By Carl Makin

The long overdue Social Housing (Regulation) Bill continues its path through parliament. It has been subject to a significant number of, mainly technical, government amendments, caused at least in part by the seemingly frenetic state of drafting.

The bill has a chequered history and forms part of the government’s lethargic response to the Grenfell Tower fire in 2017. The bill is not a revolution or a ‘charter’ for social housing tenants. More accurately, it is a consolidatory piece of legislation that solidifies the role of the Regulator of Social Housing (RSH) after over a decade of political upheaval.

Solving the regulatory gap

The formal regulatory landscape for social housing consists of two key bodies: the RSH and the Housing Ombudsman. In practice, the regulator issues and enforces standards relating to provider-level issues and focuses on ‘systemic’ failures in governance and financial management. By contrast, the Ombudsman adjudicates in cases of complaints made by tenants against their landlord and does so in line with its complaint handling code.

This systemic-individual bifurcation does not, however, arise from a specific statutory distillment of their responsibilities. Instead, it comes from a pragmatic interpretation of their governing statutes and their roles within the sector. This was solidified in the form of a memorandum of understanding between the two bodies, first agreed in April 2017 and updated in September 2020 to reflect the beefing up of the Housing Ombudsman’s scheme.

Since at least 2012, the regulator has taken a very limited role in the ‘consumer’ regulation arena – including issues relating to health and safety, housing quality and tenant involvement – due to amendments made to its governing statute by the coalition government in 2011. These amendments were made in a period of political turmoil at a time when the previous regulator, the Tenant Services Authority, was closed down and ‘toasted’ in the ‘bonfire of quangos’.

Since 2012, the ‘systemic issue’ test invented by the regulator, coupled with the condition that it can only use its powers if it is satisfied that a failure to do so could or will result in a ‘serious detriment’ for social housing tenants, have been cited as key drivers of the regulator’s lack of intervention in this space. Indeed, a recent inquiry conducted by the Commons LUHC Select Committee concluded that:

The application of this ‘systemic failure’ test has resulted in perhaps the most passive consumer regulatory regime possible under the Housing and Regeneration Act 2008.

This passivity, the committee suggested, has “opened up a clear and worrying gap” between the regulator and Ombudsman’s remits.

The bill does attempt to deal with the relationship between these two bodies. It introduces a new measure into section 100H of the 2008 act to place the existing memorandum of understanding on a statutory footing and renews existing duties to co-operate in the exercise of their functions. However, as the two bodies are unshackled from what they perceived as the previous statutory or political constraints on their powers, there is a possibility for overlap and potential confusion for tenants looking to escalate their concerns. At committee stage in the Lords, Lord Young of Cookham argued for a clearer demarcation to be developed within the bill to avoid “mission creep” and the emergence of any gaps in their remits. He suggested that the bill, as it stands, leaves the “potential overlap and duplication to the good will of two individuals”.

Clearing up the statutory relationship between these two bodies is not just important in the name of efficiency; it is also important to ensure that tenants’ complaints do not fall between the cracks. It is arguable that the relationship between these two bodies and enabling their powers to mesh together seamlessly is where the real missed opportunity within the bill lies. The bill enables the Ombudsman, when investigating a provider whose policies or practices “may give rise to further complaints about that matter”, to “order the member to review their policy or practice on that matter”. This, of course, relates to situations where the Ombudsman has found an issue that extends beyond the presenting individual complaint which may, potentially, relate to a wider failure in governance within the organisation. It seems remiss here that it does not include a duty to refer such issues to the regulator, when the Ombudsman has itself already recognised the need to do so.

The potential for divergence between these organisations is also illustrated by what seems to be a disconnect in the enforcement framework as it exists between the Ombudsman and the regulator. The secretary of state can authorise the Ombudsman, through secondary legislation, to apply to a court or tribunal to enforce its determination as if it were a court order. Any failure to implement an Ombudsman determination would also point to wider issues within a social housing provider, and the 2008 act cites failure to comply with an order of the Ombudsman as a ground upon which the regulator may issue an enforcement notice. However, the bill and the existing memorandum of understanding between the two bodies is completely silent on the point at which the Ombudsman should refer such non-compliance to the regulator and how the regulator will deal with and take enforcement action against such a provider.

