Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence


Memorandum by the Chartered Institute of Housing (CIH) (THC 14)

1.  INTRODUCTION

  1.1  Housing policy is high on the Government's agenda with the Sustainable Communities Plan, the commitment to the Decent Homes Standard and the Barker Review of housing supply all currently seen as priorities. The ability of Housing Associations both to develop new homes and to provide the effective management and maintenance of existing stock and neighbourhoods is crucial to this agenda.

  1.2  This, combined with wider changes in the institutional and regulatory environment, provides a series of challenges for the Housing Corporation in its role in funding and regulating associations. CIH therefore welcomes the opportunity to contribute to the debate on the Housing Corporation's role in meeting these challenges.

  1.3  In making our comments are keen to emphasise the role of the ODPM in setting the overall policy framework for housing in which the Housing Corporation operates.

2.  REGULATION

  2.1  Housing Associations provide management services to the tenants of over two million homes and protect public investment in assets worth over £54 million. Whilst still having a vital role in developing social housing and, increasingly in regeneration they are principally managers of that housing. It is therefore crucial that the Corporation has measures in place to ensure that associations are doing this job properly.

  2.2  However over recent years the performance of associations as measured by the Corporation's Performance Indicators has not improved, and in some areas performance has deteriorated. In particular Associations in London and the SE tend to have worse performance indicators than those further north, where lower rental income and having to compete for tenants in many parts of the north and midlands impose market pressures on associations which drive efficiency and effectiveness in these areas.

  2.3  In terms of financial and governance regulation the Corporation has successfully regulated the housing association sector in a way that has resulted in robust associations with a good financial record. They have avoided any major financial failure by an association, and this has been a crucial factor in keeping the confidence of lenders and ensuring continued high levels of investment.

  2.4  Real attempts to improve associations service delivery are however only very recent with the move from Performance Standards, which relied on Housing Associations meeting minimum standards and tended to be process driven, to an approach based on the Regulatory Code which focuses on improvement and outcomes.

  2.5  Delivering effective and responsive housing management and maintenance to tenants has been less of a priority. Under regulatory regimes prior to the Regulatory Code and the inspection process, there was no serious scrutiny of how effective housing associations were at delivering and improving services.

  2.6  With the loss of inspection and the Reinventing Investment proposals there is a danger of service delivery slipping down the Corporations priorities.

  2.7  That is why we believe that it is crucial that it remains clear that the Audit Commission focus on inspection but that the Corporation has responsibility for taking action to improve performance on the basis of the inspection results, This allows the HC to integrate actions arising out of the inspection within its wider regulatory responsibilities and in deciding the freedoms and flexibilities which might be available to good performing Associations.

DEALING WITH FAILURE IN SERVICES TO TENANTS

  2.8  Given that the new regulatory regime has only been in place for just over a year, it is too soon to make sweeping judgements. But we do believe that the regulatory approach needs to be driven forward in a more robust way.

  2.9  Where an association is clearly not delivering a good service to its users and has not significantly improved despite being given time and support to do so, there appears to be little the Corporation can do except use its heavyweight powers aimed at the business itself. CIH would like to see the Corporation develop incentives for improving performance and measures to tackle continued poor performance in service delivery.

  2.10  There is certainly logic to allowing Housing Associations which are delivering services which tenants find satisfactory to be given preference in new development opportunities and also more freedom to diversify. Other possible incentives could include a lighter touch on regulation and extra flexibilities in rent setting.

  2.11  We believe that the Corporation needs to be given clearer powers to deal with poor service delivery. At present they only have large powers (supervision of associations or an Inquiry) aimed at the association itself, rather than specific powers aimed at improving service delivery.

  2.12  Where an association is clearly not delivering a good service to its customers and has not significantly improved despite being given time and support to do so, there should be a wider range of measures open to the Corporation to secure improvement. There are a number of options, for example:

    —  further restrictions could be imposed in terms of development and diversification; and

    —  the association could be forced to explore options such as partnering services with other associations or even having to put parts of its service out to tender.

3.  THE CORPORATION'S INVESTMENT REGIME

  3.1  There have been criticisms of the fact that despite more money being given to the Corporation to invest in recent years, this has not resulted in significantly more units being built. However, we do not necessarily see this as a failure on the Corporation's part. The Barker Review has highlighted the way that two factors have worked against the Corporation and against the Housing Association sector in general in achieving greater output (in terms of houses built). First, there have been significant increases in land prices and in building costs across the country. Second, shifting more of the programme to London and the South East has resulted in fewer units for a given amount of money as land prices and construction costs are highest in these regions.

