Recommendations & Conclusions
34 items
1
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
The problem of a continuing chronic shortage of social housing that we identified in our 2020 Report, Building More Social Housing, remains. In line with the conclusions of our 2020 report, we conclude that the Government must support, regulate and invest in the social housing sector so that the country …
Government response. The government agrees with the committee that providers face significant financial challenges and notes record investment in repairs and maintenance. It highlights its existing regulatory casework, where it has downgraded providers' governance judgements and worked with them to address failures …
Ministry of Housing, Communities and Local Government
2
Conclusion
Sixth Report - The Finances and Sustain…
Accepted
The social housing sector as a whole remains relatively financially resilient. However, it does face the simultaneous financial pressures of higher costs and lower income. Despite the sector’s overall resilience this is a clear and direct challenge to individual social housing providers’ business models and financial stability that must be …
Government response. The government agrees on the importance of effective use of provider resources and outlines how existing Value for Money and new consumer standards, along with regulatory engagement, address this. It details how its value for money benchmarking tool and published …
Ministry of Housing, Communities and Local Government
3
Recommendation
Sixth Report - The Finances and Sustain…
Deferred
Making social housing more energy efficient is crucial for the country’s decarbonisation goals, but, of course, it is also a significant cost for social housing providers. Because energy efficiency improvements do not return savings to social housing providers or private investors, there is little, if any, scope for borrowing to …
Government response. The government's response discusses the regulator's standards concerning tenant engagement, fairness, and security of tenure during regeneration projects. It does not address the recommendation for increased grant funding for social housing decarbonisation or the urgent release of Social Housing Decarbonisation …
Ministry of Housing, Communities and Local Government
4
Conclusion
Sixth Report - The Finances and Sustain…
Deferred
Noting that the role of private investment in decarbonisation has so far been limited, we encourage the Government to review what role private investment might play in meeting net zero, noting the advice from witnesses that this could involve the use of equity rather than debt and should result in …
Government response. The government's response discusses the importance of providers explaining regeneration projects to tenants and ensuring their views are considered, referencing existing governance standards and tenant satisfaction measures. It does not address the recommendation to review the role of private investment …
Ministry of Housing, Communities and Local Government
5
Recommendation
Sixth Report - The Finances and Sustain…
Deferred
We also reaffirm the conclusion of our Local Government and Net Zero report that the Government should set out its longer-term funding plans beyond 2025, and to encourage and outline the share of funding for retrofitting it anticipates will come from The Finances and Sustainability of the Social Housing Sector …
Government response. The government agrees on the importance of understanding and scrutinising the for-profit social housing sector, outlining actions like recruiting specialist staff and undertaking a 2024-25 review of its knowledge. It does not, however, commit to setting out longer-term funding plans …
Ministry of Housing, Communities and Local Government
6
Conclusion
Sixth Report - The Finances and Sustain…
Accepted
Necessary fire safety work has resulted in significant additional costs for social housing providers, as the Government has acknowledged in its written evidence.
Government response. The government describes existing regulatory standards and inspections by the Regulator of Social Housing (RSH) that ensure social housing providers have appropriate expertise and financial management capabilities to handle complex issues, without committing to new action regarding additional fire safety …
Ministry of Housing, Communities and Local Government
7
Conclusion
Sixth Report - The Finances and Sustain…
Accepted
The Government’s focus on holding social housing providers responsible for remediating building safety work is producing an unhelpful disparity between the private and social housing sectors. There is no justification for private sector landlords to be treated more favourably. We once again reiterate the recommendation from our 2020 Report, The …
Government response. The government details how the Regulator of Social Housing (RSH) already monitors the financial health of providers and intervenes in cases of financial difficulty, stating it has sufficient powers. It does not commit to providing social housing providers with equal …
Ministry of Housing, Communities and Local Government
8
Recommendation
Sixth Report - The Finances and Sustain…
We welcome Homes England’s flexibility on additionality for regeneration funding where that has been possible. The Government must give greater weight to the positive benefits of regeneration so more funding can be made available for regeneration. Homes England should increase the flexibility it offers housing providers on replacing housing that …
Ministry of Housing, Communities and Local Government
9
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
The ultimate responsibility for ensuring that existing and future social housing is fit for habitation lies with the housing providers. Those housing providers facing the highest maintenance costs may not be the most financially resilient. Nonetheless, where registered housing providers have homes that require major improvements and significant reserves, the …
Government response. The government agrees that providers must manage resources effectively and outlines the Regulator's existing processes for oversight. It states the Regulator ensures providers have plans in place for stock improvements, citing examples where governance judgments were downgraded due to maintenance …
Ministry of Housing, Communities and Local Government
10
Recommendation
Sixth Report - The Finances and Sustain…
Rejected
Regeneration should respect the experience of existing tenants, whose lives will be disrupted, as well as those who will benefit from the new or additional homes in the future. An additional challenge is presented when estates contain both social housing tenants and leaseholders, who may be in a more challenging …
Government response. The government rejects setting detailed standards for providers' engagement in regeneration projects, citing the desirability of providers choosing their own service delivery and avoiding increased regulatory burden. However, it states that existing general consumer standards align with the committee's aspirations …
