Written evidence submitted by Optivo [RSH 44]
About Optivo
At Optivo we understand the difference safe, secure and affordable homes can make to people’s lives. We develop places with people, not profit, in mind, building homes and communities where people can thrive. We’re one of the largest housing providers in the UK and a member of the G15 group of London’s largest housing associations. We’ve over 45,000 homes across London, the South East and the Midlands, giving 90,000 people somewhere affordable to call their own. And we’re growing. Our Strategic Plan 2020-25 has been launched with ambitious plans to have started the construction of 5,500 new homes by 2025 (85% of which will be affordable).
Optivo welcomes the opportunity to supply written evidence to the Committee and would be delighted to contribute to any public evidence hearings in the new year.
How widespread and serious are the concerns about the quality of social housing?
Recent interventions by the Regulator and Housing Ombudsman – as well as high-profile coverage in the media - have exposed isolated but serious failings in the maintenance of older social housing. New-build homes across all tenures have also been the subject of quality concerns, both from a general defect perspective and with respect to specific fire safety failings as highlighted through the Hackitt Review.
Nevertheless, we would stress that, while serious, these issues are far from widespread and not indicative of the broader quality of social housing. For instance, evidence from the most recent English Housing Survey shows only four percent of social rented homes have a damp or mould problem. Whilst requiring attention and continuous efforts to address, this is less than the equivalent percentage for homes in the private rented sector (six percent). Optivo’s most recent survey data, meanwhile, reveals 93% of residents living in our general needs and homes for older people homes were satisfied with the overall quality of their home in 2020/21. And of the 4,050 blocks we’ve assessed following the Hackitt Review, under seven percent require full or partial remedial works. Again, that is not to downplay the need to achieve a universally high standard of property maintenance and building safety. But it does again suggest quality problems are isolated rather endemic across the sector.
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?
Delivering our building safety and net zero carbon programmes has significant implications for Optivo’s resources both now and in the medium term. We’ve had to take difficult decisions to scale back other priorities in order to fund these commitments.
We’ve estimated we’ll need to spend at least £250m on fire safety measures over the next decade. This covers remedial works to the just under seven percent of our blocks we’ve found to require modifications and interim measures such as the installation of temporary alarms and waking watches. By comparison, our annual turnover in 2020/21 was £332m. Over the longer-term, we’ve also set aside roughly £8m per year for fire safety improvements through our financial plan to 2050. These estimates are subject to some uncertainty given various factors including shifting government guidance and the potential to recover certain costs from third parties and warranty providers. However, they give an indication of the magnitude and potential duration of our expected spend.
To add to this, there is also the considerable challenge of decarbonising our 45,000+ existing homes, first to ensure compliance with EPC band C and then to achieve zero carbon status nearer 2050. Estimates suggest it could cost between £20,000 and £26,000 to retrofit a home to achieve net zero carbon. Our own work suggests costs are likely to be significantly higher for older Victorian and Edwardian street properties, which can make up a significant proportion of housing associations’ stock in city centres.
Given the extent of our projected expenditure on fire safety works, we have recently taken the decision to defer some major works spending for two years and scale back our development programme to deliver 1,500 fewer homes than originally set out in our current strategic plan. This was not a decision our Board took lightly. But given the finite budgets of housing associations, essential investment across fire safety and retrofitting inevitably means less capacity for new build and more general maintenance of our homes. We note the Secretary of State for Levelling Up, Housing and Communities and his predecessor have recognised such compromises are now inevitable. To reduce the impact on new supply and investment in existing homes, we have called upon Government through the G15 to:
Is the current regime for regulating social housing fit for purpose?
The current regime for regulating social housing has well-known strengths and weaknesses. Built up over a number of years, the approach to regulating the economic standards is now highly robust. Housing associations, our lenders, investors and credit rating agencies place great stock in the Regulator’s system of gradings and judgements. We would welcome a more risk-based approach to the frequency of In-Depth Assessments, with consistently high-performing associations subject to less frequent assessments, provided interim reporting requirements are not too onerous.
Optivo has welcomed moves to reinstate a more proactive approach to regulating performance against the consumer standards, especially those relating to resident involvement and customer experience. In our experience, learning from residents – whether that be through resident involvement, data analysis, or the innovative co-creation projects we’re trialling – is highly advantageous, both in driving customer satisfaction, but also in improving value for money. It is right that it becomes the focus of a more hands-on regulatory approach.
As the Social Housing White Paper acknowledges, the ‘serious detriment’ threshold, based as it is on the risk of serious harm to tenants, is ill-fitting to consumer regulation, especially for the standards covering tenancies and tenant involvement. The Tenant Involvement and Empowerment Standard has been breached just once since it was first introduced in 2010 and that did not meet the Regulator’s serious detriment test. Early indications from the regulator about the need for a proportionate, risk-based and outcome-focused approach are encouraging as these are exactly the principles we feel the new approach to consumer regulation should reflect.
A return to highly-structured inspections as previously performed by the Housing Inspectorate following Key Lines of Enquiry or “KLOEs” back at the start of the century would be unnecessarily bureaucratic. The emphasis – as it has been since the days of the Tenant Services Authority – should be on outcomes rather than means and mechanisms. Housing associations are hugely diverse in terms of their size, missions and resident populations, with some catering principally for general needs residents, while others have larger proportions of stock for shared ownership, supported housing or specialist care. The approach to consumer regulation should encourage housing associations to tailor their efforts to involve their residents accordingly, rather than encouraging a one-size-fits-all approach.
