Regulation Committee of the Homes and Communities Agency

The Regulation Committee of the Homes and Communities Agency is responsible for ensuring that the registered providers of 2.6 million homes in the social rented sector are financially viable and properly managed.

On 15 July we took oral evidence from the Chair of the Regulation Committee, Julian Ashby, on his work since April 2012. We have concerns about the reporting of financial viability of providers. During 2012 the Cosmopolitan Housing Association ran into serious financial trouble. But the Regulator's published financial viability assessment failed to reflect the serious weakening in its position until after it had been rescued. The case had implications for the sector when in May this year the ratings agency, Moody’s, downgraded all but one of the English housing associations citing the Cosmopolitan episode as demonstrating the challenges the Regulator would face if he had to step in to protect entities and their creditors in extreme situations.

It has now emerged that the Regulator is unable to use his statutory powers or provide a frank assessment of concerns about a provider’s financial viability fearing that it might trigger a re-pricing of the provider's debt and therefore undermine its viability. Instead, rather than use his financial viability ratings to convey his assessment of financial viability, the Regulator uses the governance ratings to signal concerns about financial viability. This approach lacks openness and is confusing. We conclude that the practice should cease. In addition, the Regulator should work with other regulators to examine and review how they have addressed his concerns that use of statutory powers may be counter-productive.

The Regulator has a limited responsibility for consumer regulation. We noted that of the 111 complaints that related to a breach of consumer standards referred to the Regulator, not a single case of serious detriment was found. To have the assurance that the Regulator is discharging his consumer protection obligations effectively, we call for an annual external check to be carried out.