What's in store for the social housing sector in 2023?

A new year has begun and we thought we would start it with an overview of where the sector is with the various laws, policies, reviews and more and what this could mean for you and your focus in 2023.

The regulator of Social Housing's consumer review

The review, published in the summer of 2022, is important, as the regulator is of course preparing for more proactive consumer regulation, therefore it is useful to look at the themes coming out of the review as a potential guide to what the regulator is already focusing on and is likely to be pulled through into the new regulation.

In the cases where breaches of the consumer standards were found, they were in the areas of non-compliance with health and safety, repairs and accurate and good quality data. The regulator is keen that registered providers ensure they have robust assurances about the running of the organisation, that critical issues are dealt with as they emerge and that they need to avoid complacency.

The regulator notes that as progress on new legislation and the new consumer standards is well underway, registered providers should act now to be ready to meet the new regulatory requirements. The way to do this is carry out an audit of your compliance with the current regulatory standards and to assure yourselves that you meet them. The regulator has set out that listening to your tenants and hearing what they tell you will be critical to ensuring that they receive good housing services and live in safe, decent, good quality homes. The regulator also recognises that the upcoming changes may require a cultural shift within some registered providers, and this can take time to achieve, so starting to ready yourself for the changes should begin now.

The key lessons from the review are as follows:

Good governance is key

Now would be a good time for boards to review the governance arrangements of their organisation with a fresh pair of eyes and ask themselves whether they are getting the assurances they need about how services are being delivered. This could be a wholesale review of the governance framework of the organisation or a review of policies and procedures around decision-making, the quality of information being provided to boards and the services provided to tenants and other stakeholders.

Tenant engagement & health and safety

Effective engagement with tenants will be for registered providers to be prepared for the new proactive consumer regulation. Registered providers must provide good quality, safe homes, ensuring that all relevant requirements relating to fire, asbestos, water, lift, electrical and other matters are met, with accurate records maintained, that repairs are carried out effectively and reported issues are responded to promptly.

It is critical to listen to feedback from tenants about all matters, treat them fairly and with respect, and provide mechanisms of redress in cases where things do go wrong. Registered providers may want to consider reviewing matters such as repair procedures and times, customer complaint policies, the effectiveness of any repairs and maintenance contracts and tenant satisfaction data. Registered providers may also want to consider the way in which tenants can report any issues and whether tenants are aware of those methods of reporting.

Whilst you may already have all the required policies and procedures and governance measures in place, in view of the changes which may be coming in the year ahead, we would recommend thinking about any areas where a review might be needed and any updates made, to get ahead of these changes.

The Social Housing Regulation Bill

The Bill introduces a number of new powers for the regulator and has a focus on tenants. It follows the publication of the Social Housing White Paper and also therefore has a focus on tenant safety, following the tragedy at Grenfell. The Bill would introduce the following, which registered providers should consider as having the potential to impact on their business.

The core objectives of the bill are to facilitate the new proactive consumer regulation, by:

• Enabling the regulator to set standards for the competence and conduct of staff working for registered providers
• Having safety, transparency and energy efficiency as part of the regulator’s objectives
• Requiring registered providers to nominate a designated person for health and safety
• Giving the Secretary of State the power to introduce new requirements for registered providers relating to electrical safety checks
• Giving the regulator power to direct registered providers to collect and publish performance information
• Allowing for regular inspections of registered providers
• Refining the existing economic regulatory regime
• Ensuring the regulator has a clear understanding of a registered provider’s corporate structure and any changes that could influence how it operates
• Broadening the regulator’s power to require people to provide documents or information for regulatory purposes
• Strengthening the regulator’s powers to enforce the consumer and economic regimes
• Removing the ‘serious detriment’ test, which is a barrier to the regulator’s action on consumer issues which will allow the regulator to act without the need for serious detriment to be proven
• Giving the regulator the power to require a registered provider to prepare and implement a performance improvement plan
• Removing the cap on the level of fines the regulator can issue
  Giving the regulator the power to set standards relating to energy efficiency including a minimum energy efficiency in the sector
• Imposing a duty on the regulator to produce, publish and implement a plan relating to the carrying out of both regular and one-off inspections of registered providers
• Requiring the regulator to publish a plan for regular inspections of largest landlords
• Requiring the regulator to set up an advisory panel (made up of social housing tenants, registered providers, registered providers’ lenders, councils, the Greater London Authority (GLA), Homes England and the housing secretary and any other persons as it thinks fit
• Requiring constitutional changes to be notified to the regulator
• Enabling the regulator to carry our surveys and authorise emergency remedial action (at the cost of the registered provider)

The Better Social Housing Review by CIH and NHF

A review was carried out, jointly commissioned by the Chartered Institute Of Housing (CIH) and National Housing Federation (NHF), looking at the suitability of social housing, and the culture of registered providers and their responsiveness to tenants’ concerns and complaints. The review was in response, at least in part as a result of stories in, and scrutiny by, the media. The review concluded with seven recommendations for registered providers.