Concerns relating to a potential overlap of responsibilities seem misplaced in a system where there are currently chasm-like gaps between the two key regulatory bodies, but the bill ought to have done more to bring together the powers, remits and roles of the regulator and Ombudsman to create a more coherent regulatory landscape, fit to deal with the concerns and complaints of social housing tenants.

A consumer regulation charter?

For tenants, one of the most potent measures introduced by the bill is the removal of the ‘serious detriment’ test. This threshold was introduced by the Localism Act 2011 to restrict the role of the regulator in ‘consumer’ cases. In setting out its approach, the regulator has made clear its view that this is a high bar to reach:

In defining serious detriment, it is clear that the threshold for regulatory intervention is intended to be significantly higher than that in relation to the economic standards. Failure to meet one or more of the consumer standards does not in itself lead directly to us reaching a judgement of serious detriment. We consider that the meaning of serious detriment is when there is risk of, or actual, serious harm to tenants.

The removal of the serious detriment test does, therefore, represent a step change within the current regulatory settlement. However, in the wider context of social housing regulation, this simply returns the powers of the regulator to their position when the 2008 act was introduced. The regulator is yet to publish any substantial detail on how this new ‘proactive’ consumer regulation regime will operate, and there are broader concerns as to whether the regulator’s assurance and governance-led approach, reliant on enforced self-regulation (termed co-regulation), will be sufficient to effectively detect and deal with non-compliance in an increasingly diverse sector. Added to this is the question of resources amidst calls in central government for the stripping back of civil service staffing. This issue was raised by Matthew Pennycock MP in a Commons debate back in June 2022:

…it is almost certainly the case that the social housing regulator will be unable to act on the volume of individual tenant complaints it will receive, and that it will be inadequately resourced to perform its new inspections role.

The other key pillar of the altered regulatory settlement introduced by the bill is the introduction of new information and transparency requirements enabling the regulator’s existing plans to introduce tenant satisfaction measures (TSMs). The government suggested that this change, coupled with the publication of Ombudsman determinations, will create a “a regulatory regime and a culture of transparency, accountability, decency and service”. Part of this cultural change involves empowering tenants to hold their landlords to account. Yet this idea is inherently problematic, as was recognised by Professor Martin Cave in his review of social housing regulation back in 2007. He argued that:

Part of the reason why the social housing domain exhibits so many signs of failure is because of the unintended or unavoidable consequences of deeply embedded structural features.

Some of the key structural features he refers to are the lack of any substantial representation of tenants at a national policy level and the fact that regardless of how unhappy tenants are with their provider, there is no option to choose another. These deep structural features mean that superficial empowerment techniques such as performance measures do not empower tenants. They may have external power if they are triangulated by other bodies such as lenders or used as mechanisms for peer pressure amongst providers. Alone, these measures do not represent any transfer of power or the ability to blow the whistle for tenants, and instead mark a continuation of the regulator’s name-and-shame performance management approach to regulation. In fact, they are remarkably similar to provisions originally contained in the 2008 act requiring the annual publication of performance information, but, again, this was repealed by the Localism Act 2011.

Taken together, these measures do not amount to a charter for social housing residents. They represent a return to a sensible and proactive consumer regulation regime, but their full effect will not be felt if wider structural and cultural issues are not dealt with.

Strengthening the regulator’s hand

The regulator’s approach has been fundamentally shaped by several key events over the past decade, such as the near collapse of riskier providers and wider crises such as the Grenfell Tower fire. However, since government efforts to deregulate the sector in 2011, the regulator’s remit has not seen a significant revision. This bill changes that position, but rather than introducing swathes of new powers for the regulator, it consolidates the existing regime and provides a sure footing for the regulator to exercise its powers.

Since 2011, the sector has changed remarkably. A trend towards consolidation, often driven by financial rather than service considerations, has significantly reduced the number of providers, and mergers have formed large, conglomerate housing providers. Since 2008, for-profit providers of social housing have also been able to register. The bill deals with the growing diversity of the sector and attempts to future-proof the regulatory regime. Some of these issues were picked up after the initial draft of the bill was published, such as the fact that LLPs were omitted from the accounting requirements. Nonetheless, there is a palpable sense within the drafting of the regulator trying to get on the front foot as it appreciates that new for-profit and more diverse provision has the potential to qualitatively change the voluntary and almost altruistic bedrock that has historically underpinned social housing.

