What a new regulatory regime should look like

By Alistair McIntosh, Chief Executive, HQN

You know that the direction of regulation will be changed within days. Of course, the details will follow on at some point. Here’s what the Council for Mortgage Lenders had to say the last time we looked at this four years ago. I want you to read every word of it and just let it sink in.

“We support the HCA’s rationale for reviewing how the Regulatory Framework protects social housing assets. The increasingly diverse activity undertaken by providers to develop a wider range of housing tenures and generate capital to support further development of social housing inevitably increases risk and complexity in the sector. The recent failure of the Cosmopolitan Housing Group brought these issues into sharp focus and the HCA’s implied lack of confidence in the current arrangements underlines the need for change. We believe it is also important that the viability and governance of providers is robustly but proportionately regulated to maintain the confidence of lenders and investors. We believe that the proposed review is focusing on the most appropriate elements of the framework at this time.”

Where do you begin with this self-centred tripe? And more importantly why would you listen to such a conflicted bunch? Surely you would try and balance it. No one did. The money lenders called the shots.

So, what do I hate most about what they had to say? Is it that they focus on the collateral not the people? Maybe it’s the cynical use of Cosmopolitan as a pawn in their wider game? I’ll tell you what it is. It’s the confident claim that they are the bosses. It is not so much a policy submission as a dictated set of orders. And they got everything they asked for. Even in the darkest days of austerity we could have spent more time on the human side of regulation. When we were checking covenants, we could have been checking more important things or at least arriving at a better blend of activity. A period of silence from the CML and their acolytes would be welcome.

Here’s a first go at what a new regulatory regime should look like:

  • It would cover all rented homes (in the real world private renters and social tenants live in the same streets and the same blocks and face the same issues)
  • It would place a duty on leaseholders to co-operate on and pay for safety works (it is insane to look at safety only in the rented homes – we need to wake up to the fact that the right to buy happened)
  • Safety would move to the top of the agenda with a new mindset (the way in which we relentlessly scan and stress test for financial problems should be applied to safety)
  • It would listen to and act on tenant’s views especially where there is a shortage of rented homes and they have no consumer power (maximising the use of social media – but recognising the fact that the top end of the market sorts itself out so it doesn’t need us)
  • It would ensure that a cadre of professionals, such as clerks of works and fire risk assessors, are trained and ready to nip problems in the bud (these people would have direct access to boards and cabinets)
  • Yes, it would safeguard the money and look after the interests of lenders – but not as a sole or all-consuming duty.

Tenants and politicians of all hues are getting angry with us. Yes, you can say some of this is wrong and misplaced. At the CIH conference the lawyers are calling for calm until we know what happened. And I can see where they are coming from. But we do know only too well that some things have got to change. I’m not at all interested in recriminations, I just want to see us move quickly to do all we can to stop any more accidents. While all this is going on the housing shortage is still with us. We must build more homes. But we mustn’t find the cash by cheeseparing on the homes we have.

Do you think I am being too harsh on the CML? Let me be crystal clear this not an attack on capitalism. But it is a punch square on the jaw of its unacceptable face. There is a better way of going about things. This is from the Association of British Insurers’ submission on this year’s housing white paper. “Fire safety is of upmost importance when building new developments. When building new properties, particularly when extending upwards, fire safety management, compartmentation, panel system construction, combustibility and fire performance of panel material as well as fire mitigation systems all need rigorous regulation. Modern methods of construction have led to an increase in the use of lightweight and combustible materials, such as insulation panels and timber frames, which can contribute to a greater degree of fire spread.” Now this is the sort of voice we need to listen to. You can bring together the interest of business and the public – it doesn’t have to be one or the other.