The review recognises the challenges faced by registered providers, especially in a climate where more social housing is needed, alongside the need to retain quality in existing stock. It also recognises that registered providers undoubtedly have the various matters set out in the recommendation as central to their organisation but asks registered providers to ask themselves difficult questions around the services and properties they provide. Registered providers have at their core a purpose to provide safe, affordable, quality homes, taking into account the wide and differing needs of their tenants. However, registered providers face many external pressures, such as development, access to funding, rent caps and fallout from the Grenfell tragedy and a worldwide pandemic. The review’s main concern is the potential dilution of focus on the core purposes of registered providers, which it sets out as tenants, staff and stock.

1. Core purpose
   The review recommends that registered providers go back to their core purpose: safe, decent, affordable homes and ensure they are delivering against that purpose. Once registered providers have established this delivery as their primary focus, they can review their capacity for delivering additional objectives and ambitions.
   
   It is key to ensure delivery against purpose. However, we understand that diversification can also be a way to meet this main objective, in a climate where funding is restricted and the pressure to develop is increasing.
   
   
2. Social housing audit
   The review recommends that registered providers work more closely together to get a better idea of the bigger picture of the sector across the country and to have regard to the different ways in which different registered providers work, which could lead to sharing ideas and examples of good practice and innovation. It recommends adopting the HACT UK Housing Data Standards across the sector.
   
   
3. Partnering with stakeholders
   Registered providers should partner with tenants, contractors and frontline staff to develop and apply new standards, defining what an excellent maintenance and repairs process looks like, including asking these stakeholders to work together to develop an annual plan for continuous improvement.
   
   As part of the work towards meeting this recommendation, it could be beneficial to review R&M contracts.
   
   
4. Recruitment and training
   CIH should promote the traditional housing officer role as a supported and valued employment opportunity by providing a recognised programme of training and continuing development. Registered providers should increase investment in recruiting, developing and supporting the retention of more housing officers and it is hoped this will assist in retention by reducing the high pressure housing officers are under.
   
   
5. Working with tenants
   Registered providers should work with all tenants, making sure they have a voice and have influence at every level of decision-making across the organisation, through both voluntary and paid roles. Additionally, registered providers should assess their performance against tenants’ experiences by enabling them to lead investigations and reviews and further expanding the roles tenants can have.
   
   This recommendation fits well with the impending consumer regulation changes and the NHF’s code of governance, which suggests appointing board members with lived experience.
   
   
6. Community presence
   Registered providers should proactively increase their community presence, through community hubs, in order to assess the needs and aspirations of the community and assist with multi agency working.
   
   There are many ways in which an ROP can choose to engage with the community and ensure that it takes its recommendations to the board and the executive.
   
   
7. Annual progress review
   Registered providers should support tenants and frontline staff to undertake an annual review of the progress each organisation is making in implementing this review’s recommendations.

Registered providers: supported housing and lease arrangements

In the case of National Community Homes Community Interest Company v Regulator of Social Housing [2022] EWHC 3171 (Admin) it was decided that the regulator was justified in removing a registered provider from the register of registered providers as a result of the serious insolvency issues whereby the regulator deemed it not to be financially viable.

The registered provider specialised in providing supported housing and overall it did not own the freehold of the buildings where the support was provided. Instead, investment funds would purchase the freehold and the registered provider would enter into arrangements with the investment fund, taking a lease of the property. The registered provider would then let the individual units to tenants. The regulator’s concern was that this was not a financially viable model and that the registered provider could incur quite significant losses under the terms of the leases, due to the rent payable, and the fact that the leases contained no provisions to allow for renegotiation or break clauses. The registered provider could be affected if for any reason they were unable to fill the properties with tenants, for example, or if there were any changes to housing benefit or support funding in relation to those tenants. The regulator concluded that this was an inherent insolvency risk. Additionally, the registered provider had not paid certain matters due under the leases and was relying on the goodwill of the investment fund (as freeholder). A winding up order was issued and when bailiffs were appointed to enforce debts, the regulator opted to deregister the registered provider. The registered provider appealed but was unsuccessful and it was found that the regulator was within its rights to deregister in light of the serious solvency risks faced by the registered provider.

We are aware that a number of registered providers enter into similar arrangements and it is important to take advice on the terms of the lease, as well as to put a management or service level agreement in place, setting out the terms, in particular terms around voids, break clauses and no fault termination. This is particularly important if the arrangements are for a medium to long term (although we would suggest medium term is most appropriate). Many registered providers are charities as well, but whatever the charitable status of a registered provider, it must remember that first and foremost it must act within its objects and must be very careful as to how it uses its funds. Entering into these arrangements must not be detrimental to the registered providers social housing assets and risk assessments should be carried out in each case, along with advice on the terms of the leases and other agreements which form part of such arrangements. Often it is easy to enter into such arrangements for the short term benefits. However, it is important to take a long term view and forecasts for the duration of the term, taking into account any possible changes which may happen to render the arrangement not viable. We can advise you on the best way to enter into these types of arrangements, working with you to mitigate risk and helping to ensure financial viability.

It should also be noted that the Social Housing Bill will give the regulator power to deregister a registered provider for failing to meet a regulatory standard.

This insight was produced by Consultant, Jo Loake. jo.loake@weightmans.com.