1. Summary
1.1. About us
1.1.1. Altair Consultancy and Advisory Services Ltd (“Altair”) is a multidisciplinary consultancy working across the social housing sector. Established in 2011, we work with hundreds of housing associations, local authorities, for-profit housing providers as well as private and public institutions operating in social housing.
1.1.2. As part of our offer, we work with stakeholders including governments to design evidence-based policy for sustainable housing markets.
1.2. About our response
1.2.1. We have responded to the following questions contained in Levelling Up, Housing and Communities Committee’s call for evidence on “The Regulation of Social Housing”.
1.2.2. Our key recommendations to the committee contained in our response include:
2. Q3: Is the current regime for regulating social housing fit for purpose?
2.1. Overview
2.1.1. On balance, we feel the current regime is fit for purpose. This is because the Regulator of Social Housing (“the regulator”) provides a good level of oversight which encourages, rather than deters, outside investment into the sector. At present, the regulatory environment is attractive to new entrants. We also feel that the environemnt encourages providers to manage their businesses effectively in ways that work for them, rather than undertaking activity purely to achieve regulatory compliance.
2.1.2. We feel if improvements were to be made, we would consider legislation review / change to ensure legislation is comprehensive, clear and reflective of the current operating environment. We would urge government to consider how the regime could be changed to ensure those who register provide social housing and how the regime applies to leaseholders. We would also encourage government to consider enhancing the powers (e.g. through legislation) or reinforcing the regulator (e.g. through resource) to ensure value for money in service delivery. While value for money falls within the regulator’s powers, we feel the regulator is limited in how it can reasonably enforce this principle.
2.1.3. We feel that the social housing white paper lays out the expectations for the consumer regulation well, but the legislation is needed so that that the regulator can implement and deliver these proposals. This should be a priority of government.
2.2. The regulator’s role
2.2.1. The regulator takes a risk-based regulatory approach underpinned by co-regulation. This means the regulator places an emphasis on providers’ own responsibilities. This also means that small, less risky RPs are not regulated as actively as larger, riskier providers.
2.2.2. The regulator only has powers which are permitted by legislation.
2.2.3. Currently, the regulator’s approach ensures that it has a grip on the sector’s long-term financial viability but that it can also intervene in a timely way to address any short-term viability issues through active engagement with providers. We feel that the level of regulation ensures the sector remains attractive to external investment, which is important for the delivery of new housing supply. This is important going forward as less grant is made available for new social housing, and as new entrants (including for-profit providers) enter the sector.
2.2.4. The regulator interprets its role as acting to:
2.2.5. We understand legislation is already being developed to support the regulator to better (e) ensure tenants are protected and have opportunities to be involved in the management of their housing. We feel some progress is being made in this area since the release of the social housing white paper. We know from our work with clients that registered providers (“RPs”) are acting in anticipation of more proactive regulation of the consumer standards. However, legislative change is required to ensure these changes are clear and enforceable by the regulator. This includes a change to legislation to enable the regulator to apply the consumer standards without being bound by the “serious detriment test”, which currently blocks the regulator from intervening unless a tenant is at potential or actual risk of harm.
2.3. An International View
2.3.1. We have recently undertaken reviews of regulatory standards in both Ireland and Scotland. From our reviews, we find English regulator’s risk- and principles-based approach contributes to a mature, entrepreneurial sector. This is because it focusses on encouraging providers to be self-sustaining businesses, while ensuring social homes and social housing residents are protected. We also find that other regulators are adapting their approaches to align more closely with the English regulatory system, as described below.
2.4. Potential change 1: Clarifying and ensuring legislation is fit for purpose
2.4.1. The regulatory system is based on different pieces of legislation, which forms the basis of how providers and the regulator interpret their roles and responsibilities. This includes legislation applying to all landlords as well as social landlords (“providers of social housing”). Much of this legislation was written when the social housing environment was different from today. We feel that a review of the current legislation which binds social landlords is due, and that new legislation should contain very clear requirements of social housing providers. Some specific instances where we feel legislation has created gaps include:
Rules about social housing levels
2.4.2. There are no clear rules how much social housing an RP must provide (e.g. as a percentage). The rules are that to become an RP, the body must be an English corporate, provide or intend to provide social housing and satisfy the regulator’s criteria. In practice, some providers registering as a provider of social housing with the benefits of this status (e.g. access to exempt accommodation rates, Section 106 properties, closer working with local authorities, some tax benefits or some grant funding) are doing so without providing much social housing at all. Some organisations, for instance, have 1 social home registered under the regulatory system but have other assets under their ownership. While this is permitted in most instances for not-for-profit RPs (for-profit RPs are restricted by how much turnover can come from provision of non-social housing), we feel these organisations could be better incentivised to ensure the housing they provide is indeed social housing and their business are set up and intended to run as a social housing business. This is closely linked to point below about the definition of social housing being limited.