How clearly defined are the roles of the Regulator of Social Housing and the Housing Ombudsman?
We believe these roles are reasonably well defined, with the Housing Ombudsman being responsible for individual complaints and the Regulator for Social Housing assuming responsibility for identifying systemic or organisation-wide issues. Where we see greater potential for confusion is in the potentially overlapping responsibilities of the existing Housing Ombudsman and the soon-to-be-established New Homes Ombudsman and Building Safety Regulator. While we understand the rationale for creating these new bodies, expanding the number of ombudsmen will undoubtedly lead to greater confusion amongst residents as to the most appropriate source of redress. Clear guidance and efficient signposting / redirection will be essential to ensure access to redress is not made unduly complicated or time-consuming.
This potential for confusion is mirrored in the creation of various similarly titled posts through the Building Safety Bill and Social Housing White Paper. Between them, the Building Safety Bill and Social Housing White Paper are likely to create an Accountable Person, a Principal Accountable Person, a Responsible person, a Nominated Person and a Building Safety Manager, all with significant legal responsibilities attached. Though well-intentioned, the proliferation of similarly titled accountability points will inevitably create a more complex redress landscape.
Does the current regime allow tenants to effectively resolve issues?
Immediate responsibility for resolving any issues lies with the landlord. Our aim is always to resolve issues swiftly and satisfactorily as they are brought to our attention, and then through our internal complaints handling service if necessary. Over many years we’ve ingrained in staff the philosophy that complaints are an opportunity to learn and improve. We see complaints as a critically important source of feedback – an opportunity for organisational learning and service improvement, and a chance to nip minor issues in the bud before they escalate or become more systemic. Our approach has been hugely successful. Overall resident satisfaction was 89% in 2020/21 and, given the extensive benefits, we believe more housing associations should be adopting this model.
On the rare occasions residents have escalated their complaint to the Housing Ombudsman, the process has worked well overall. We’ve developed an excellent working relationship with the Ombudsman and often take advantage of its suite of tools for training and improvement.
One area for improvement remains the speed with which the Ombudsman determines cases, a point we have communicated through our recent response to its consultation on its forthcoming corporate and business plans. We would welcome an increase in resources for the Ombudsman so investigations can take place in a more timely manner.
We are also wary compensation orders to residents need to remain evidence-based and proportionate. With awards now well-publicised, it is important the Ombudsman remains seen principally as a source of complaint resolution rather than an awarder of compensation payments, even more so given the current cost-of-living squeeze.
Do the regulator and ombudsman have sufficient powers to take action against providers?
The suite of measures proposed in the Social Housing White Paper will better equip the Ombudsman and Regulator to take action against providers. Chief amongst these is the removal of the ‘serious detriment test’, which we believe will have a transformative effect on the nature of consumer regulation, putting it on a more equal footing with the proactive approach to monitoring the economic standards.
Will the reforms proposed in the social housing White Paper improve the regime and what progress has been made on implementing those reforms?
In short, yes. A strengthening of the Housing Ombudsman’s powers and a return to more proactive monitoring of the consumer standards by the RSH is to be welcomed. As referenced above, early indications about the adoption of a “proportionate, outcome focused and risk-based approach to consumer regulation” are welcome. We would caution, though, that both the Ombudsman and RSH need to be adequately resourced for the potential of the reforms to be fully realised.
Optivo has been closely engaging with DLUHC officials on the detail of the White Paper, and with representatives of the RSH on the precise design of the tenant satisfaction measures. We will continue to engage through ongoing dialogue and formal consultations with both bodies into 2022.
What changes, if any, should the Government make to the Decent Homes Standard?
In common with other G15 members, we believe the new Decent Homes Standard should:
Any revisions to the Standard, especially requirements around quality and energy efficiency, should be supported by extra funding – as was the case for the original Standard through the Decent Homes Programme. This is especially important given the multiple competing demands on our spending across fire safety works, new-build, energy efficiency and more general investment in existing stock.
Should all providers of social housing, not just councils, be required to register with the regulator?
Our understanding is that registration is compulsory for:
Registration is voluntary for other providers of social housing who fall outside of the criteria above.
Our belief is that all providers of social housing, be they local authorities, housing associations or For-Profit Registered Providers should be required to register with the Regulator. This is a simple matter of fairness. Residents of social housing should benefit from the protections afforded by the Regulator irrespective of the particular business model adopted their landlord.
What challenges does the diversification of social housing providers pose for the regulatory system?
The growth of For-Profit Registered Providers (FPRPs) provides an opportunity to bring additional capital funding into the social housing sector. A recent example is Optivo’s deal with Sage housing, which saw Sage purchase 420 grant-funded affordable homes from our development pipeline. In exchange, Optivo received £106.5m, net of grant, to invest in additional land-led development – homes that it wouldn’t have been possible to build in the absence of this deal. The deal not only creates additionality, but also means better value for money for those funding affordable housing. Initial grant allocations from Homes England and the Greater London Authority (both of whom approved the deal) will enable delivery of not one, but two phases of new housing – our initial 420 home pipeline plus the new homes constructed with our capital receipt. This stretches government grant further at a time of great strain on the public finances.
In response to the growth of FPRPs, the regulator and, to a lesser extent, the Ombudsman will need to ensure they have the requisite skills, budget and resources in place to manage providers with a more diverse range of operating and funding / investor models. Knowledge and experience of traditional, charitable housing associations will no longer suffice. The Regulator will need staff with a strong commercial background, including those previously involved in regulating sectors where generating profit or shareholder value are explicit aims.
December 2021