4.The Draft Legislative Reform (Regulator of Social Housing) (England) Order 2018 was laid before the House on 28 February 2018 by the Ministry of Housing, Communities and Local Government (‘the Department’). It was accompanied by an explanatory document. The Department has also provided the Committee with a copy of responses to the 2016 consultation on using a Legislative Reform Order to establish the Regulator as a stand-alone body.
5.The Order is intended to be made under section 2 of the Legislative and Regulatory Reform Act 2006 (‘the 2006 Act’), which allows a Minister to make provision by order to promote principles of better regulation.
6.The Minister has recommended that the draft Order be subject to the affirmative procedure. The House of Lords Delegated Powers and Regulatory Reform Committee has concluded that this proposal is appropriate.
7.The purpose of the draft Order is to separate social housing regulation from the work of the Homes and Communities Agency (‘HCA’, now operating as Homes England), amending the Housing and Regeneration Act 2008 (‘the 2008 Act’) to implement a conclusion of the 2016 Tailored Review of the Homes and Communities Agency.
8.The 2008 Act established a regulator of registered providers of social housing in England. It was amended by the Localism Act 2011, which moved the regulator into the HCA and established a Regulation Committee to exercise the regulatory functions. In its current incarnation, the regulator is required to maintain a register of social housing providers, including housing associations and local authority landlords providing low cost rental accommodation, and to regulate proactively and intervene on private registered providers’ compliance with economic standards, including governance, financial viability, rents and value for money.
9.The 2016 Tailored Review of the HCA found that the creation of an investment function within the agency in 2014, including secured lending in some cases to housing associations and others who are on the regulator’s register, created the potential for conflicts of interest with its regulatory function. The Review noted that “[w]hile there was no suggestion that any conflict has materialised, there has also been no significant test” and that “the complexities of the HCA’s investment role and the regulated sector itself are also likely to increase over time.”
10.If approved, the draft Order will transfer the regulatory functions of the HCA to a new non-departmental public body, the Regulator of Social Housing. The draft Order would not change the powers and responsibilities of the regulator or change the level of independence at which the regulator operates. The Department does not expect this transfer to increase costs to the taxpayer, and the draft Order would enable the regulator to share administrative functions with the HCA without interfering with accountability.
11.In this section, we assess the draft Order against the criteria set out in the Standing Orders of the House. We make no assessment of the policy within the draft Order.
12.There is nothing highly controversial in the proposals and therefore we agree that the draft Order does not make an inappropriate use of delegated legislation and therefore does not raise any issues in respect of this test.
13.The draft Order is made under section 2 of the Act and is therefore not required to be deregulatory. The draft Order does not raise any issues in respect of this test.
14.Under Section 2 of the 2006 Act, Ministers may seek to make changes where the activity is transparent, accountable and proportionate and targeted only at cases in which action is needed. In the explanatory document accompanying the draft Order, the Department has set out its application of these criteria:
By transferring the HCA’s regulatory function to a standalone NDPB, this measure will create a body with exclusive focus on a single set of regulatory statutory objectives to ensure that social housing regulation governance is more transparent, accountable, proportionate and consistent, and better able to adapt to any changes that result from policy or legislative changes.
15.The Department’s consultation on the proposal for the LRO asked respondents whether there was empirical evidence for the proposed change. Of the 35 people who responded to this question, 27 (77 per cent) were unaware of any evidence or did not respond. However, no evidence against the change was provided and we note that the Tailored Review identified and explained the potential risk of conflict of interest between the HCA and the Regulation Committee, and demonstrated that action is required to prevent this. We agree that the regulatory principles set out in the 2006 Act are being complied with.
16.The Department has stated that
The Regulation Committee of the HCA was created by the Localism Act 2011 amending the Housing and Regeneration Act 2008. Those amendments transferred the regulatory functions to the HCA, and it is not possible to transfer them from the HCA without further legislation. It is also not possible within the framework of the 2008 Act to delegate HCA’s regulatory function to a separate entity.
We are satisfied that this test has been met.
17.The Secretary of State for Housing, Communities and Local Government has stated that
It is solely an administrative change–because the statutory powers and functions of regulation are being transferred, there will no change to regulatory operations as a result of the LRO.
We agree that the effect of this Order is proportionate to the policy objective.
