Examination of Witnesses (Questions 1-19)
MR ANTHONY
MAYER AND
PETER MARSH
21 OCTOBER 2008
Q1 Chair: Good morning and welcome to
the inquiry. If members address questions generally, we will leave
it up to whichever one of the two of you feels it is most appropriate
to respond. Can I start off with a question about the fact that
both of you were formerly with the Housing Corporation and ask
if you could comment on the fact that you were both with the Housing
Corporation and that the Tenant Services Authority (TSA) of course
is supposed to mark a break from the past. How do you feel that
you can have credibility as an authority that is supposed to be
representing tenants when you were formerly with the Housing Corporation?
Mr Marsh: Both Anthony and myself,
as you quite rightly say, have been Housing Corporation servants
in the past. I have only been with the Housing Corporation since
2005 and before 2005 I had a career in further education and in
audit. Whilst I am cognisant of the inheritance the TSA has from
the Housing Corporation, the TSA is a completely new body. We
are new for six key reasons. We are new because we are an independent
regulator. We are new because we are a regulator, not an investor.
Fundamentally the name says it all; we are Tenant Services Authority
and we exist to champion what consumers want, not to look after
the club of housing associations. In due course we hope to regulate
across local authorities, Arms Length Management Organisations
(ALMOs) and the Registered Social Landlord (RSL) stock. I think
the work we have done in the last six months with colleagues from
the Tenant Participation Advisory Service (TPAS), the Tenants
and Residents Organisation of England (TAROE) and the Confederation
of Co-operative Housing (CCH), the national tenant bodies, is
where I seek my evidence for the fact that the TSA is a new and
different body.
Mr Mayer: I was the Chief Executive
of the Housing Corporation for the whole of the '90s. I did stop
in 2000, eight and a half years ago, and have been much distracted
from housing issues by being the Chief Executive of the Greater
London Authority with Ken Livingstone and then Boris Johnson.
I think I have had a nice long break. Any accusation of continuity
after eight and a half years away would, I think, be misplaced.
Q2 Chair: Let me ask it from a different
point of view. What would you see as the major changes in the
social housing world since you actually were the Chief Executive
of the Housing Corporation?
Mr Mayer: There are two particular
features. One is a welcome focus by government on the needs and
aspirations of tenants. That was relatively peripheral but not
wholly absent in the '90s. The second is that the '90s are always
remembered fondly but remembered fondly on the basis you have
a decade of falling interest rates and rising house prices. The
circumstances of the last eight and a half years I think have
been much more difficult for housing associations to operate in.
It is greatly to their credit that their delivery record so far
has been excellent in more difficult times. Those would be the
two differences for me.
Chair: Can we pick then on the issue
about those more difficult times?
Q3 Andrew George: Can I clarify this?
Do you see the role of the TSA as being one which also considers
the position of those with shared equity packages as well? After
all, they are tenants. Is that right?
Mr Marsh: It is right. The Act
defines our responsibilities quite carefully. It is quite complex.
For all registered providers—which includes registered social
landlords from day one and in due course new private providers,
ALMOs and local authorities—we reckon across our activities
the standards that we shall set will apply to both social rented
tenants and the tenants who have a tenure through the Low Cost
Home Ownership (LCHO) route. The only LCHO tenants that we will
not have a regulatory responsibility over are those tenants who
are provided with an LCHO home by the Homes and Communities Agency
(HCA) via a provider that is only managing LCHO homes and not
social rented homes. In a nutshell, provided the providers are
managing rented homes, they will be regulated for their rented
homes and their LCHO homes. It is only where the provider only
owns the LCHO homes that they fall outside our purview.
Q4 Andrew George: In that case, your
remit is rather wider than perhaps a lot of people may consider,
given the fact that there will be a lot of people who are effectively
owner-occupiers. I wanted to find out, given the straitened times
which we are in and that face us in the coming months at least,
what role you see the TSA playing in minimising the impact of
the credit crunch on tenants and also perhaps maximising the opportunities
to expand the stock and improve the conditions for them?