Definition of social housing
2.4.3. The scope of the regulatory system is bound by the definition of social housing. The definition is set out in the Housing and Regeneration Act 2008. It describes social housing as relating either to “low cost rent” or “low cost home ownership”, with applicable details for each category.
2.4.4. On one hand, we feel this definition could potentially be challenging would-be providers of innovative social housing products, whose products are not categorised by these definitions. For example, we know of some discounted home ownership products which may not meet this definition but that are being provided by RPs and non-RPs. It could be that these assets fall outside of the umbrella of the social system when they could be provided if this definition was more flexible.
2.4.5. However, the narrow definition also means that where homes fall outside of the scope of the regulated umbrella because they are not social housing (despite having the characteristics of social housing), some of the most vulnerable tenants may not have the same protections as tenants whose landlords are RPs. This is the case with some exempt providers. This issue is significant in the sector, and we feel legislation should ensure that all vulnerable tenants, regardless of who their landlords are, are protected by legislation.
2.4.6. Further, the definition of social housing to include home ownership products may conflate too many types of products, at very different income and affordability levels, at the expense of a focus on the delivery of social (formula) rent, a much-needed tenure by some of the most vulnerable in society.
Leaseholder protections
2.4.7. Per the HRA 2008, when a home is sold to a tenant, a home ceases to be “social housing”. This distinction is also included in the regulatory system where rules (contained in the regulatory standards) “apply” differently to tenants and leaseholders. For example, the rent standard does not apply to shared ownership residents and the consumer standards do not apply to leaseholders or shared owners who own 100% of their home. While this may be the intention of the regime (as it presumes the same level of protections should not apply to those who own their own home, which is a sensible principle), we feel it creates inconsistencies in application of the standards as most providers will have both tenants and leaseholders, and as a business may wish to apply their policies consistently.
2.4.8. The social housing white paper however sets out social housing residents as tenants and leaseholders. We also know that redress to leaseholders relating to building safety works is a critical issue in the sector. We would encourage government, as it develops its new approach to consumer protections and powers in the sector, to consider the implications of legislation and regulation on leaseholders.
2.5. Potential change 2: Value for Money
2.5.1. The value for money standard is one of more recent additions to the regulatory standards. It contains provisions for RP’s requirement to have a robust approach and measurement systems in place to achieve good value in their activities, including procurement and use of resource as well as investment. As part of the regulatory requirements, all RPs must report against a series of value for money indicators every year, usually in their annual report.
2.5.2. We feel that this is an area of particular interest by residents, who wish to provide challenge to their providers about where and how they spend. We feel the regulator could take a greater role in ensuring RPs are indeed providing value for money, as we feel the current approach to regulation is much lighter on this area than other areas, primarily financial viability and governance.
3. Q4: How clearly defined are the roles of the Regulator of Social Housing and the Housing Ombudsman?
3.1. Overview
3.1.1. As advisors to the sector, we understand the roles of the Housing Ombudsman Service (HOS) and the regulator and we feel in principle these roles are clearly defined, and correct. We are unconvinced by how clearly defined these are to residents. We feel there could be some work to articulate these roles more clearly in a user-friendly way. This could include explicit reference by the regulator on its website about the role of the HOS and vice versa. We also feel there could be some work to help set public expectations more clearly about the power of each body.
3.2. Information available online
3.2.1. With changes to the names and roles of the various bodies involved in the wider regulatory regime for social housing, there should be a focussed effort on clarifying to residents who the bodies are and what they should and should not expect from these bodies.
3.2.2. We find that it is not clear in the “resident” section of the HOS website what the scope and powers of the HOS is. It may also be difficult to determine what the HOS is and is not. The HOS has a page dedicated to “Others we work with” but is in the “About Us” section rather than the “Residents” section. Where it does describe the regulator, this is done in a technical way – referring to the ‘consumer’ and ‘economic’ regulatory standards for RPs of social housing. Additions could be made to both the regulator and HOS websites to explain to residents what they should and should not expect from the service. It should be made clear how residents should and should not engage with each service, with simple and common examples of resident enquiries. Both bodies may want to refer to one another and each other’s roles on their websites. There could be additional challenges for vulnerable residents and residents whose first language is not English which should also be considered.
