Written evidence submitted by UK Finance [RSH 052]


UK Finance is the collective voice for the banking and finance industry. Representing more than 300 firms across the industry, we act to enhance competitiveness, support customers and facilitate innovation. 


We welcome the opportunity to respond to the inquiry by the Levelling-up, Housing and Communities Committee Government on the quality of social housing, the effectiveness of the regulatory regime and the proposals in the social housing White Paper.


In addition to representing residential mortgage lenders for home purchase and buy-to-let, UK Finance members also lend and invest to support the social housing/ housing association sector.




With significant levels of private investment in the housing association sector in England alone, the ongoing need for independent, robust, proportionate and well-resourced economic regulation of the sector is fundamental to the interests of our members


Although the focus of the inquiry is on housing quality and residents’ redress, which will be key aspects of the new consumer regulation regime, financial viability and governance strength are essential to delivering quality homes and services and are the focus of economic regulation.


The economic regulation of private registered providers helps to limit risk, through the standards it sets for governance and financial viability.  To date, this has enabled private finance and investment to be widely available to housing associations at competitive rates.  The robustness of the economic regulation regime gives funders the confidence needed to lend and to invest.


Regulation has been and remains the element in the risk/ return equation for funders that has supported very substantial investment in the sector.  Regulation also provides the regulator with statutory powers and tools to intervene where housing associations fall short of standards.  The effectiveness of regulation is related to pricing and the availability of funding and investment to the sector, in respect of both new and existing facilities.


Through previous incarnations of the regulator, particularly the former Tenant Services Agency, consumer regulation has had varying degrees of prominence and focus.


In the current climate, particularly given the priorities for building safety, retrofitting homes to higher environmental standards and the ongoing priority to develop new homes of quality, it is right to develop and implement a new consumer regulation regime.  In doing so, it will be important to ensure that the new regime is balanced, proportionate and outcomes-focussed in a way which complements but does not compete with the economic regulation regime.


Key recommendations




Response to call for evidence questions


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


Poor housing quality in terms of maintenance, management and construction can be symptomatic of governance failures at providers which could in turn impact on financial viability.


Further, poorly managed and maintained stock could have impaired value for loan security purposes and require more costly remediation to restore required standards, all of which could have negative impacts on a provider’s business planning and covenant compliance. 


For these reasons, it is important that regulation continues to focus on governance strength which will drive quality improvements for residents/ consumers.


Based on regulatory reporting, it would appear that the significant majority of providers operate in a professional and diligent manner to provide the most suitable and best accommodation they can for their residents.


Given the wide variety of stock across the sector there will inevitably be instances of homes not meeting required standards.


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?


Building safety risk is, of necessity, a top priority, but funders are not reporting concerns that building safety costs are adversely impacting general levels of stock investment. It is more likely that the impact has been and will be on new housing development programmes. 


The need to remediate building safety deficiencies is a significant operational challenge, coming at a time when labour and materials shortages are causing difficulties in some areas.


Retrofit programmes to decarbonise and reduce the carbon impact of housing have been a limited feature of providers’ regeneration activities for many yearsA significant change in this area relates to new energy efficiency standardsThese requirements are likely to have a greater impact on stock investment in the coming years, as new standards are implemented.


It is likely that the costs associated with building safety and energy efficient retrofit will prove to be a substantial draw on existing cash holdings and future income. While the current balance sheet strength of the sector should be sufficient to begin required works, it could be that reducing new housing development activity might be required to complete the works.


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


Yes.  Over many decades to-date, no housing association default has resulted in a lender loss.  Problems arising with regulated providers are identified quickly and appropriate plans put in place.  The strength of regulatory supervision is evident by the readiness of housing associations to “self-report” deficiencies that they uncover themselves.  More recent enhanced features of economic regulation such as In-Depth Assessments (IDAs) and stress testing have proved effective, along with the encouragement for under-performing HAs to adopt voluntary undertakings.  In contrast to two of the other national regulatory regimes (Wales and Northern Ireland) where the social housing regulator forms part of Government, we welcome the independence of the RSH in England.  Independence, along with a clearly prescribed regulatory mandate, leads to fewer circumstances where different policy initiatives interact sub-optimally, leading to less effective outcomes.


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


They are clearly defined but with some areas of overlap between the Housing Ombudsman’s role and the role of the RSH in overseeing the “consumer regulation objective”. The current approach of the RSH in consumer regulation is reactive and does not involve resolution of individual landlord-tenant disputes.  This is appropriate as we believe strongly that the RSH must maintain a strong focus on economic regulation.


The existing Memorandum of Understanding between the RSH and the Ombudsman is well considered and seems to work well.


Does the current regime allow tenants to effectively resolve issues?


Yes, via the Housing Ombudsman if normal routes via their landlord have been exhausted.


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


Yes, the RSH has robust powers and has experience of using them. The Ombudsman has sufficient powers as evidenced in its reported decisions of recent cases where landlords have been ordered to pay compensation to tenants.


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


The reforms, including the Charter for Social Housing Residents, the new consumer regulation framework and Tenant Satisfaction Measures will improve the regime.  Although consumer regulation is still at an embryonic stage, it is encouraging that the regulator has published initial thoughts on what the future may look like, with formal consultation planned.


From the perspective of funders, it essential that the regulator’s primary focus should remain on economic stability and strength of the sector.


In terms of the Charter, significant progress has been made on “Objective 1 – to be safe in your home” with the social housing sector making great progress on fire safety remediation. In addition, housing associations also typically provide high quality information on value-for-money measures to meet “Objective 2 – know how your landlord is performing”.


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


While the current standards are acceptable, there could be merit in framing Decent Homes as a dynamic standard to drive continuous improvement rather than a static benchmark to be achieved and maintained.


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


It would be challenging to amend the standard in a way that takes account of the great complexity in housing archetypes and the age of stock in the sector.  It might be more appropriate and realistic to establish a new separate standard for social housing energy efficiency, such as the Energy Efficiency Standard for Social Housing (EESSH) in Scotland. 


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


Universal registration (of housing association, local authority, and for-profit providers) would help drive consistent outcomes for the sector and tenants.  Expansion of the regulatory perimeter in this way could, however, present resourcing issues for the regulator which would have to be addressed up-front to avoid compromising existing economic regulation. 


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


The current Regulatory Framework and review processes such as regular data submission and IDAs provide excellent supervision of the sector including the risks associated with diversification.  Risks associated with, for example, development-for-sale are well regulated, and feature consistently in Regulatory Judgements.


We are not aware of any new areas of diversification that might pose challenges for the system, per se.  However, we are aware that some institutional investors invest in both fixed income housing association bonds and REITs that, themselves, invest in specialist small housing associations providing supplementary supported housing.  A significant number of this group of underlying HAs are currently subject to intense regulatory scrutiny.  If any were to fail, leading to a loss to investors, there is a danger of contagion to both the default-free track record of HAs (in fixed income bonds) and, arguably, unwarranted reputational damage to the regulator.



December 2021