Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 9
9
Accepted
Paragraph: 57
Encourage registered housing providers to deploy reserves for property remediation and regeneration.
Recommendation
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 Regulator of Social Housing should encourage them to deploy their reserves to remediate and regenerate their existing properties, or to replace them with new ones if necessary. In response to this Report, the Regulator should set out what steps it is doing to achieve this and its assessment of how successful it believes the steps that it has taken have been.
Government Response Summary
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 failures.
Paragraph Reference:
57
Government Response
Accepted
HM Government
Accepted
As outlined in the Committee’s report registered providers are faced with significant financial challenges, as well as multiple and competing pressures on their resources. We agree with the Committee that providers need to manage these difficult trade-offs and make best use of their resources, so they can continue to deliver their core objectives of providing safe, well-maintained homes for their tenants and invest in new homes. Investment by the sector in repairs and maintenance is at record levels with further significant increases forecast.2 Over the next five years, repairs and maintenance expenditure is forecast to amount to £50bn, 43% of social housing lettings turnover.3 However individual provider business models and their stock profile affect the levels of investment they need to make and their capacity to do so. Increasing expenditure on repairs at the same time that rents have been capped below inflation and interest rates have risen is the main reason that interest cover (ratio of surplus to debt repayment costs) has gone down and recently fell to its lowest level. The increased investment in existing stock is impacting on providers’ capacity to invest in new supply which is being reined in to meet the demand for spend on existing stock. We are confident in our ability and capacity to regulate the sector’s financial position to enable them to invest in existing and new stock. We expect landlords to deliver the outcomes of our standards that apply to them, deciding for themselves the best way to do this for their organisation and their tenants. Our standards require them to understand their stock condition and make adequate financial allowance for the work in their business plan.4 Through our regulatory engagement we look at the processes and controls a provider has in place to deliver this outcome and seek evidence which gives us assurance that they are taking appropriate action if there are failures to deliver this. Where it is not cost effective to invest in stock to meet expectations we seek assurance that providers have plans in place to remedy this. There are a number of examples of recent regulatory casework where failure to maintain stock has been a factor. For example, a case in which the regulator had concerns about the integrity of stock condition data which then adversely impacted on decision making and scrutiny of risks. In another, a provider failed to manage its affairs appropriately in relation to risk management, fire safety, and the decency of homes. In both these examples we downgraded the providers’ governance judgements and worked closely with them to address the issues identified.