Mr Marsh: This is where the relationship
between the Tenant Services Authority and the Homes and Communities
Agency is quite critical. I think that the credit crunch has two
broad impacts on the tenants that we have regard to. The first
is the four million households, 10 million people, who currently
reside in social residential accommodation for whom there are
now difficult choices between, to put it bluntly, heating and
eating and where issues around the cost of occupation, not just
the cost of rent but the cost of fuel bills, is one of the concerns
of many tenants. When we come to consider our new rent standard,
working with the Department for Communities and Local Government
in the direction of that standard, I think one of the things we
need to consider is not just the cost of rents but the cost of
living in a home and fuel bills as well. The Homes and Communities
Agency is the investment body and through that Agency the Government
will aim to expand the number of homes that social housing landlords
operate. You will be aware of the recent announcements in relation
to the extension of the homebuy product and the encouragement
of RSLs to purchase homes. Here what matters is the right property
in the right place for the right price, so that we are not just
purchasing properties because they are available now but we are
thinking about the long-term maintenance and the management of
those properties for years to come.
Q5 Andrew George: In terms of the
tenants, including those with the shared equity product which
they are working with, what can you do, given the difficulties
a lot of them are going to face over the coming months, to assist
them through the problems which they are going to experience when
they face unemployment or a downturn in their own prospects? What
can you do to help them? The Government has announced various
packages to assist. Is there anything that you can do and have
you spoken to the Government and the Agency staff about that?
Mr Marsh: Yes, we have discussed
these issues with the Agency and the Government staff. The week
before last I was at a meeting with the Council of Mortgage Lenders
and Iain Wright MP on the issue of home ownership and the lack
of liquidity in the mortgage market. I think the TSA has a relationship
in encouraging the supply of investment funds by the lending sector.
We are regularly in liaison with the CML about making sure that
the concerns about liquidity are not overstated and that housing
associations can continue to borrow and fund new development for
both rental and LCHO. Also, Anthony and I are discussing tonight
with a group of RSL chief executives their role in providing reverse
staircase opportunities so that where people find themselves in
difficulties with their mortgage payments, they can switch to
a higher proportion of rent. We think that is exactly what RSLs
should be doing and that it is a proper response to the current
market situation.
Mr Mayer: At the end of the day,
it is the housing association that is the landlord, not us. On
the other hand, I think critical in our new role is going to be
listening to tenants and finding out what their concerns are.
To the extent we can then listen to those concerns, we can be
in a very powerful position then to talk to housing associations
to address the concerns raised with us. One could very easily
get the best of all worlds; the landlord would still remain the
landlord but have a new ally in us.
Q6 Andrew George: Bearing in mind
that the RSLs are now being encouraged by the Government perhaps
to take great risks to buy private sector accommodation, (one
hopes it is up to the standard), is there not a question there
in your mind and in the discussions you are having about whether
the RSLs themselves are extending themselves to a point where
they are putting tenants at risk?
Mr Marsh: It is a very good question.
We are certain that the TSA needs to be a new organisation with
tenants at its heart. However, in a year's time, if we have a
situation where a number of landlords find themselves in an insolvency
situation and their stock is sold in a fire sale situation and
homes become sold on the open market that were originally designed
for rent, nobody will thank us for any work that we have done
on the standards framework. We are absolutely certain that governance
and viability in the sector are the bedrock of good regulation.
We inherit from the Corporation a revised set of systems and a
far more proactive approach to monitoring the risk of individual
associations, and it is fair to say that there is a number—not
a large number but a number—of associations whose business
plans and cash flow forecasts are much tighter today than they
were a year ago. We are absolutely clear to the boards and management
teams of those bodies that the long-term viability of their organisations
matters more than being able to respond to speculative opportunities
in the private market today.
Q7 Chair: On that point, have you
learnt the lessons from the collapse of Ujima?