  3.2  The Corporation does have a good record in terms of delivery of the Approved Development Programme; they are one of the few public bodies—whether government department, "quango" or local authority—that has effectively spent its capital budget consistently to order over the last 20 years.

  3.3  But there are always potential efficiency gains in any system and we believe that the new investment strategy proposed under the Reinventing Investment document can be seen in this light. Certainly the possibilities of a longer term, partnership approach to programmes, and an end to the complexity of TCIs (total indicative cost indicators) and fixed grant rates, should all be welcomed. It is also not unreasonable to think that there might be a more efficient way of delivering the development programme than splitting it between around 350 associations, most with their own development teams.

  3.4  Nevertheless these proposals are in many ways a leap in the dark. We have emphasised above the Corporation's success in delivering its spending targets. Yet the new regime, with a "pilot programme" which constitutes a substantial part of the ADP being "rolled out" over two years not only changes the basis of how the ADP is delivered but is also likely to change the nature of the sector in unplanned ways.

  3.5  CIH has expressed particular concerns about the way the proposals seem to go a considerable way to separating out investment from housing management.

  3.6  We saw in the 1960s and 70s how an over-emphasis on construction without also focussing on the effectiveness of long term management led to major problems only a very few years down the line. CIH said in its recent submission to the ODPM—on the proposal to give SHG to developers—that "The key strength of the development of social housing by associations is that it is viewed as a sustainable product. Housing associations are in the affordable housing business for the longer term, with the development and financing arrangements being linked to the on-going management and maintenance of the property."

  3.7  In the light of the new Investment regime the CIH believes that it is important for the Corporation to clarify a number of key issues:

    —  Does the Corporation want to ensure that management is not concentrated—or is it happy to allow the emergence of a number of "supra" associations who are both managers and developers to arise?

    —  Should there be a presumption that where there are local managers who are good performers they should normally become the long-term manager? If so, what are the mechanisms to support this happening?

    —  How far will it be up to the programme partners to determine who they pass stock on to? Will we see "beauty contests" to select local managers?

    —  What say will local authorities have in which associations develop and what local management arrangements are set up in their areas?

    —  How can managing associations have an influence over design issues?

    —  How does the resolution of these issues fit with any long term vision for the future of the sector?

  3.8  Despite these concerns, now that the new investment regime is about to start, and given the preparation to get it up and running, we believe it is essential to ensure that the pilot programme is properly evaluated as the programme is developed.

4.  RELATIONSHIP WITH OTHER AGENCIES

  4.1  We seem to be at a point of fairly profound change in the institutional framework for the development and regulation of social housing. With the Audit Commission undertaking housing association inspections and the new roles of English Partnerships and the Regional Housing Boards there are an increasing number of agencies which need to work together and where roles need to be understood, by each other, and by other partners.

  4.2  Take for example the role of English Partnerships. The ability of housing associations to access available land is a key issue, and English Partnerships have a clear role in site assembly and land preparation. However there is discussion about English Partnerships being more involved in actually commissioning and providing homes, which steps over into the functions of the Corporation. At the same time there is evidence, from the way that the 1,600 homes have been commissioned by the two bodies in the growth areas, that partnership working between the two organisations can work.

  4.3  The other relation of concern is that between the housing Corporation and the Audit Commission. There is increased scope for confusion and overlap between the regulation role of the Corporation and the inspection role of the Audit Commission—a confusion that needs to be resolved.

  4.4  The key role in ensuring that the new arrangements lead to better outcomes and do not cause confusion is clearly that of the ODPM. But whilst the Corporation has increasingly seen its role as a delivery vehicle for the Community Plan, there seems to be a lack of any clear articulation of its relationship with the various players, both in relation to specific functions and over time. This lack of clarity may lead to confusion and uncertainty particularly at a local level and the danger of undermining the confidence that stakeholders, particularly associations, have in the Housing Corporation.

  4.5  This may well be the function of the End-to End Review, but when its outcomes are announced it is vital that the Housing Corporation is able to clearly articulate a vision to its stakeholders.