Rather than relying on its formal enforcement powers, the regulator depends on a networked web of accountability, whereby it assesses and grades how well providers are governed and financed. If providers fail to comply with the regulator’s standards, or the regulator loses confidence in how they have managed their affairs, they are downgraded or subject to regulatory notices. The power of these measures lies in their ability to affect the views of third-party stakeholders. A non-compliant grading can make it harder for housing associations to secure funds from lenders to cover day-to-day expenditure, repairs or future property development, and can have wider reputational issues for the organisation or those executives in charge of seemingly underperforming providers. For local authorities, a regulatory notice can alert executive members or local councillors to failures within their housing function.

Where the regulator downgrades a provider or issues a regulatory notice, its usual route is to secure a voluntary undertaking from that provider to map out a pathway to compliance. The bill, leaning into this performance management approach to regulation, adds an intermediate option: the performance improvement plan. This new measure empowers the regulator to impose a roadmap to compliance on a provider and adds failure to comply as a ground for issuing an enforcement notice under the 2008 act. Here, again, we see the bill being used as a statutory conduit through which the regulator finesses its current approach.

Much fuss has been made about the powers introduced in the bill which enable the regulator to enter properties to conduct a survey without a warrant and with only 48 hours’ notice – termed “Ofsted-style” inspections by Michael Gove. This power is not entirely new, as the regulator is already able to enter properties with 28 days’ notice to conduct a survey. Unless the regulator’s approach to engaging with providers shifts significantly, these powers are likely to sit untouched on the statute book. The regulator has scarcely, if ever, used its powers to enter properties to conduct surveys. Its approach instead relies on seeking assurance from a provider that they have conducted those surveys and then carrying out a desktop assessment of the relevant reports and follow-up actions.

A connected and eminently sensible change in the bill enables the regulator to take emergency remedial action following a survey. This addresses an obvious gap in the 2008 act’s powers, whereby the regulator could conduct a survey and produce a report but was not empowered to address any immediate issues. However, here again there was a missed opportunity to deal with a gap in the overall regulatory architecture. The Ombudsman will naturally be dealing with individual complaints of the nature contemplated by this clause relating to maintenance and safety but will not have any powers to take emergency remedial action itself. Given that the threshold for the regulator’s use of this power is “imminent risk of serious harm to the health and safety of the occupiers”, surely the bill ought to have included some duty for the Ombudsman to escalate issues that it comes across that meet this high bar. Added to this, the bill is completely silent on any connection between the regulator’s survey of properties and any hazards identified that may be of interest to local authorities given their powers under Part 1 of the Housing Act 2004 and the Housing Health and Safety Rating System.

Bringing it all together

On analysis, the bill is clearly not the ‘charter’ for social housing residents that it set out to be. It contains some provisions that may, if applied correctly, make a measurable difference to those who live in social housing. Nonetheless, it is more accurately described as a consolidating piece of legislation in which the RSH has finally neatened its governing statutes and given itself a cleaner legislative slate upon which it can oversee the sector. The bill does not give the regulator a great deal more teeth, but it might give it more comfort or confidence in exercising its powers. This is an important step for an organisation that has, for the last decade, cited its legislative framework as a significant constraint on its activities.

Nevertheless, five years on from Grenfell, this bill is a disappointment. It lacks the ideas and inspiration that sat behind visions of a shift in power and quality embodied in the Housing and Regeneration Act 2008. The bill is not just a case of reinventing the wheel: it represents a failure to learn from the gaps that have troubled tenants in the regulatory system since at least 2011 and a failure to deal with much deeper, historical issues that have disempowered social housing tenants. The powers of the RSH and the Housing Ombudsman must fit together neatly and work in tandem because failure to achieve this will mean that social housing tenants’ complaints continue to fall between the cracks.

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This material was first published by Thomson Reuters, trading as Sweet & Maxwell, 5 Canada Square, Canary Wharf, London E14 5AQ, in Journal of Housing Law as “Not a Bang, But a Whimper: The Social Housing (Regulation) Bill” [2022] J.H.L. 116 and is reproduced by agreement with the publishers. For further details of Journal of Housing Law, please see the publishers’ website: http://www.sweetandmaxwell.co.uk.”