Mr Marsh: We have spent a long
time looking at what happened with Ujima. There is a number of
lessons that the independent report by Simon Braid drew out. For
me, the most important lesson was that the new regulator needs
to be hearing the issues that tenants are raising early in the
day. I was personally quite surprised, having spent Christmas
working with lenders, local authorities and London councils, how
few tenants complained to the Housing Corporation in January following
the transfer of Ujima to London and Quadrant. I was very surprised.
I went round a number of estates in south and north London talking
to tenants. Their general message back to me was: we wish you
had acted earlier. I think number one: if we are listening to
tenants' complaints and concerns earlier, we will get in there
more quickly; and, number two, I think every situation when an
organisation faces cash flow difficulties is different. It is
difficult to generalise from their circumstances. Yes, we have
begun to develop a cab rank, if you like, of organisations that
would be ready and willing to step in if a similar situation took
place. We are also scenario-testing what would happen if a larger
organisation faced difficulties and there was not a single organisation
able to step in and help them out in that situation. So being
able to respond to a variety of different events that may or may
not take place in the next 12 months is what I think you need
TSA to do for you.
Q8 Emily Thornberry: Can I ask some
more questions about the credit crunch because I am particularly
interested in expanding that base and housing associations being
in a position where we can extend the number of people who are
renting from social landlords. You explained at the outset that
there were difficulties during the boom period for housing associations.
Is it a naive question to say that during the time of the downturn
in the economy this should be your time and that in fact there
should be plenty of opportunities for you to be able to build
more? Is it right that housing associations need the Government
to look again at the formula for funding building of housing association
properties outside the Section 106 agreements?
Mr Marsh: Let me pick up a couple
of issues in response to your question. Firstly, I think we all
recognise that there is a strong reliance on Section 106 within
housing today. Something like 50% of the Housing Corporation's
programme and therefore 50% of the programme that goes into the
HCA is derived from Section 106 sites. It is very difficult to
see how housing associations themselves can meet and fill that
gap, but, having said that, they are in a strong place. In our
view, housing and in particular investing in housing for rent
is one of the safest places that money can be lent to today because
the rents are fixed; two-thirds of the rents nationally are paid
by the Department for Work and Pensions in the form of housing
benefit; and the value of the homes in the open market is often
twice the value they are held in book and balance sheets. It is
a safe haven for investment. There is an issue in the current
model of housing association grant funding that has seen a reliance
on shared ownership sales and a cross-subsidy from shared ownership
to fund rental property development.
Q9 Emily Thornberry: On the assumption
that that is not going to be as buoyant as it was before, my question
is: do we need to look at that formula?
Mr Marsh: I have said this in
conversations with Sir Bob Kerslake: I think that we need to look
at the formula. It is not just a question of the percentage of
the grant rate; it is a question of what else is happening. One
should see land prices coming down in a downturn and if we avoid
too much competitive speculation then a feed through of those
land price reductions should help the total cost of development
to come down, too. Is there a case for increasing the proportion
of subsidy that goes into rent, recognising that profits from
LCHO are not flowing through? Absolutely, there is a case for
that. I think there is a case for looking at new ways of funding
LCHO, perhaps using equity devices that were originally suggested
two or three years ago by the Corporation. That is a conversation
that we will have. Ultimately, these are HCA policy decisions,
not TSA decisions.
Q10 Emily Thornberry: I know. I still
want to you to stick your oar in. On the Government's target of
70,000, if the formula is not changed, how many are we going to
get?
Mr Marsh: I do not think it would
be the place of the TSA to speculate on that.
Emily Thornberry: Go on!
Chair: Emily, I think we should try to
stick to what the TSA's role is. One of the issues is quite what
the TSA role is as opposed to the HCA.
Q11 Mr Betts: This is about the relationship
between the HCA and the TSA. Quite rightly, you are going to need
to make sure there is caution around about allowing development
by an association which may have potential liquidity and financial
problems. What I have never seen in the past is any link between
giving the go-ahead for associations to develop whose track record
in management might not be very good, even though that responsibility
has been passed to one organisation, the Housing Corporation.
