Implementing social housing reform: directions to the Social Housing Regulator

Under section 197 of the Housing and Regeneration Act 2008, the Secretary of State for Communities and Local Government is empowered to direct the social housing regulator both to set standards for registered providers of social housing (social landlords ) and to indicate the content of those standards.

Once formally issued, the directions will be binding on the regulator, previously the Housing Corporation, currently the Tenants Services Agency. and shortly to be the Regulation Committee of the Homes and Communities Agency.  Prior to issuing new directions or revoking existing ones, the Secretary of State is required to consult interested parties.

Because of the changes the government is proposing for social housing, some of which are dependent on the passage of the Localism Bill, five new directions are needed for the following areas:

Tenure reform: to allow social landlords to issue flexible tenancies for a minimum period of two years, which the government claims will make better use of existing and future stock. The rights of existing secure and assured tenants will “be respected”.

Mutual exchange: to require landlords to “enable access” to internet-based mutual exchange schemes allowing tenants who want to move the best possible opportunity of finding a match.

Tenant involvement: to strengthen landlord accountability to tenants and support the Tenant Cashback model, which will provide opportunities for social housing tenants to get involved in commissioning repair and maintenance services for their homes.

Rent: to make changes to reflect the introduction of the Affordable Rent model.

Quality of accommodation: to clarify that providers are expected to maintain their stock at a decent level.

The consultation paper contains both the text of the draft new directions and a commentary on them, together with a series of questions on the proposed changes which form the basis of consultation.

The draft new directions

Tenure reform

Tenure reform is probably the most controversial change proposed by the government in that its main plank is to move away from the existing on-going security of tenure for local authority and housing association tenants. The government argues that this will give greater flexibility to landlords and will lead to a more efficient use of the housing stock; the aim is to give relatively short term housing assistance until people are able to afford to move out of social housing. Many commentators have pointed out that the changes may give tenants a perverse incentive not to improve their financial circumstances, given the disruption, for example to children’s schooling, that moving home can cause. Also, it can be argued that better off families moving out of social housing will be detrimental to the overall community well-being.

To implement this change, the Localism Bill provides for a new category of secure tenancy for council tenants, a flexible tenancy let for a fixed period of a minimum of two years.  Flexible tenancies for housing association tenants will be assured shorthold tenancies let for a minimum of two years.  Changes will not apply to existing secure and assured tenants.

Changes to secure tenancies cannot take effect prior to the passage of the Localism Bill, which proposes on tenancy:

  • the creation of a new local authority flexible tenancy with a minimum fixed term of two years with similar rights to secure tenants
  • to provide that all new secure and flexible tenancies include a right to one succession for spouses and partners, while giving registered providers the flexibility to grant whatever additional succession rights they choose
  • to place a new duty on local housing authorities to publish tenancy strategies, to which registered providers should have regard when formulating their own tenancy policies
  • to give the Secretary of State a power to direct the Regulator on the content of a Tenancy Standard.

The tenancy changes and the proposed new direction mark a shift of emphasis away from the cornerstones of the existing direction – community sustainability and security of tenure.  It currently states:

“registered providers shall offer and issue the most secure form of tenure compatible with the purpose of the housing and the sustainability of the community”

“The most secure form of tenure” is a secure tenancy under the 1985 Housing Act for local authority tenants or a periodic assured tenancy under the 1988 Housing Act for housing association tenants.  Both these tenancies can generally only be ended if the tenant commits a fault, for example, failing to pay the rent.

The proposed new direction, whilst still recognising the need for community sustainability, puts this on a par with the needs of individual households and the efficient use of social housing stock. Its proposed wording is:

“that registered providers offer and issue tenancies which are compatible with the purpose of the housing, the needs of individual households, the sustainability of the community and the efficient use of their housing stock”

The mechanism for implementing tenure changes is the requirement that the regulator sets a standard relating to types of tenure and relating to the content of registered providers’ tenancy policies (“the Tenure Standard”). This will require registered providers to specify the types of tenancy they will issue, the length of any fixed term tenancies, and the circumstances in which tenancies may or may not be reissued at the end of a fixed term. It covers also appeals against a decision on tenancy, policy on vulnerable tenants, and advice and assistance to tenants whose fixed term tenancy is not being reissued.

The Tenure Standard also stipulates that a fixed term tenancy should be for a minimum period of two years and should be in addition to any probationary tenancy period. Probationary tenancies will be for a minimum period of 12 months with the possibility of extending to 18 months in certain circumstances.

The Tenure Standard will also provide that existing tenants who choose to move to social rented property, unless it is an Affordable Rent home, will be given a tenancy for their new home which is no less secure than their previous tenancy.

The first consultation question asks whether the draft direction on tenure sets out the relevant factors that registered providers should consider when deciding what type of tenancy they should offer and issue; it is suggested that it could be made more explicit that vulnerable tenants will not be offered on a fixed term tenancy.

The second consultation question asks whether the draft direction sets out the right minimum requirements for a registered provider’s tenancy policy; subject to the reservations on vulnerable tenants, the answer is yes.