Ministry of Housing, Communities and Local Government
11
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
We welcome the Regulator’s efforts to ensure that regeneration projects are properly explained to tenants, and that tenants have had some opportunity to share their views. However, we believe the Regulator must go further to ensure registered providers not only listen to, but appropriately act on, tenants’ views, by considering …
Government response. The government agrees on the importance of providers listening and acting on tenant views in regeneration projects, stating that existing Governance and Financial Viability, and Transparency, Influence and Accountability Standards already set clear expectations for providers and are monitored during …
Ministry of Housing, Communities and Local Government
12
Conclusion
Sixth Report - The Finances and Sustain…
The Government’s policy on social housing rent increases, and the rent settlement it puts in place to implement this, are the basis of the social housing sector’s finances. It is undoubtedly the case that uncertainty about future rental income makes business planning more difficult. Sudden changes to planned rental income, …
Ministry of Housing, Communities and Local Government
13
Recommendation
Sixth Report - The Finances and Sustain…
Accordingly, the next rent settlement should be set for at least five years and should also be linked to inflation. As part of setting the rent settlement, the Government should publish a non-exhaustive list of the types of events that would, in its view, likely lead to the reintroduction of …
Ministry of Housing, Communities and Local Government
14
Conclusion
Sixth Report - The Finances and Sustain…
Accepted
We remain very concerned about the impact of rent increases on social housing tenants. These are some of the most financially vulnerable people in our society. We believe housing associations must bear this in mind when they are setting rent levels, and reflect on the levels of their reserves they …
Government response. The government agrees on the importance of providers' effective use of resources and responsibility to tenants, stating that existing Value for Money and new consumer standards, along with regulatory engagement and benchmarking tools, already ensure landlords consider rent levels and …
Ministry of Housing, Communities and Local Government
15
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
Social housing providers should involve their tenants in discussions about rent levels. When rent rises are being considered providers should explain to residents why such rises may be necessary. The Regulator should proactively assess how registered providers use their reserves not only as an indication of financial viability, but also …
Government response. The government agrees that providers should involve tenants and that the Regulator should assess resource use, stating that existing Value for Money and new consumer standards already cover these aspects through regulatory engagement, published measures, and governance judgements.
Ministry of Housing, Communities and Local Government
16
Conclusion
Sixth Report - The Finances and Sustain…
A significant percentage of rent in the social housing sector is ultimately borne by the Department for Work and Pensions through benefits. As a result, rent increases could end up transferring costs onto central Government finances.
Ministry of Housing, Communities and Local Government
17
Recommendation
Sixth Report - The Finances and Sustain…
The Government should set out in its response to this report what role the Department for Work and Pensions will have in future discussions about rent settlements. When a rent settlement is agreed, the Government should write to us to inform us what impact it expects the change in rent …
Ministry of Housing, Communities and Local Government
18
Conclusion
Sixth Report - The Finances and Sustain…
Accepted
The for-profit financial models involved in social housing are evolving and can be more complicated than traditional financing models. However, we are optimistic that new financing models have some role to play in generating the investment that the sector as a whole needs, although these new models do need careful …
Government response. The government agrees on the importance of understanding and scrutinizing the for-profit sector, detailing how it has recruited expert staff, engages with advisors, conducts audits, and has a 2024-25 priority to review knowledge of for-profit providers, thereby addressing the need …
Ministry of Housing, Communities and Local Government
19
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
We are pleased that the Regulator has taken steps to ensure that it has the adequate skills and resources which are required for it to have an effective understanding and scrutiny of the new financing models emerging in the sector, particularly equity investment and for-profit registered providers. Nonetheless, for the …
Government response. The government accepts the need for continuous improvement, detailing current efforts in recruiting specialist staff, engaging advisors, and conducting internal audits, along with a planned 2024-25 review of knowledge and development for for-profit providers.
Ministry of Housing, Communities and Local Government
20
Recommendation
Sixth Report - The Finances and Sustain…
Accepted in Part
Accordingly, we recommend that the Regulator must regularly conduct reviews of its own understanding of and ability to scrutinise new financing models in the social housing sector. These reviews must be published biannually in order to provide reassurance and transparently share some of the key challenges that the Regulator faces.
Government response. The government agrees with the importance of understanding and scrutinising the for-profit sector, stating it has a 2024-25 priority to review its current knowledge and that internal audit reports are published, but does not explicitly commit to biannual published reviews …
Ministry of Housing, Communities and Local Government
21
Recommendation
Sixth Report - The Finances and Sustain…
Accepted
Furthermore, the Regulator must ensure that, as part of its governance ratings, it examines whether registered providers’ boards and executive teams have individuals with sufficient expertise in the financial models the provider is using. Registered providers must demonstrate that they properly understand any capital markets and financial products they are …
Government response. The government welcomes the recognition of expertise importance, stating that its existing Governance and Financial Viability Standard and Code of Practice already set expectations for board capability and expertise, which are examined during regulatory inspections and inform governance gradings.