Integration of national, regional and local policies

  4.6  A further potentially difficult issue is that of the Corporations relationship with Regional Housing Boards. Superficially the division between the RHB developing strategy for the region and the Corporation putting this into practice seems clear. There is however a potential problem if the RHBs priorities conflict with those of central government particularly where the Corporation have measured their effectiveness by delivering national targets. Indeed from recent research CIH undertook on Regional Housing Strategies for ODPM it was clear that the perception that the Corporations first loyalty was to central government, meant that players at the local level believed that they were not fully engaged in terms of regional strategy.

  4.7  This relationship may become more complex if regional government is set up as a result of positive referendum votes in particular regions. Given the mandate which regional government would have, there will be pressure for it to be given control over the funding to achieve the strategic aims. There would then be a logic to regional government taking over direct responsibility for the ADP in its region. This would potentially leave the Corporation in the situation of having different responsibilities in different regions.

  4.8  There is also a perception that the Corporation is currently downgrading the role of local authorities. Whilst we appreciate that Regional Housing Boards will be making the overall strategic decisions in a region, the local role and knowledge of the local authority is still vital to effective delivery on the ground. CIH has long argued for an enhanced strategic enabling role for local authorities—a role that should incorporate an understanding both of the broad housing markets and of the relative strengths and weaknesses of the partners operating within those markets.

  4.9  Authorities will have an important function in terms of planning permissions and site assembly. They will also have views about the effectiveness of local associations and there seems to be a danger of prejudicing effective co-operation if the Corporation is seen to be imposing associations and development solutions which run contrary to an authority's experience and future strategy.

5.  THE CORPORATION'S STRATEGIC ROLE

  5.1  As outlined above the Corporation has increasingly seen its role as a deliverer of Government policy, and over the past year has set out its stall as a key delivery vehicle for the Communities Plan.

  5.2  However CIH believes that the Housing Corporation does not set this within a wider strategic context. Its concern with "delivery" and its focus on the regulation of individual associations neither reflects the complexity of local housing markets nor the broader picture of the sector's future. CIH is keen to see the Corporation take a more proactive role in developing a strategic vision for the sector—ensuring in so doing that the sum of the individual regulation and investment decisions delivers the overall objectives set by ODPM. Taking this approach would also enhance the spatial element of investment and regulation activities—contributing to the creation of balanced housing markets.

The Nature of the Sector

  5.3  There is also a need to recognise the fragmented nature of an industry with over 2,000, often very diverse, associations, and the resultant difficulty in regulating them. One of the key problems which the Corporation faces is having to deal with the administration of so many Housing Associations, with 1,500 of these having less than 1,000 units in management. They have reduced this somewhat by streamlining the monitoring requirements for those Housing Associations with under 250 units, and there is a case for trying to extend this streamlining.

  5.4  The Barker review said that there is "scope for economies of scale, if fewer associations owned and managed this stock". We believe that it is important not to assume that "big means better" in terms of landlords and it may well be more effective and efficient to have locally based managers rather than a large absentee landlord. Nevertheless we believe that as part of its strategic thinking there is also a strong case for the Corporation to take a more robust view on the issue of rationalisation of stock. The new investment regime will lead to significant changes in terms of mergers and new partnerships. Without a vision of the sector we are likely to see unintended consequences which may harm—in particular—effective service delivery.

  5.5  We also believe that in dealing with "independent" housing organisations the Housing Corporation's attempts to broker change means that at timing its approach is too consensual. Where it has tried to be bolder on such things as rationalisation and remunerating board members it spends considerable time consulting and trying to negotiate with the sector or parts of the sector which disagree with it, and too often ends up compromising, when boldness may have driven change forward.

  5.6  On a major issue such as whether private developers are likely to be more effective than Housing Associations in developing or how associations are to meet the decent homes standard, the Corporation could also act more proactively to produce analysis that will inform that debate.

6.  CONCLUSION

  6.1  CIH believes that the roles of regulator and funder of housing associations are vital to the continuing effectiveness of the sector in both service delivery to tenants and in the provision of new housing.

  6.2  However we believe that these roles can only be effectively performed by an organisation with a clear vision of its own, set within a wider strategic context for delivery of the Sustainable Communities Plan.

  6.3  CIH sees the major challenges which the Housing Corporation will have to confront as being to:

    —  build upon its regulatory function and ensure improvements in service delivery to the customers of housing associations;

    —  ensure that its Investment strategy is consistent with wider strategic objectives;

    —  ensure that the new investment regime is properly evaluated and does not place barriers in the way of effective service delivery as well as achieving better value for money from new development; and

    —  ensure that the Corporation has a clear strategic vision for the sector and articulates this to all stakeholders and other partners.


 
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