipate the revised Decent Homes Standard will mirror the recommendations outlined in PAS 2035:2019 i.e. low energy lighting, provision (where required) of solar blinds, shutters and shading devices, separation of internal spaces with high heat gains from those with high solar gains (where feasible) and provision of mechanical / natural ventilation.

 

Whilst we appreciate that many of these measures are designed to combat the impacts of climate change, which will undoubtedly become an issue of greater significance in years to come, there does need to be some flexibility in application of this part of the Standard.

 

These measures should be subject to an assessment of need / severity of impact determined by the property type and aspect rather than universally applied, as cost of delivering the Standard could very quickly become prohibitive.

 

Similarly, measures that may be included to combat extreme weather conditions e.g. flood defences should be subject to needs and risk assessments and only applied where required.

 

Whilst all contributors to this response agree the Decent Homes Standard requires updating there are concerns that a new standard could be too wide in scope i.e. incorporate issues beyond the curtilage of the property that are outside of the landlord’s area of control and the costs of delivering it.

 

As outlined above, all social housing providers are facing unprecedented financial challenges through buildings safety and carbon reduction requirements and the fear is an over onerous Decent Homes Standard is only going to add to these costs, unless a consistent government backed funding package is made available.

 

Should all providers of social housing, not just councils, be required to register with the regulator?

The short answer to this question is, yes.

 

One of the enduring strengths of the social housing sector is that, on the whole, it is well regulated ensuring standards of service delivery are high, there is confidence in the sector from lenders and it has good governance structures.

 

We believe these principles should apply to all providers of social housing and by meeting the registration eligibility criteria this will ensure these standards are maintained.  This should apply to all providers whether or not they are seeking assistance from Homes England in the form of grant.

 

What challenges does the diversification of social housing providers pose for the regulatory system?

The recent upturn in ‘for profit’ providers creates a problem for the Regulator in that they do not have the same enforcement powers as they do over ‘non for profit’ providers i.e. the Regulator:

 

  • Is unable to remove / appoint board members
  • Does not have the power to impose restrictions on their dealings and
  • Cannot suspend / remove officers and / or employees during or following the use of its inquiry powers

 

The question is then – what assurance can the Regulator provide if it has limited enforcement powers against this type of provider from the added risks to the sector as a whole that can arise from profit and asset distribution activities?

 

As ‘for profit’ providers are unlikely to have the same established relationships with customers as traditional providers and are therefore potentially less incentivised to maintain sustainability high standards of service delivery, perhaps the need for strong regulation is even greater.

 

Questions also remain as to how the new ‘look through’ powers that were outlined in the Housing White Paper will work in practice when the Regulator has no jurisdiction or control over non-registered entities.

 

 

Contributors to this response include:

 

December 2021