RSH consultation on statutory powers

The Regulator of Social Housing (RSH) has) launched a consultation on updated statutory guidance which sets out how it proposes to use its powers. RSH’s existing powers were strengthened by the Social Housing Regulation Act (SHR) which received Royal Assent in July 2023. Most will come into effect in April next year. RSH is proposing to update the statutory guidance under section 215 of the Housing and Regeneration Act 2008 (HRA08) to reflect amendments to the HRA08 introduced by the SHR, which delivers the reforms set out in the Social Housing White Paper, one of which was to strengthen the regulator’s enforcement powers.

RSH will continue to consider using its powers when Registered Providers of social housing (RPs) both fail to deliver the outcomes in the regulatory standards and cannot or will not put things right. RSH will also continue to have a proportionate approach and consider each case individually, and the priority will be for RPs to identify and address issues themselves.

The types of issues that may lead to RSH using its powers include serious failings that put tenants and their homes at risk, financial viability issues, and failure to comply with regulatory standards despite intensive engagement and other regulatory interventions.

RSH’s proposed statutory guidance explains the situations where it may use its powers, as well as the process for using them.

Some of the key changes to the existing powers and new powers introduced are summarised below. There are a number of guidance notes in relation to the new powers and changed existing powers which can be found in Annex 2 of the consultation.

New powers

Performance improvement plans

RSH will have the ability to require an RP to prepare and implement a performance improvement plan, provided RSH is satisfied that specific grounds have been met.

A performance improvement plan must set out how the RP will address the issues identified by RSH and RSH may either approve or reject the performance improvement plan. If the performance improvement plan is approved, the RP must implement the plan in full and must provide tenants with a copy where written requests are made.

Circumstances where RSH may use this power

The grounds under which the RSH can use this power are:

• where the RP has failed to meet certain standards
• where there is a risk that, if no action is taken by RSH or the RP, the RP will fail to meet certain standards
• where the RP has failed to comply with directions or a request relating to performance information
• where the interests of the social housing tenants of the RP require protection; or
• where the RP has given a voluntary undertaking under section 125 of the HRA08 and failed to comply with it.

Emergency remedial action

RSH will have the ability to arrange for an authorised person to enter an RP’s social housing premises to take emergency remedial action. These are works which are regarded by the authorised person as immediately necessary to remove the imminent risk of harm. Such power may only be exercised where specific conditions have been met.

An authorised person may enter with or without a warrant, and RSH may recover its relevant expenses in connection with this.

RSH expects RPs to resolve issues raised by their tenants or RSH in a timely manner appropriate to their level of risk. RSH is mindful of its duties to minimise interference and, so far as possible, to be proportionate. As such, RSH only anticipates using this power in exceptional circumstances where the health and safety of tenants is at imminent or serious risk. Decisions in the use of this power will be made on a case-by-case basis.

Circumstance relating to the entry into premises and emergency remedial action; the conditions which must be met are:

• a survey of the condition of the premises has been carried out
• RSH is satisfied that the RP has failed to maintain the premises and that failure has caused an imminent risk of serious harm to the health or safety of the occupiers of those or other premises; and
• the RP has failed to comply with an enforcement notice requiring it to take action to address these failures.

RSH expects RPs to resolve issues raised by their tenants or RSH in a timely manner appropriate to their level of risk, but only anticipates using this power in exceptional circumstances where the health and safety of tenants is at imminent or serious risk.

Amendments to the existing powers

Repeal of the ‘serious detriment’ test

The ‘serious detriment’ test limits RSH’s ability to use its regulatory and enforcement powers where an RP fails to meet a consumer standard. Currently, such powers can only be exercised where RSH considers that a consumer standard has been failed and there are reasonable grounds to suspect that:

• the failure has resulted in a serious detriment to the RP’s tenants (or potential tenants) or
• there is a significant risk that, if no action is taken by RSH, the failure will result in a serious detriment to the RP’s tenants (or potential tenants).

This means that the threshold for regulatory intervention is significantly higher for failures to meet the consumer standards than failures of the economic standards.

The repeal of the serious detriment test means RSH will be able to use its monitoring and enforcement powers in relation to failure to meet a consumer standard without first applying the serious detriment test enabling it to regulate consumer standards proactively.

Amending the grounds under which the regulatory and enforcement powers can be used

The changes make a number of amendments to the grounds under which enforcement powers can be used by RSH, as well as expanding the grounds under which some powers can be exercised. These include:

• require RPs to comply with health and safety requirements under sections 126A to 126C of the HRA08
• comply with directions or a request under 198C of the HRA08 made by RSH regulator requiring RPs to collect, provide, process or publish performance information
• impose obligations on the RP where RSH has issued a performance improvement plan notice. These obligations are set out under s.218A to s.218B of the HRA08.