18.In considering the balance between public interests and persons adversely affected the Department has stated:
The draft Order will have no negative impact on the public interest as there is no person adversely affected by it. The regulation of registered providers will not be changed as a result of the draft Order.
We agree with the Department that removing potential conflicts and providing more transparent governance are in the public interest. We conclude that this test has been met.
19.The draft Order does not seek to amend the regulatory functions and powers of the regulator. We are content that no necessary protections would be removed.
20.The draft Order does not seek to make any changes to rights and freedoms currently being exercised. We are satisfied that this test has been met.
21.The draft Order makes no proposals to change the level of independence or the ways in which the regulator will function, other than administratively. We agree that this draft Order is not of constitutional significance.
22.The draft Order does not raise any issues in respect of this test.
23.The then Department for Communities and Local Government carried out a formal consultation on the changes proposed in the draft Order between 30 November 2016 and 27 January 2017, including on the appropriateness of using the LRO process to achieve this change.
24.A total of 41 consultation responses were received, with registered providers (who are subject to the regulator) providing 19 of the responses. Lenders, representative bodies, local authorities, individuals and others contributed the remaining 22 responses. 38 of the respondents (93 per cent) supported the proposal to establish the social housing regulator as an independent body and to maintain the current regulatory framework. Respondents who disagreed or did not express an opinion were concerned about the potential cost of a new regulator. The Department has confirmed that
In establishing the Regulator as a standalone body, there would be a need to recruit some additional posts to provide for legal and corporate services resource. However, this would not increase existing Government budgets or increase commensurate costs for the taxpayer. Value for money has been a key principle in shaping the proposal and the Regulator will seek to maximise efficiencies.
25.35 out of 40 respondents (88 per cent) agreed that that the proposal was compliant with better regulation principles, and the one respondent who actively disagreed provided no evidence to support their view.
26.Respondents to the Department’s consultation largely supported the use of an LRO to make the proposed change (30 out of 34 respondents or 73 per cent). No respondents actively opposed the approach. Respondents also used the consultation to make suggestions to Department on the remit and accountability of the Regulator. We agree with the Department that these measures are out of scope of the consultation and the proposed Order.
27.We conclude that the draft Order has been subject to an appropriate level of consultation, and the decision by the Department to proceed with the draft Order has taken account of the responses received.
28.The criteria for consideration of statutory instruments includes Standing Order No. 151 (1)(viii) “that its drafting appears to be defective”.
29.In the final paragraph of the preamble to the draft Order, a reference to section 17(2) of the Legislative and Regulatory Reform Act 2006 has been incorrectly included as a reference to section 14(1) of the Act.
30.Subject to the Department amending this minor typographical error, we are content that this test has been met.
31.The Secretary of State has stated he is satisfied that the proposals are compatible with the legal obligations arising from membership of the European Union. We agree.
32.We conclude that, subject to a minor typographical correction to the preamble, the draft Order meets the required preconditions and tests.
33.We conclude that a satisfactory case has been made in favour of the proposal and recommend that the draft Order be approved using the affirmative resolution procedure.
34.Notwithstanding our agreement, we note that the 2016 Tailored Review stated that “the capabilities of the regulatory function will need to be kept under review.” We encourage the Ministry for Housing, Communities and Local Government to ensure that the Regulator of Social Housing is reviewed regularly and any findings are reported to the House.
7 Department for Communities and Local Government, , November 2016
8 Legislative and Regulatory Reform Act 2006,
9 House of Lords, Unpaid Work Experience (Prohibition) Bill [HL], Draft Legislative Reform (Constitution of the Council of the Royal College of Veterinary Surgeons) Order 2018, Draft Legislative Reform (Regulator of Social Housing) (England) Order 2018, 18th Report of the Delegated Powers and Regulatory Reform Committee, Session 2017–19, , Para 11
10 Department for Communities and Local Government, , November 2016
11 , p4
12 , p2
13 Department for Communities and Local Government, , November 2016, p26
14 , p10
15 Legislative and Regulatory Reform Act 2006,
16 , p6
17 , p10
18 Department for Communities and Local Government, , November 2016, p26
19 , p6
20 As above.
21 As above.
22 , p9
23 , p10
24 , p10
26 As above.
27 , p13
28 Standing Orders of the House of Commons—Public Business 2017,
29 , p7
30 Department for Communities and Local Government, , November 2016, p14
Published: 23 April 2018