Written evidence submitted by Homes for the South West [RSH 051]

Homes for the South West is a coalition of some of the largest housing associations in South West England. Our eleven members own 245,000 homes and house half a million people.

Questions

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

The recent report of the National Audit Office (NAO) “Regulation of Private Renting” compares the quality and safety of different housing sectors, using data from the English Housing Survey. This finds that homes in the social housing sector:

• Are most likely to meet the Decent Homes standard, with only 12% of homes failing to meet the standard, compared to 16% of owner-occupied homes and 23% of privately rented homes;
• Are least likely to present a Category 1 hazard (under the Housing Health & Safety Rating System) – 5% of social housing homes presenting a hazard, compared to 10% of owner-occupied homes and 13% of privately rented homes;
• Are more energy efficient, achieving an energy efficiency score of 69, compared to 64 in both the owner-occupied and private rented sectors;
• Are most likely to have a working smoke alarm; 96%, compared to 91% of owner-occupied homes and 89% of privately rented homes.

The report attributes – in part at least – the performance of the social housing sector to the regulatory regime to which it is subject. 

Whilst there is no room for complacency, and we recognise the problems and the challenges that exist, the evidence suggests that the social housing sector continues to perform better than other residential sectors.

2. 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?

Social housing is a well-regulated sector, committed to maintaining and improving the quality and safety of our homes. However, we are currently facing a growing list of requirements and expectations which mean we must prioritise.

Maintaining the fabric, services and components of our homes has always been fundamental to what we do. For two decades our business models have enabled us to use surplus income from older homes (where original subsidy has been recovered, typically after 30 years) to contribute to new affordable housing supply, in the form of revenue subsidy for an additional home. More recently building safety, fire safety, and retrofitting to meet the country’s carbon targets, have come centre stage. It is now clear that the investment required will be significant.

At the same time, we are subject to financial constraints outside our immediate control:

• Regulator-imposed rent control restricts our ability to increase our principal income source;
• Grant levels, which contribute to the subsidy required for new affordable homes, are set by Homes England;
• Lender requirements on interest cover are a very significant factor for a heavily indebted sector.

These are challenges we are committed to meeting but the reality is that this growing list of expectations, and the external constraints on our finances, mean that some things will take longer to deliver, and in some cases we will have to make difficult choices. The area most likely to take the strain will be – must be – the supply of new homes.

One further factor now emerging is the regeneration of estates which have come to the end of their useful life, or which cannot meet future EPC or fire safety standards. Currently this is not supported by any government funding streams. Indeed, a significant flaw in current funding models is the assumption that homes last forever; the reality is that older homes and estates become more expensive to maintain and, in some cases, unfit for purpose. Focus on these estates will become an increasingly important consideration for Boards and will further erode organisational capacity for building new homes.

These are challenges that we face here in the South West every bit as much as elsewhere in the country. Fire remediation and the need for the regeneration of estates are urgent issues for all of our members.  

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

Yes, the current approach is effective, and we believe will be further enhanced by the proposals set out in the Social Housing White Paper. It is important that Boards remain accountable for delivering the social purpose of the organisation.

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

In our view the scope of their role and the extent of their powers are clearly defined. This is the case for both Regulator and Ombudsman.

However, many social housing businesses are now complex and include parts that sit outside those scopes and fall under other regimes. Activities such as care and support, housing construction, market sales and market renting may all fall outside social housing regulation. While  those working in the sector may be clear about the relevant regulatory or Ombudsman regime, it can be difficult for consumers and other stakeholders to negotiate.

At least two significant additions to that picture are on the near horizon. Enhanced consumer regulation and the new building safety regulatory regime both have the potential to increase complexity for consumers. Building Safety in particular will be a challenge as it cuts across several of the different activities noted above, currently subject to separate, distinct, regulatory regimes. That may give rise to issues around the primacy of regimes and carry the risk that scope and roles become less clear.

It will be important for new regulators to give clarity on their separate roles and for all to work effectively together.

5.  Does the current regime allow tenants to effectively resolve issues?

There are currently mechanisms to address both individual complaints and systemic failure. However, we believe that the proposals set out in the Social Housing White Paper offer, if effectively executed, the capacity to greatly strengthen both of these areas.

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

Again, current mechanisms exist but will, we believe, be strengthened by the proposals in the White Paper.

7. Will the reforms proposed in the Social Housing White Paper improve the regime and what progress has been made on implementing those reforms?

We believe that they will, most notably in the context of consumer regulation. We are already making significant improvements to our complaints processes and our approach to engaging with residents. We are keen to see progress on the detail and the implementation of the proposals as quickly as possible.

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

Decent Homes has been a significant driver for the performance of the sector as summarised in 1 above, including in comparison to the private sector. Our view is that the standard needs updating but not at the expense of what’s already there and what has been achieved over its lifetime.

If the Standard is expanded to include retrospective standards, contributing to decarbonisation and fire safety, then due regard should be given to the way in which rents are set and reflect those standards. There must also be recognition of the difficult choices again referred to in 1 above.

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

Reference is made to this in Q8 above. We would also draw attention to the performance of different sectors on decency referred to above. The Standard, as part of a robust regulatory regime, has been effective in delivering good performance by the social housing sector and we suggest that consideration be given to the way in which it could drive improvements in other sectors.

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

Any organisation providing social housing (or at least using public resources to do so – and the use of such resources is quite fundamental to the definition of social housing) is already required to register with the Regulator.

That requirement includes Housing Associations as well as Councils. Councils are excluded from some regulatory standards (notably economic and governance) and some statutory differences remain which affect the way councils and housing associations manage their homes. Our view would be that the changes proposed by the White Paper should be an opportunity to move towards a more level playing field for all providers. In the context of consumer regulation particularly there is no reason why that should not be the case.

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

There are two ways of interpreting that ‘diversification’ and a two-fold challenge.

Firstly, the arrival of ‘for profit’ new entrants into the marketplace and into the sector.

Secondly, the increasing diversification of existing providers into areas of non-social housing activity.

Both present challenges – from the application of different regulatory/ombudsman regimes referred to above through to increased financial risk. And there are no easy answers. The current balance between ‘public’ and ‘private’ activity is a fine one, driven in some part by the imperative of avoiding classification of housing associations as ‘public bodies’. Members may recall the impact on public finances when that happened briefly in 2015.

For both forms of diversification, effective consumer regulation should as a minimum ensure that service delivery is consistent and that assets are protected.

December 2021