3.2.3. We also feel there could be some improvement to the accessibility and clarity of data about RPs. This includes the name and scales of regulatory gradings, as we feel these are currently unclear to residents. We suggest government considers Ofsted as good practice, including the clarity of the grading system and the search function for identifying inspection reports on Ofsted’s webpage to be a good example of what could be done for residents of RPs going forward. See https://reports.ofsted.gov.uk/
3.3. Impact on providers
3.3.1. There is a risk that the strengthened relationship between the HOS and the regulator creates an overlap in responsibilities which may make processes more resource intensive and bureaucratic for providers. Similarly, there may be risks around the duties and the relationship between the regulator and the new Building Safety Regulator.
4. Q6: Do the regulator and ombudsman have sufficient powers to take action against providers?
4.1.1. The regulator currently has sufficient powers to take action against providers, however it has a balanced view on when to use these powers. This is protect the overall independence of the sector and to promote investment.
4.1.2. Similarly, the HOS has certain powers to intervene to resolve disputes or help action complaints. It takes a balanced view on how to apply these powers, with a focus on early resolution between the resident and landlord. Too much focus on early resolution could mean that some residents with disengaged landlords are not put through the formal investigation process as early as they could be, delaying the process.
4.1.3. Despite this, we feel the HOS is improved now as the result of the removal of the democratic filter. This improves services as it gives tenants direct access to its services with the removal of the eight-week wait period to escalate a complaint. This should allow for faster redress within the service, rather than tenants seeking support and redress outside the HOS. The proposed removal included in the draft Building Safety Bill is an effective piece of legislation that should improve the service.
5. Q10: Should all providers of social housing, not just councils, be required to register with the regulator?
5.1.1. All providers of social housing should be required to register with the regulator. This is because social housing residents and social homes require protections regardless of who their landlords are. As the social housing environment has diversified, to include public and private, for-profit and not-for-profit landlords, it is ever more important that the regime ensures that all social housing residents should have common expectations of their landlord.
5.1.2. Over time, we have seen effort to ensure all providers of social housing register under a common regulatory body, despite their legal status:
6. Q11: What challenges does the diversification of social housing providers pose for the regulatory system?
6.1. Overview
6.1.1. We interpret this as the diversification of the types of providers and the types of products they provide. Our view is that while diversification means that more providers can enter the social housing regime and to provide more social housing, there are challenges around exactly what kind of social housing these providers are providing and at what cost to products like social (formula) rent. Also, we feel that as more providers from outside of the regulatory system fill gaps created by a lack of much needed supply, some vulnerable tenants who should be housed by a social housing provider are not able to, with subsequent implications on their protections.
6.2. For-profit providers
6.2.1. It is our view that for-profit providers of social housing serve a critical role in the delivery of new social housing. It should be considered by government, however, the type of social housing these providers are able to provide while ensuring their business models are robust. This is usually not formula rent social housing, and is usually intermediate and other forms of rent, as well as low cost home ownership products.
6.2.2. For-profit providers are not the only ones – with more grant available for low cost home ownership and affordable rents, and reliance on cross-subsidy to fund activities, housing associations are also building more homes of these tenures. The regulator’s latest data from 2020/21 shows that while there was a 6% annual increase in the number of low cost home ownership units, there was only a 1% increase in low cost rental, the smallest increase since 2014. We feel social rent is critical tenure to ensure homes are affordable to those in need, especially as house prices (including market sale and market rent) continue to increase across England.
6.3. Providers who are not social housing providers
6.3.1. As described in our response to Question 3, government may wish to consider the landscape of who is providing social housing or housing solutions akin to social housing. Because of the limited definition of social housing, some of the landlords provide housing to vulnerable individuals are not social housing providers. Exempt accommodation providers, for example, may not be RPs, and therefore fall outside of the regulatory umbrella. This means the various regulatory protections for social housing residents do not apply to residents who live in these homes. These residents are often some of the more vulnerable in society.
6.3.2. The main challenge is that there is much needed supply of social housing, and a mismatch between need for social housing (including demand by local authorities to exercise their statutory homelessness duties) and the supply of social housing. Some providers including exempt providers, are addressing these gaps.
December 2021