It seems to me that development grants have gone out to associations
whose track records in management was, quite frankly, pretty awful,
yet you kept saying to them, "Well carry on and build more
homes" and the management has been as bad as it has been
in the past. How are you going to deal with that?
Mr Marsh: Let me make it clear
again that TSA is a brand-new organisation. We have a duty to
make judgments in a whole number of different areas. One area
we make a judgment on is the extent to which landlords are fully
engaging and offering their tenants an opportunity to be involved
in the management. The second area in which we make a judgment
is the quality of the services that people provide on a day-to-day
basis. It is my view that in the housing world—both I would
suggest across local authority and RSLs—the sexy end of
the business has been development and actually on an annual basis
in England £15 billion is spent on running landlord businesses[1]
and £8 billion is money spent on maintenance. There is no
relationship between the cost per home of management and maintenance
and the satisfaction that tenants get from that management relationship.
In fact, although this is not statistically sound, there is a
negative correlation, which suggests poorer managers spend more
per home and provide worse services. To answer your question directly,
one of the powers in the Act allows the TSA to direct the HCA
not to fund a provider. I think that has to be in relation to
whether that funding may jeopardise the long-term viability of
that partner, and we do not want new development to jeopardise
the security of existing tenures; and, secondly, if the partner
is unable to provide the sorts of service that is to be expected
from the management and maintenance perspective, we do not believe
they should be allowed to grow their stock until they have sorted
their bread and butter bit out as well.
Mr Mayer: It is much to this Government's
credit that the focus is on tenants and that within the next year
we will issue what we call our Standards Framework—standards
that we expect associations to achieve—which will include
a quality deal given to tenants in terms of housing management.
If the association fails to meet a management standard and shows
no intention or ability to meet that standard, that will now trigger
a regulatory action by the TSA. That was a world that the Housing
Corporation never lived in. I am looking forward to a step change
in the area you are concerned about.
Q12 Sir Paul Beresford: To turn it
on its head, there is a theory out there amongst those who you
are regulating that you are going to be another heavy-handed organisation
with lots of targets and regulations and you are actually going
to cost the people being regulated quite a lot of money to do
a job that could be done very lightly and gently. Can you comment?
Mr Marsh: I am not an advocate
of light touch regulation. I think I have been quoted as saying
that light touch regulation was fashionable in the last decade;
it is no longer fashionable. What I am a keen advocate of is proportionate
regulation. I am telling boards, and Anthony and I are giving
the same message when we go round and speak to boards and to executives,
that if you are an organisation that has a healthy balance sheet
and a viable business plan, if you are an organisation whose management
costs per home are reasonable, and if you are an organisation
that has good governance and whose tenants are satisfied with
the deal, you should not see TSA from year to year. Yes, we need
to collect from you information to form that judgment, but the
information that we need to collect from you should be no different
from the information you need to collect yourself to run a decent
business. If we take that approach, that means that the 250 or
so staff we inherit from the Corporation and the additional staff
we may need to recruit to regulate across the domain as well should
then be focused on where we need to spend our time, which is addressing
poor performance, viability, engagement or customer service. Absolutely,
I agree that those who can run their business effectively should
not have a significant regulatory burden. Where they cannot do
that job well—and I think we may be some years off achieving
everybody doing that job as well we would like them to—we
need to take action in proportion to the risks that we see.
Q13 Sir Paul Beresford: If you are
the regulatory advocate of the tenant, I have two questions for
you, particularly during the credit crunch. One expects the Government
wants there to be a big expansion of developments and there are
a lot of erstwhile tenants coming along. You said in answer to
an earlier question that there has to be the right property in
the right place. How are you going to ensure, on the basis of
your own intelligence of where the need is, that it is both the
right house—in other words not below the standard, a sort
of ghetto house, something which is a decent home—and, secondly,
in the right place? How are you going to do that? What role do
you play in making sure that the developments take place in the
areas where the greatest need is?
