Draft law paves the way for economic ‘look-through’ powers

The RSH would also be able to authorise another person to exercise those powers, enabling specialists such as forensic accountants to investigate non-regulated third parties on its behalf – something it can already do for RPs.

 

This could include looking into potential fraud by examining the accounts of organisations “thought to be financially deriving profits” from an RP’s activities.

 

The government published its proposed draft clauses on 29 March, alongside an announcement that it would “name and shame” failing social housing landlords.

 

It said that “social landlords providing sub-standard housing and services would be publicly called out” on a new website and across social media channels.

 

Applications have also opened for a new Resident Panel, in line with changes proposed in the white paper, which will invite around 250 tenants across England to share their experiences.

 

Chief among the changes outlined in the draft clauses are steps to enable the new consumer regulatory function of the RSH, adapting its fundamental objectives to include a new requirement to support the provision of housing that is “safe”.

 

These add to the existing expectations of being “well managed” and of “appropriate quality”. There would also be a new objective for the regulator to require RPs to be “transparent” with their tenants.

 

The regulator would be able to set standards for safety and for the transparency and provision of information (to tenants and the regulator), in line with the aims in the white paper. It would also be able to issue a code of practice in relation to its consumer standards.

 

As proposed in the white paper, the “serious detriment test”, to which a breach of the consumer standards is currently held, would be removed, and the regulator would be able to use its monitoring and enforcement powers in relation to a failure to meet a consumer standard without first applying the test.

 

“This will enable the regulator to regulate consumer standards proactively and to bring parity between economic and consumer regulation, as committed to in the Social Housing White Paper,” the guidance notes state.

 

Proposed clauses also add to the criteria the RSH is able to require new registrants to satisfy before they can become RPs, to include consumer standards. This would add to the financial, constitutional and management arrangement criteria it can currently require.

 

The insertion of new clauses into the 2008 act would also require RPs to designate a ‘health and safety lead’ to head up compliance on health and safety obligations towards tenants.

Performance improvement plan

 

Other key changes would enable the RSH to require new so-called ‘performance improvement plans’ (PIPs) from RPs that are failing to meet regulatory standards to produce and follow.

 

If made law, these could be applied in the enforcement of its economic standards as well as the new consumer standards.

 

The advisory notes explain: “The change will allow the regulator to hold a registered provider to account in relation to how, and by when, it proposes to address an issue that has been identified. It will also allow tenants to be aware of the actions their landlord is required to carry out and when, so they can hold their landlord to account.”

 

Under the proposed legislation, the regulator would be able either to approve or to reject a submitted PIP, with the provider required to implement it once approved.

 

If a PIP is not approved by the regulator, the provider is deemed to have failed to comply with the PIP notice. Following a rejection, the regulator can consider exercising another enforcement power.

 

The introduction of PIPs, if approved, would essentially add further weight to the process currently enacted through
voluntary undertakings (VUs) in the regulator’s economic work.

 

At present, as the RSH’s ‘Annex 1’ guidance document on its intervention approach sets out, the regulator may propose that a failing provider pursues an ‘action plan’ in order to bring about improvements, setting out “key corrective actions it requires the registered provider to take, and the milestones and timetable in which they should
be achieved”.

 

As part of this process, an RP can propose a voluntary undertaking with the regulator. The regulator may consider whether the voluntary undertaking is satisfactory, and monitor the provider’s progress in delivering it, but the existence of a VU does not necessarily prevent further enforcement action.

 

Speaking to Social Housing, Will Perry, director of strategy at the RSH, said that the proposed new system of PIPs, if implemented, would essentially give “more teeth” to the voluntary undertaking process.

 

“If we put one of these in place, the provider would know that if they didn’t complete the plan, we would do something harsher [in terms of enforcement],” he said.

 

But he emphasised that the clauses were “strictly draft” at this stage, and that after any legislation is introduced, a formal consultation by the regulator would be required before establishing what this looks like in practice.

 

Other draft clauses would see the removal of a previous cap on the level of penalty the regulator is able to impose on registered providers, giving it “flexibility to determine the appropriate level of penalty depending on the circumstances”, the notes state.

 

And, when appointing a manager to an RP that has failed to comply with the regulatory standards or mismanaged its affairs, the regulator would in future be able to appoint an organisation, in place of an individual (as currently required).

 

“Organisations may be more effective in cases where wider expertise, skills and capacity are required to improve the management of a provider quickly and effectively,” the notes state.

 

Mr Perry said that the current system presents challenges in requiring professional indemnity insurance to be put in place for individuals, despite the fact that they were normally appointed because of the organisation they worked for, such as an accountancy firm or another registered provider.

 

“It’s a lot more robust if we can appoint the firm, rather than just an individual,” Mr Perry said.

 

For-profits

 

Under the draft schedule, the government would also legislate to extend a number of the regulator’s enforcement powers so that they also apply to for-profit providers. This will see previous terminology relating to ‘non-profit’ RPs in parts of the 2008 act replaced with ‘private’ RPs.

 

“These amendments more closely align the regulation of for-profit providers with non-profit providers, to provide equal protection for tenants regardless of the profit status of their landlord,” the notes state.

 

Earlier in March, the regulator updated its approach to grading for-profit providers, citing qualitative differences, in particular around group capital structures and cash flow dynamics.

 

In an updated edition of ‘Regulating the Standards’, the RSH revealed that it would use an asterisk next to a for-profit provider’s grade, such as G1*, to make this clear to stakeholders.