01 August 2008
A six-year-old system for monitoring housing associations is about to be torn up by the new regulator for social landlords.
Peter Marsh, chief executive designate of the Tenant Services Authority, is keen to see the Housing Corporation's 'traffic light' system switched off as quickly as possible once the TSA takes over at the start of December.
Under the corporation's assessment system, registered social landlords are allocated lights each year, based on whether their performance is satisfactory or causing concern.
A red light shows that an RSL's financial viability is of serious concern and makes it ineligible to receive development grants.
According to Marsh, currently deputy chief executive at the corporation, the lights encourage a 'tick-box' culture without fully revealing to tenants how well their landlord is performing. Most associations gain green lights but do not have any further incentive to improve.
The new regulatory framework, he said, should be 'aspirational' and require RSLs to assess themselves against benchmarks. In addition, more extensive data should be available on the TSA's website to allow tenants to make judgements. Some of this could be tailored to local needs, he told Public Finance.
The switch to the TSA has been brought forward from next April to coincide with the launch of the Homes and Communities Agency.
Although the TSA will use the corporation's regulatory framework until September 2009, when a new system is introduced for RSLs, councils and other providers, there is no reason why the lights system could not be scrapped sooner.
'There is nothing in statute to say that the regulator needs traffic lights,' said Marsh. 'We will review prior to launch whether any further refinements are needed, but if people expect no change [from December], they will be radically surprised.'
John Bryant, policy officer at the National Housing Federation, said it had nothing against the system in principle, but accepted that it did not give a full picture of RSLs. 'Anything that gives richer results and reflects performance better would be seen as a gain,' he said.
The limitations of the system were acknowledged this week by the inquiry into the collapse of Ujima Housing Association.
Ujima's board refused to give crucial information to the corporation, which delayed placing it under supervision.
The Housing Corporation should have stepped in more quickly to avoid the social landlord for black and minority ethnic families becoming the first association to be declared insolvent, the inquiry concluded.
Ujima was wound up last December with debts totalling £28m, and its 4,600 homes taken over by London and Quadrant, one of the country's largest RSLs. But Ujima's problems were evident as far back as 2006, when it started buying up development sites, in spite of struggling to build homes.
When the corporation requested information from Ujima's board, it was continually rebuffed and even threatened with legal action. The association was finally placed under supervision last October but with hindsight, said the independent enquiry, the corporation was over-cautious and should have intervened far sooner.
'There is evidence that senior regulation and headquarter staff were seriously concerned with Ujima,' it found. 'There was significant regulatory activity, but there was an unwillingness to take decisive action as the corporation waited for 'sufficient evidence' to trigger intervention.'
The inquiry, which reported on July 28, added that insolvency laws should be amended for registered social landlords as Ujima's board was left with no choice but to transfer its assets and liabilities to L&Q. Other RSLs did not have time to put forward alternative proposals, and the process was neither open nor transparent.
Peter Dixon, chair of the corporation, said it would learn from the case but pointed out that Ujima's collapse was ultimately down to poor management. 'No tenants lost their homes, no taxpayers' money was lost and lenders were successfully protected,' he said.
The corporation, which is gearing up to transfer its regulatory powers to the Tenant Services Authority in December, has since made 17 changes to the way it monitors RSLs, including reviews of its risk classification and whistle-blowing procedures.
PFaug2008