The third consultation question asks whether the draft direction sets out the right minimum protections for tenants of registered providers. For an existing tenant who is seeking a mutual exchange with a tenant on a fixed term tenancy, the position post exchange needs clarification. The current situation is that, following a mutual exchange, each tenant takes on the other person’s tenancy; this does not chime with the guarantee that a tenant choosing to move will not lose their existing security of tenure.

Mutual Exchange

In line with the government’s intention to establish a nationwide mutual exchange scheme, the Localism Bill provides a power for the Secretary of State to direct the regulator on the content of a standard for registered providers on “methods of assisting tenants to exchange tenancies.” The draft direction will require all social landlords subscribe to one or more internet-based mutual exchange schemes to enable tenants to advertise their own properties and to search for suitable exchange matches. Landlords must also provide “reasonable support” to tenants who do not have internet access, though the form this support will take is not specified.

The fourth consultation question asks if respondents agree with the principle and detail of the proposed direction on mutual exchange; whilst the draft direction generally reflects the government’s intention, it is felt that the wording on support for tenants could be expanded to make it clear that this includes assistance for people who may not be confident in using the internet.

Tenant involvement

The existing tenant involvement and empowerment direction is to be amended in order to:

  • implement several recommendations set out in the Review of Social Housing Regulation on strengthening the ability of tenants to hold registered providers to account
  • reflect the Government’s Tenant Cashback scheme.

The review divided future regulation of registered providers into economic and consumer protection regulation.  The change of emphasis from the then-existing regime of external audit commission inspections to internal scrutiny by tenants was best summed up by the phrase “landlords are accountable to the tenants, not to the regulator”. The new draft direction seeks to put this in place through the Tenant Involvement Standard in three ways.

First, there is a clear expectation that tenants are able to scrutinise registered providers’ performance. In particular, tenants should have a wide range of opportunities to influence and be involved in “the scrutiny of their landlord’sperformance and the making of recommendations to their landlord about how performance might be improved.” There should also be further opportunities for tenants to take responsibility for managing their homes, and support tenants in exercising this choice.

Second, that registered providers should welcome scrutiny via a tenant panel (or equivalent group). The proposed text is designed to sit alongside the provisions in the Localism Bill for tenant panels that have been recognised as a “designated person” for the purpose of referring complaints to the Housing Ombudsman.

Third, that there should be a clear regulatory obligation on registered providers to provide timely, useful performance information to tenants in order to support effective scrutiny.

The final issue in the draft direction reflects the Tenant Cashback model. The intention is to give tenants opportunities to be involved in the commissioning or carrying out of routine repairs, as agreed with their landlord, and to share in any financial savings made as a result.

The fifth consultation question asks whether respondents agree with the principle and detail of the proposed revisions to the direction on tenant involvement and empowerment.  As indicated in an earlier briefing on the Review of Social Housing Regulation, the change of emphasis from an external inspection to internal scrutiny by tenants’ panels places a great deal of responsibility on active tenants, possibly few in number, with the time and inclination to get involved.

The sixth consultation question asks what type of models for involving social tenants in repair and maintenance services are registered providers likely to offer, how many tenants might participate in these and what costs and benefits might they result in.  This question would suggest that the Tenants Cashback scheme has not been properly researched or costed and that adequate safeguards on quality of repair, price and standards have not been addressed.

Rent

The changes to the direction on rent are minimal; the  Rent Standard applies to private registered providers only – housing associations –  and repeats the current formula for rent rises for association tenants. The only change is to specifically exclude affordable rent accommodation from the existing rent rise formula and to indicate that, where accommodation is let on a rent of up to 80% of the estimated market rent, annual rent rises will be up to RPI + 0.5%. There will be a new valuation of the market rent for the property each time it is re-let.

In answer to the seventh consultation question, it would appear that the proposed revisions to the rent direction reflect the introduction of the Affordable Rent regime.

Quality of accommodation

The changes to the direction on Quality of Accommodation reflect the fact that the original date of December 2010 for the completion of Decent Homes work has now expired and thus that date is removed from the direction. Instead, local authorities and housing associations will be expected to maintain their property to Decent Homes standards. In the few cases where property is below Decent Homes standards, the Regulator will be able to agree a temporary period where the requirements of the Quality of Accommodation standard is not fully met.

In answer to the eighth consultation question, the changes to the Quality of Accommodation direction adequately reflect the expiry of the original target date for Decent Homes and the government’s intention to allow temporary extensions where standards have not yet been met.

The ninth consultation question asks if energy efficiency requirements should be made more explicit; as the proposal only reflects the Decent Homes requirement of “a reasonable level of thermal comfort”, it is suggested that this be expanded to reflect current expectations on energy efficiency.

Comment

The draft directions contain little that is new; the major changes, on tenure in particular, have been extensively trawled. The only real surprise is how little thinking appears to have gone into the Tenants Cashback scheme for commissioning repairs.  Given that this is an area where good standards of work are crucial and poor craftsmanship can lead to health hazards or worse, it is essential that a robust mechanism for quality assurance is in place.

Ensuring tenants who commission repairs are getting value for money and are not being “ripped off” is another issue that would merit some attention prior to the scheme being introduced.

This post is based upon an LGiU members briefing. For more information on LGiU membership please email chris.naylor@lgiu.org.uk.