Allowing RSH to exercise some enforcement powers where there has been a failure to meet a standard under the HRA08, or there is a risk there will be a failure to meet a standard.

These standards are:

• standards relating to consumer matters
• standards relating to economic matters
• this is a new provision allowing RSH to set standards relating to information and transparency
• removing the ground to comply with social housing rent requirements under the Welfare Reform and Work Act 2016.

The grounds under which the different regulatory and enforcement powers can be exercised vary. There are individual guidance notes for the specific grounds under which they can be exercised.

Extending some of the enforcement powers to for-profit providers

The following powers under the HRA08 which apply to non-profit RPs have been extended to for-profit RPs:

• restrictions on dealings during an inquiry
• restriction on dealings following an inquiry
• suspension during inquiry
• removal or suspension following an inquiry
• removal of officers, and
• appointment of new officers.

Extending some of the enforcement powers to charities which have not received public assistance

The HRA08 is also amended to extend some powers to charities which have not received public assistance. This provision came into force on 20 September 2023. Prior to this, these powers could only be used in respect of charities which had received public assistance.

RSH is able to use the following powers under the HRA08 in respect of all registered charities regardless of whether or not they have received public assistance:

• inquiries
• restriction on dealings during an inquiry
• restriction on dealings following an inquiry
• suspension of officers, employees or agents during an inquiry
• removal or suspension of officers, employees or agents following an inquiry
• removal of officers, and
• appointment of new officers.

Notification of Charity Commission of exercise of enforcement powers

The following enforcement powers have also been amended so that RSH is required to notify the Charity Commission when it exercises these powers:

• restriction on dealings during an inquiry
• restriction on dealings following an inquiry
• removal of officers
• section 269 of the HRA08 is also amended so that where RSH decides to appoint new officers to a charity, it is only required to notify the Charity Commission of its intention to do so rather than consult them.

These amendments came into force on 20 September 2023.

Surveys

The survey provisions of the HRA08 are amended to insert new sections.

The amendments include:

• creating separate powers to allow a person authorised by RSH (‘authorised person’) to enter with or without a warrant for the purposes of carrying out the survey
• reducing the amount of written notice an authorised person must give to enter premises without a warrant from 28 days to 48 hours, although this may be waived
• enabling an authorised person to enter with a warrant obtained by making an application to a justice of the peace. This application may be granted provided the justice of the peace is satisfied that certain circumstances exist
• enabling equipment and materials to be brought onto the premises and left there provided certain requirements are satisfied
• enabling the authorised person to be accompanied by other persons they consider necessary to complete the survey, and
• creating two separate offences where an RP, an officer of an RP or other person obstructs an authorised person.

Circumstances where RSH may use the powers include:

• a potential problem in design, construction or condition which may impact across an RP’s social housing stock, where there are reasonable grounds to suspect this represents a safety risk to tenants; or
• a survey is necessary as part of the exercise of RSH’s wider regulatory or investigatory powers such as an inspection
• a scenario where the RP has been unable or unwilling to provide adequate assurance to the regulator.

Inspections

The changes remove the requirement for the Secretary of State to consent to inspections where these are carried out by a member of RSH’s staff.

New provisions are also inserted which require RSH to produce an inspection plan and set out requirements about actions which must be taken following an inspection by the inspector and RSH.

RSH is considering what the inspection plan will look like and will publish these.

Inquiry

Consultants of RSH are no longer regarded as not being independent and therefore ineligible to conduct an inquiry.

In respect of an inquiry, for local authorities, for profit RPs and registered charities, the scope of the inquiry is limited to affairs relating to social housing. An inquiry may consider affairs of a body which at the material time was a subsidiary or associate of the RP.

An extraordinary audit of accounts may be required as part of an inquiry. In relation to local authorities and registered charities, it is limited to the extent to which the accounts relate to the provision of social housing.

RSH will meet the costs of the inquiry. Where the RP is a local authority, it may contribute to RSH’s expenses and the RP shall pay the costs of the extraordinary audit.

Circumstances where RSH will use this power

The grounds under which RSH can hold an inquiry are if it suspects that:

• the affairs of the RP may have been mismanaged
• the RP has failed to meet certain standards; or
• there is a risk that, if no action is taken by RSH or the RP, the RP will fail to meet certain standards.

