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 bodieswhether government department,
"quango" or local authoritythat 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 ODPMon
the proposal to give SHG to developersthat "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 concentratedor 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 Commissiona
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 authoritiesa 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 sectorensuring
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 activitiescontributing 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 harmin particulareffective
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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