News analysis Housing sector split over choice of regulator

20 Sep 07
It was inevitable that Professor Martin Cave's recommendation that all providers of social housing should come under a single regulator would fail to please everybody.

21 September 2007

It was inevitable that Professor Martin Cave's recommendation that all providers of social housing should come under a single regulator would fail to please everybody.

He delivered the conclusions of his review of social housing to ministers in June. The resulting consultation, which closed last week, reveals that Cave's proposal on regulation has divided the housing sector down the middle.

Faced with a choice between the Audit Commission and a new stand-alone regulator, local authorities have plumped for the devil they know. However, housing associations, developers and private lenders are backing Cave by calling for a new organisation to be set up.

According to the Local Government Association, the commission should be able to combine regulation with its existing inspection work, which also covers registered social landlords.

'We view regulation by the commission as the option that others need to beat,' declares the LGA boldly in its response to Cave, submitted to the Department for Communities and Local Government earlier this month.

Martin Wheatley, the LGA's housing programme director, says councils are instinctively drawn towards the commission but stresses that the identity of the regulator is by no means the only issue that remains unsettled.

Local authorities are uncertain whether changes to housing regulation will conflict with the new performance framework for councils, based on Local Area Agreements and national indicators, which is being developed by the DCLG for 2009.

So far, says Wheatley, the government has failed to enter into the wider debate it promised over performance assessment. 'It should sit down with the main stakeholders and move people towards a more common understanding,' he says.

The commission's proposed Office for Housing Standards, which promises to streamline inspection and regulation and deliver better value for money, also has the support of arm's-length management organisations.

'Combining inspection and regulation in a single agency gives the regulatory arm more teeth,' says Gwyneth Taylor, policy officer at the National Federation of Almos.

The National Housing Federation disagrees, although it stresses that it is not criticising the commission's work as an inspector. It believes there must be a stand-alone regulator with its own board and chief executive, which in turn respects RSLs' constitutional independence.

'The regulator must understand the constitutional forms of every provider,' says NHF chief executive David Orr. 'Otherwise there is a danger that they will [all] be required to behave like each other.'

More specifically, RSLs are concerned that, if they are regulated by the commission, they will be seen as part of the public sector. This, in turn, could hit their ability to borrow privately and supplement the grants they receive for house building and other work.

Private lenders have also come down in favour of a stand-alone regulator. Andrew Heywood, deputy head of policy at the Council of Mortgage Lenders, says they wish to see a smooth transition from the system they are familiar with at the Housing Corporation and ensure that the new regulator keeps its 'eye on the ball'.

According to the CML, a single system must not lead to 'one size fits all' regulation. 'The key things that lenders are interested in are finance and governance,' says Heywood. 'These are quite specific needs that are not the same for local authorities.'

Developers, which are expected to receive a larger share of house building grants over the next few years, also want a new regulator. Andrew Whitaker, head of planning at the Home Builders' Federation, says giving the job to the Audit Commission would be no better than handing it to the new housing and regeneration agency that is due to replace the corporation and English Partnerships – an option ruled out by Cave.

Although developers would oppose any attempt to regulate their private operations, they are happy to come under the same umbrella as councils and RSLs for social or affordable housing. 'Managers of all types of social housing should be regulated by the same people,' says Whitaker.

Housing associations, meanwhile, are fighting a proposal by Cave to give the regulator the power to fine poorly performing landlords or cap their rent increases. According to Orr, financial penalties of this sort only limit their ability to provide a quality service for tenants. 'It's not reasonable to impose fines for poor performance on organisations that are not in control of their income streams,' he says.

When it comes to the identity of the regulator, the Chartered Institute of Housing is, by its own admission, sitting on the fence. Abi Davies, principal policy officer at the CIH, says the main issue is whether the commission – which is widely seen as a public sector body – can focus on the mixed agenda being pushed by the government.

There may well be reasons, based on cost and pragmatism, for choosing the commission but, Davies says, it would be wrong to let these settle the debate.

'I'm concerned the government will take a decision that enables it to go forward faster,' she says. 'It's much easier to do that with an organisation that already exists rather than one it would have to create.'

Ultimately, it could come down to which part of the housing sector the government is happiest to upset. Julian Ashby, an independent housing consultant who advised Cave during his six-month review, says the fact that RSLs have lenders on their side might well settle the argument in their favour.

'Lenders are likely to be highly influential, and more influential than housing associations as they will be putting more into the next housing programme than the government,' he says. 'If the government chooses to ignore them, it will do so at its peril.'

The Cave consultation also covers the government's new housing and regeneration agency, which was provisionally given the title Communities England until Gordon Brown ordered a rethink within days of becoming prime minister.

Responses show widespread support for the agency, but uncertainty over its precise role – especially as it now lacks a name. It is understood that the DCLG has been told to find a title that demonstrates the government's commitment to house building. But the LGA says the agency should support communities, not simply deliver more homes.


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