MPs criticise social housing regulator inaction

11 Sep 13
MPs have slammed the social housing regulator for his reluctance to downgrade the financial viability ratings given to landlords, warning that ‘nobody would have a clue’ if a housing association was in serious financial difficulty.

By Vivienne Russell | 11 September 2013

MPs have slammed the social housing regulator for his reluctance to downgrade the financial viability ratings given to landlords, warning that ‘nobody would have a clue’ if a housing association was in serious financial difficulty.

A report from the Commons communities and local government committee, published today, highlighted the regulator’s preference for using governance ratings to indicate his concerns about the financial health of social housing providers. Lowering financial viability ratings could prompt an upward repricing of debt, and fear of this happening had made the regulator unwilling to take such action, the MPs said.

However, they added that his approach lacked transparency and risked the development of too close a relationship between the regulator and providers.

Committee chair Clive Betts said: ‘The committee was surprised to find that what purported to be an assessment of the financial viability of housing associations was no such thing. As it stands, if a housing association was in serious financial difficulty, nobody would have a clue.

‘The current approach of using governance ratings to signal concerns about financial viability lacks openness and is confusing. It is unfair to expect tenants, taxpayers and lenders to understand and decipher the regulator’s coded messages.’

Betts added that, if the regulator was known to be unwilling to use his statutory powers, then his position and effectiveness was undermined.

The committee said its concerns were underlined by the case of Cosmopolitan Housing Group, which came close to insolvency in 2012 but did not have its financial viability rating lowered until the end of the year.

Betts said: ‘The eventual downgrading of Cosmopolitan amounted to a futile exercise in locking the stable door long after the horse had bolted. It exposed the serious shortcomings of the system.’

The current social housing regulator is Julian Ashby who works out of the Homes and Communities Agency as chair of its regulation committee. The HCA assumed regulatory functions following the disbandment of the Tenant Services Authority.

Responding to the MPs’ concerns, the HCA’s regulation committee said it would alter some of its procedures.

‘Where a provider does not meet either our governance or viability standard, we will say so. But in the light of the select committee’s comments, we will alter our description of a grade three viability judgement to make it clear that we regard a non-compliant viability judgement as a very serious issue rather than just a concern,’ a statement said.

It added that, where possible, the regulator wanted to work with social housing providers to resolve issues without recourse to a statutory intervention.

On the specifics of the Cosmopolitan case, the regulator said the serious problems occurred at a time when the regulation committee was getting to grips with its new responsibilities and considering how to issue judgements. Future judgements would not be subject to the delays that the Cosmopolitan judgement was, it added.

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