If an RP meets the grounds for an inquiry, no additional grounds must be satisfied for an extraordinary audit. However, the following circumstances may indicate an extraordinary audit is required:

• there is a material misstatement in the accounts
• the accounts have been qualified
• a for-profit RP’s solvency is in doubt
• there may have been a fraud; or
• auditors have raised matters of serious concern, for example in their management letter

This is not an exhaustive list, and it does not limit the way in which RSH uses this power, as there may be other circumstances where an extraordinary audit is considered necessary.

Penalties

RSH will be able to issue penalties to all types of RPs including local authorities, and the £5,000 cap is removed so RSH has the potential to issue penalties of an unlimited amount.

Whilst the cap has been removed, RSH is mindful of its duties to minimise interference and so far as possible be proportionate when deciding whether to impose and the amount of the penalty, taking into account the RP’s individual circumstances.

Appointment of manager

RSH is able to appoint an organisation or an individual as a manager, and the 28-day period within which an RP provider may make representations has been reduced to five days.

Suspension and removal of officers

RSH may remove or suspend an officer (or employee or agent) for obstructing or failing to co-operate with an inquiry, and further amendments clarify that RSH must take reasonable steps to notify the person suspended or removed and the RP.

Appointment of new officers

RSH can appoint a person as an officer in the case of a registered charity, society or company where none of the officers is a board member. The changes also further define the meaning of board member and clarify that RSH may renew an appointment on any number of occasions.

Appeals

Clarification has been made regarding the appeal periods (where an RP has a statutory right of appeal) where RSH exercises its powers. Such appeals must be brought within 28 days beginning with the day on which RSH provides the RP (or individual) with a notice (or notifies them) depending on the power. Further amends set out the compensation and penalties provisions by providing that the requirement to pay such sums is suspended during the appeal period.

Moratorium

Amendments to the moratorium provisions mean that during a moratorium, RSH’s consent is required for an RP to dispose of their land.

It modifies the HRA08 by amending the events which trigger the commencement of a moratorium to:

• presentation of a petition for the winding up of an RP by a person other than the Secretary of State
• an application is made by an RP for permission to pass a resolution for voluntary winding up
• an application is made by a person other than the Secretary of State for an administration order in respect of an RP
• a notice of the appointment of an administrator of an RP is filed with court
• a notice is given to RSH of intention to enforce a security over the property of an RP.

Currently, a moratorium is triggered where an RP gives notice to RSH that an insolvency-related event has occurred.

Further amendments made:

• clarify when a moratorium ends
• enable RSH to extend a moratorium or impose a further moratorium where it has made enquiries but been unable to locate any secured creditors of the RP, or there are no secured creditors
• enable RSH to cancel a moratorium for no reason. Currently, RSH is only able to cancel a moratorium if it is satisfied that it is unnecessary to make proposals.

Amendments are also made to the proposal provisions which:

• require RSH to consult with any secured creditors it is able to locate after making reasonable enquiries before making proposals;
• allow RSH to agree proposals and amend proposals where it has made enquiries but has been unable to locate any secured creditors of the RP, or there are no secured creditors.

Amendments also clarify one of the scenarios where the appointment of an interim manager will come to an end, which is where RSH notifies them that proposals have been agreed and to clarify RSH’s existing power to give financial or other assistance to an RP during a moratorium. Additional amendments the Housing and Planning Act 2016 supplement the moratorium provisions the HRA08 to clarify the process which must be followed in the event an insolvency-related event occurs and sets out requirements which must be complied with in order for notice to be validly served on RSH.

Enforcement notices

There are a number of specific grounds under which RSH can use its power to take a particular action or actions, which will be set out in an enforcement notice. Some of these grounds are:

• failure to meet certain of the standards
• where the affairs of the RP have been mismanaged in relation to social housing
• failure to comply with an earlier enforcement notice
• where the interests of tenants require protection
• where the assets of a for-profit RP require protection
• failure to pay an annual fee
• failure to comply with an order made by the housing ombudsman
• where there is no health and safety lead
• failure to comply with a performance improvement plan notice.

There are additional changes which amend the powers of RSH in relation to requiring an RP to tender or transfer some or all of its management functions, as they relate to social housing, requiring two RPs which are registered societies to amalgamate, together with others in relation to compensation.

What does this mean for RPs?

RPs should be aware of the consultation for which the closing date is 16 January 2024. The changes to the powers of RSH give scope for RSH to do more in relation to an RP’s failures and are consistent with the current regulatory approach around consumer standards and consumer focus. RPs should consider the new powers and whether there might be any current concerns which would allow RSH to use the new and amended powers in respect of those concerns.