Ministry of Housing, Communities and Local Government
22
Conclusion
Sixth Report - The Finances and Sustain…
Acknowledged
It is deeply concerning that as a result of financial pressures on social housing providers less new social housing will be built. This will further exacerbate the chronic shortage of social housing and will place further unacceptable pressure on those in need of social housing.
Government response. The government acknowledges the committee's concerns about financial pressures on social housing providers and explains how increased expenditure on existing stock, coupled with rising costs, is impacting their capacity to invest in new housing supply.
Ministry of Housing, Communities and Local Government
23
Recommendation
Sixth Report - The Finances and Sustain…
The current low levels of direct Government grant available to housing associations to build new social homes has received justified criticism from housing associations for being inadequate. We reiterate the conclusion in our 2020 report that the Government must invest significantly to fund the building of new social homes.
Ministry of Housing, Communities and Local Government
24
Recommendation
Sixth Report - The Finances and Sustain…
The Government should make an assessment of the extent to which a significant increase in grant funding for social housing development would allow the sector to build more homes and the overall balance of revenue and capital funding together with other sources of private finance and available subsidies.
Ministry of Housing, Communities and Local Government
25
Recommendation
Sixth Report - The Finances and Sustain…
The Government must also calculate the increase in grant funding for social housing that would begin to have a significant impact on the provision of more new homes.
Ministry of Housing, Communities and Local Government
26
Recommendation
Sixth Report - The Finances and Sustain…
Properly motivated and regulated private investors present a real opportunity to increase the building of social housing. The Government should set out its assessment of how many new social homes for-profit registered providers can be expected to build over the short and long term. In addition, the Government should engage …
Ministry of Housing, Communities and Local Government
27
Conclusion
Sixth Report - The Finances and Sustain…
The Government has failed to set out the rationale for the decision to focus the inadequate grant on developing affordable rent homes. There should be an early assessment of the adequacy of grant funding allocations within the remaining Affordable Homes Programme and how much social rent is to be supported, …
Ministry of Housing, Communities and Local Government
28
Recommendation
Sixth Report - The Finances and Sustain…
The Government must start by providing a clear direction for the social housing sector: it should publish a target for how many social rent homes it intends to secure, and explain the reasoning behind it. The confusion and delay around targets must end now. The Government should set clear targets …
Ministry of Housing, Communities and Local Government
29
Conclusion
Sixth Report - The Finances and Sustain…
The Government and local authorities should more actively use their planning powers to ensure that the price of land does not inhibit the development of new social homes. We believe that land value capture should be part of the process for funding new social housing, especially for new towns and …
Ministry of Housing, Communities and Local Government
30
Recommendation
Sixth Report - The Finances and Sustain…
The Government should critically review the results of the Infrastructure Levy pilots and carefully consider suggestions for improvement, including a possible requirement to deliver a certain amount of the Levy as on-site social housing. This should include the possibility of replacing the Levy with a reformed section 106 system.
Ministry of Housing, Communities and Local Government
31
Recommendation
Sixth Report - The Finances and Sustain…
Reducing local authorities’ debt could be an effective way for some authorities to provide greater funding for building social housing. It may be possible to cancel some of the additional £8bn debt attributed to local authorities in 2012. We were not able to ask the Minister for the Government’s position …
Ministry of Housing, Communities and Local Government
32
Conclusion
Sixth Report - The Finances and Sustain…
Acknowledged
We recognise that the social housing sector is, as a whole, financially resilient. However there remains a very real possibility that individual housing associations may come close to insolvency. One housing association defaulting on its loans could have a knock-on effect on rest of the social housing sector’s ability to …
Government response. The government acknowledges the committee's conclusion on the social housing sector's financial resilience, agreeing with the assessment of significant financial pressures and potential for individual insolvencies, and outlines ongoing engagement with providers and expectations for early warning of viability risks.
Ministry of Housing, Communities and Local Government
33
Conclusion
Sixth Report - The Finances and Sustain…
Acknowledged
We are concerned that some of the largest housing associations may face more financial risk, because they have higher fire safety costs and they have been building more homes. At the same time, we are also concerned that the Regulator of Social Housing’s ability to manage the insolvency of a …
Government response. The government acknowledges the committee's concerns about financial risks facing large housing associations and confirms the sector faces significant pressures. It states it will continue to engage closely with providers demonstrating weak financial performance and expects early warnings of viability …
Ministry of Housing, Communities and Local Government
34
Recommendation
Sixth Report - The Finances and Sustain…
Rejected
We are pleased that the Regulator is already engaging more regularly with larger housing associations. However, the Regulator must specifically set out what early measures it would be able to take and by when in the event that this engagement identified any notable problems. (Paragraph 168) 48 The Finances and …
Government response. The government describes existing regulatory processes and powers for identifying and addressing financial risks in housing associations, but rejects the call to specifically set out early measures and timelines, stating it would fetter its discretion to react to specific situations.
Ministry of Housing, Communities and Local Government