Mr Marsh: Let me answer the second
part first and then come back to the first part. It is the role
of the Homes and Communities Agency to determine whether investment
takes place and where, in partnership with local authorities;
it is not the role of the TSA. What we will encourage is that
an association develops a plan that responds to local needs and
that they work with the Agency in that regard. That clearly is
an HCA term. On the issue of standards, though, the Act allows
us to set standards of development and standards of accommodation
for existing supply. It is our view that we should adopt the same
standards which the HCA should adopt so that all homes being built,
whether they are grant-funded or otherwise, comply to the same
standards. I observe the comments that Sir Bob made at the NHF
conference around the difference in the standards required of
certain developers who happen not to be RSLs or local authorities
and private sector developers in relation to carbon performance.
If we can address that issue and achieve a common set of standards
across the house building industry, that would make the HCA's
and the TSA's job more easy.
Q14 Sir Paul Beresford: Can I be
clear on the issue of your role representing the tenants, you
do not have any regulatory role in representing those who are
latent tenants or erstwhile tenants, those who are on the waiting
list waiting to be re-housed. You do not see yourself as having
any kind of role in advocating as a regulator on their behalf
to ensure that their needs are met in the system?
Mr Marsh: I'm sorry if my answer
was misleading. I do not think it is our role to direct where
the Agency expends its money or to direct an individual association
in which street and which borough they should be building new
homes. But, do we think that our role includes thinking about
the other five million households who would like to be in social
rented housing or who would like to be in home ownership but cannot
afford to be in home ownership, either because of their income
levels or for other issues? Absolutely, we think we have a role
in relation to thinking about their needs as well. When we are
talking about championing what tenants want, it is not just about
housing those who are already inside the stock; it is tenants
who would like to be inside the stock too. When we come to designing
standards around the rent regime and tenure issues, I think there
is a big discussion to be had about what devices might be used
to meet unmet need in the future, too. These are early days and
they, the standards, do not yet quite exist.
Mr Mayer: There is a debate to
be had, addressing the point, as to whether or not we turn the
clock back a bit, and if there is support for it, certainly we
can help, and that is getting employers more involved in the provision
of housing for employees. I personally think it is a great pity
that hospitals and the police have cut back on the accommodation
they were providing directly. I think there is an area there that
we need to debate about the employer-led housing associations.
We need to be much more imaginative in terms of addressing the
erstwhile tenants than we are at the moment.
Emily Thornberry: I would like to go
back to good governance and tenant satisfaction. I had a survey
within my constituency of housing association tenants. There were
a number of things that were quite remarkable. The first was the
simple question: who knows the most about your estates and who
knows the least? Who has the most power over your estates and
who has the least? We all know what the answer was. That disconnect,
it seems to me,—
Chair: What was the answer?
Q15 Emily Thornberry: The tenants
know most about their estates and they have the least power and
housing associations know very little but have the most power.
It leads into the problem, I think, which is: when you are assessing
a housing association's performance, if you assess it simply,
in talking about standards and good governance, and you look at
the national level or even on a regional level, you can be overlooking
another thing which came out of my survey. We then did a poll
asking people how satisfied they were about living on their estate.
The same housing association appeared at the top of the poll and
at the bottom of the poll because the worst estates were being
run by the same housing association running the best estates.
That was of little help to my constituents living in estates where
the housing association on that estate was not listening to a
single word they said, spending huge amounts of money on an estate
that would continue to be managed in the most appalling way. What
is your role going to be in being able to sort that out on much
more localised estates? Having a tenant on the board of a housing
association may in some ways fulfil some sort of function, but
it does not address the very localised problems that we, as constituency
MPs, come across all the time.
Mr Marsh: I should probably declare
that I spent four years on the EC1 New Deal Board when Bishop
John Sentamu was the Chair and I am familiar with the concerns
that tenants have around the difference in performance between
one estate and the next, which is often more to do with architecture,
design, management and maintenance then it is to do with a standard
approach to engagement across an association. I do not believe
that a single statement on service delivery for an organisation
that is managing 50,000 homes or so across England can ever fairly
represent the divergence of good and bad that will exist within
that organisation. It comes back to the question Sir Paul Beresford
asked of me in relation to the information being collected. If
a landlord does not know the difference between a block at one
end of Finsbury and a block in Islington, then in my view they
cannot be doing their job properly. Housing is a local service.
