Memorandum submitted by Local Government Association and Chartered Institute of Housing (H&R 11)
NEW HOUSING REGULATOR AND LOCAL AUTHORITIES
1. This submission responds to the Housing and Regeneration Bill Committee's invitation to participants in its evidence sessions to explain their positions further in writing. In the light of the discussion about regulation with local government and CIH witnesses and the Minister for Housing, we believe it would be helpful to set out our joint views on the desirability of the new regulator operating, from the beginning, across the whole social housing domain, and on how regulation should operate in relation to council landlords - in particular to make clear the strength of the sectoral view on these questions, and our common position on how regulation should apply to council landlords.
2. The policy position in this note has been shaped and agreed by the LGA Environment Board, a group of expert council officers in housing and corporate performance roles, and the CIH Policy and Practice Board, a group made up of senior figures from across housing associations, local authorities and ALMOs. No one in either of our memberships has expressed any disagreement with it. It is also supported by the National Federation of ALMOs, the National Housing Federation, National Federation of Tenant Management Organisations, TPAS, and TAROE. It is based on a firm conviction that there is an unanswerable case for a regulatory regime which provides all social tenants with an equivalent level of protection. It is often down to chance and where a suitable home is available as to whether someone allocated social housing ends up as a housing association or council tenant. What possible justification can there be for a fundamentally different approach to regulation?
3. Central and local government share a strong commitment to the performance of councils being managed and monitored through the single local government performance framework. The regulation of council landlords should be carried out as part of this.
4. We welcome very much the Minister's statement in her oral evidence session that "If there were consensus on the matter and everyone felt that we could get far enough fast enough, we would obviously be happy to look at amendments" to enable regulation to operate domain-wide without the need for further primary legislation.
5. We also agree with her that the regulation of council landlords could not operate identically to housing associations, and the way this should be done needs to be thought about carefully. We would emphasise that this application of different regulatory approaches to different landlords is entirely consistent with the current legislation, indeed, the Bill already provides for different approaches to for-profit and non-profit landlords. There are very significant governance and financial differences between the two parts of the domain. We therefore welcome the establishment of the advisory panel chaired by Professor Ian Cole and look forward to working with him and CLG to develop a detailed approach to the regulation of council landlords.
6. On the question of whether regulation should operate domain-wide, our only disagreement with CLG's current position is therefore about whether it is practicable for the current Bill to be amended to permit regulation to operate domain-wide from the beginning.
Balance of risk
7. We accept that providing for the regulation of council landlords through amendments to a Bill already introduced is less than ideal and gives rise to some risks. In particular, drafting primary legislation without the most detailed understanding of how the regime for which it is providing is to be operated may lead either to clauses being drafted in a very open-ended way about which legislators would justifiably be concerned, or, if more closely defined, inadvertently close off approaches to their implementation which might have been desirable. However, we are clear that we believe these risks can be mitigated, and that they are outweighed by clear and significant risks in not providing for domain regulation in the current Bill.
8. The justifiable concerns which legislators are likely to have about widely drawn enabling powers need, in our view, to be set against three sets of considerations:
· The purpose of the enabling powers would be to provide for the application and adaptation of the regulatory regime to local authority landlords, not to permit radical alteration of the regime itself without further reference to Parliament;
· There has already been serious consideration of how regulation could be applied to council landlords. LGA held discussions with housing and performance experts in councils, and CLG officials, earlier this year. While this thinking undoubtedly needs to be developed further, it provides, in our view, a sufficient basis for concluding that regulation of council landlords is feasible, and a clear possible model for how it would operate. Similarly, the CIH has also debated the development and application of a domain regulatory framework amongst members with particular expertise in this area.
· The Minister's welcome establishment of the Advisory Panel provides for a transparent and participative mechanism for developing the secondary legislation needed to apply the enabling powers. Parliamentary scrutiny could be further reinforced by a variety of means, for example through examination of the proposals of the Advisory Panel by the CLG Select Committee.
9. There are, in our view, serious risks in not providing for the establishment of domain regulation in the current legislation:
· The achievement of domain regulation - an aspect of the Cave Review's recommendations to which Government and all stakeholders support - would be dependent on further primary legislation. There is always intense competition for Parliamentary time, and it is all too easy to see how legislation which could seem to those outside the housing world of the character of tidying up could be pushed aside in favour of higher priorities;
· Even if time for further legislation were available in the 2008-09 session, it is impossible to see how it could be enacted, necessary secondary legislation put in place, and the regulator's operating approach defined and started simultaneously with the start of the new regime for housing associations in April 2009. There must be a serious risk that the new regulator will be set up and commence operations with a focus on housing associations (particularly as it is likely to take over many staff from the Corporation's current regulatory function), and that it would struggle to develop the necessary equivalent competence and focus on local authority landlords. In their response to the consultation on the Cave Review, the Audit Commission and others drew attention to the risks attendant on setting up a new regulatory body. These risks must be all the greater if it is established piecemeal, with an additional set of functions bolted on to its initial remit a fairly short time after its establishment.
Regulation of local authority landlords: how it should operate
10. Our joint views about the way in which the regime should be applied to local authority landlords are:
· In line with the recommendations of the Cave Review, the approach, across the whole domain, should be customer-driven but deregulatory in character. The regulator's powers to demand information, trigger inspections, and intervene and penalise, should be limited to what is necessary to protect the interests of tenants. Neither Government nor the regulator should have power to interfere in the legitimate decisions of those responsible for the governance of individual landlords to set their own policies and standards;
· Regulation should only apply to the landlord functions of councils and ALMOs. The CIH and the LGA agree that there is no reason to include other council housing functions, including the strategic role, allocations, and private sector regulation. These will all be included in CAA, and the economic justification for landlord regulation - to make up for the limited ability of social tenants to exert market disciplines on their landlords compared with other forms of housing tenure - does not apply in the case of these other functions;
· The regulator's approach to information requirements, inspections and intervention must be consistent with the local performance framework;
· Regulation can and must respect other characteristics of councils as institutions. Since Members are subject to democratic election, the regulator's powers to remove and appoint Board Members of housing associations cannot be replicated for council landlords. (Members involved in decisions about their council's stock could, however, expect to suffer political damage if the regulator found significant shortcomings or was driven to take other enforcement action.) The regulator could not have equivalent powers over financing, because the sovereign risk of councils puts them in a fundamentally different position from housing associations classified in the private sector, and because their finances are subject to close audit by the Commission.
11. We hope the Committee finds this further evidence helpful in understanding the strength and consistency of our views on domain regulation, and on the balance of risk attached to the inclusion or otherwise of provision for regulation of council landlords in the Bill. We welcome the opportunity presented by the Minister to clarify the consensus on a domain approach and would emphasise our belief that we are indeed in a position to "get far enough, fast enough". We will gladly provide any further information which the Committee would find helpful.
 Generally where this note refers to LA landlords, it should be taken to including councils with ALMOs as well as those with directly managed stock.