You need to know how people locally are feeling. The best way
of finding that out is to engage your tenants and listen to their
feedback. That is why I think the TSA standard, that we have not
yet developed but we will be consulting on with tenants from January
2009, on tenant engagement needs to go far beyond the rather sterile
debate about tenants on boards. I think tenants on boards are
a damn good thing. My message to chief executives who question
why that is a good thing is: I think you may be in the wrong industry.
I also believe that we need to make sure that we are recruiting
people with the appropriate skills to be on boards, not just the
token tenant. I would challenge any association to tell me they
do not have residents in their homes that do not have the necessary
skills. It is not just about tenants on boards. It is about the
local engagement with the tenants forum on each block; it is about
tenant-led inspections; it is about giving tenants more power
and choice over the management that makes the contracts that are
being delivered on their behalf with their rent money.
Q16 Emily Thornberry: It is good
localised management which is the problem. Good localised management
comes not least from listening to tenants. Where I have constituents
who have been suffering for years prior to localised management,
will they be able to come to you and will you be able to help
them? They come to me and I am not always able to help.
Mr Mayer: If we get this right,
we will move from an era of approaches, resource-consuming generic
fishing expeditions, to actually regulation which addresses issues
raised. The onus is going to be on tenants themselves or groups
of tenants to express their concerns to us. If the issue is flagged,
our whole approach would be to go back to the association saying,
"We have this issue. What are you doing to address it?"
If they say, "We are addressing it. We are doing X, Y, Z",
that is fine by us and we will walk away. If they are not, if
we are not satisfied, then we will take regulatory action. I think
it is much more focused.
Q17 Emily Thornberry: What will you
be able to do?
Mr Marsh: The new Act gives us
a whole new set of graduated powers. It will start off with an
improvement notice; it will go through the enforcement notice—
Q18 Emily Thornberry: At an estate
level?
Mr Marsh: At estate level and
ultimately if a set of tenants on a particular estate is not satisfied
with the performance of their landlord, the new tenant triggers
will allow the TSA to move the management of that estate to another
landlord. Being able to move the management without having to
move the ownership—we have had experience of it with the
ownership and it is a very long-winded and complicated legal process—should
be a far more effective and speedy tool. I think any provider
who is providing a bad service locally should be reviewing how
they are managing and monitoring that because I know those tenants
through the National Tenant Voice (NTV) and through TAROE and
TPAS will be shouting to us as soon as they can about their desire
to achieve the sorts of management that their neighbours on neighbouring
estates enjoy.
Q19 Jim Dobbin: I was interested
in Mr Marsh's comments about the quality of developments and standards
within developments and, because of the credit crunch, the fact
that some small developers have either stopped building halfway
through a development or have completed and cannot sell. They
think the Government are encouraging local authorities to have
a look at that to fill the gap in house building. You probably
have not had time to think about this. This may well pose a problem
for you as regards quality of standards for those developments.
I have had personal experience of real cowboy outfits that built
some of these places. Do you think that is going to be a difficulty
for you or is it something you have not considered yet?
Mr Marsh: At the moment, the discussion
around what to do with private development sites that have been
mothballed is HCA and CLG territory. I do not wish to sound like
we do not have an opinion on that or do not care about these issues.
We do, but we are very clear about where the primary relationship
rests. In the past, one of the questions of the Corporation as
a regulator might have been that too much focus was on 40,000
new homes or 70,000 new homes and not the four million homes in
the existing stock. I think the TSA's wider perspective is on
questions around: what are we doing on void management; what are
we doing around homes that have been illegally sub-let; how is
the allocation system operating. Intervention in those areas is
likely to have a bigger impact on the availability of new homes
for people, new tenancies that people can move into. I am not
trying to dodge your question; I am merely trying to give you
an idea of the emphasis of our thinking at the moment.
1 Note by Witness: The £15 billion refers to
both LA and RSL spend. Back
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