First Report - The Regulation of Social Housing

It is not possible to gauge exactly how prevalent poor quality is within the social housing sector. Given that the English Housing Survey (EHS) estimated that 13% of homes in the social rented sector failed to meet the decent homes standard in 2020, it is fair to conclude that the majority of homes are decent, although we note that this is based on an outdated decent homes standard. It is equally apparent, however, that the condition of some of the stock has deteriorated so far as to be unfit for human habitation and that the impact on the mental and physical health of those affected is extremely serious. According to the EHS, 5% of social housing contains a category 1 hazard. This might be less than in the private rented sector, but it still equates to an unacceptable number of homes.

Whatever the extent and causes of housing disrepair, we call on everyone in and connected to the social housing sector to work together and prioritise above all else the quality of housing being provided to existing tenants.

The level of disrepair in some parts of the social housing sector can undoubtedly be attributed partly to the age and design of the housing stock, some of which was never built to last and is now approaching obsolescence. For this, some blame must attach to successive Governments for not investing enough in new social housing or providing funding specifically for regeneration. We therefore welcome the Government’s commitment to building more homes for social rent.

We are concerned, however, about the Government’s decision to extend the statutory right to buy to all tenants of private social housing providers. The existing policy has reduced the number of homes available for social rent and increased the proportion of the social housing stock that is hard to maintain, as most of the properties bought have been in suburban areas, rather than inner-city areas, where much of the harder- to-maintain stock is concentrated. It is impossible to properly assess the proposal for extending the right, however, as it lacks detail. If it does amount to a genuine right to buy for tenants of private providers, it must surely amount to far greater central government interference in the sector than did the measures that prompted the Office for National Statistics (ONS) in 2015 to reclassify private providers as part of the public sector.

To reduce the social housing sector’s reliance on outdated stock, we recommend that the Government introduce funding specifically for regeneration that does not require the delivery of net additional housing and deliver on its commitment to increase the supply of homes for social rent. We also recommend that it amend the Affordable Homes Programme to remove the requirement to deliver net additional housing.

To prevent the further erosion of the social housing stock, we urge the Government to set out how it plans to fully fund the one-for-one and like-for-like replacement of every home sold under the proposed extension of the statutory right to buy to tenants of private social housing providers. One-for-one replacement must be completed within The Regulation of Social Housing 69 three years of the sale. We also call on the Government to publish its assessment of whether extending a genuine right to buy to tenants of private providers might result in the ONS reclassifying the sector as part of the public sector.

The social housing sector is under serious financial pressure, and the Government is asking it to do far too much without sufficient resources. We therefore welcome the progress made towards finding a financial solution to the building safety crisis and the Government’s commitment to exploring ways of exempting social housing providers from the building safety levy. The Government says the Building Safety Fund is available to social housing providers if they can demonstrate that the costs of remediation are unaffordable or present a threat to financial stability, but it is not clear how easily a provider could demonstrate this. Social housing providers must have exactly the same access to funds for building safety remediation as private sector landlords. There must be no discrimination against social housing.

We recommend that the Government provide an update on social housing providers’ access to funds for building safety remediation and commit to ensuring they have exactly the same access to funds as private landlords. It should also provide an assessment of the total cost of remediating the social housing stock, and the gap between this and the funds that are available, from whatever source, to carry out the remediation work. The Government should then work with the sector to identify how the funding gap can be bridged. We also call on the Government to provide an update on the impact of the Social Housing Decarbonisation Fund and on the ability of social housing providers to decarbonise their housing stock.

We agree with our witnesses that housing disrepair, particularly damp and mould, is often aggravated by the inability of tenants to heat or ventilate their homes properly or by overcrowding, or by a mixture of both. We also agree that tenants cannot, and must not, be held responsible for either of these things. It would be unacceptable if anyone was suffering from fuel poverty or experiencing overcrowded living conditions, and also being blamed for their home falling into disrepair as a consequence. This is of particular concern at a time when fuel poverty is likely to increase significantly as a result of rising energy bills.

We urge all providers of social housing to support tenants who, through no fault of their own, cannot heat or ventilate their homes properly. This support should include the provision of dehumidifiers and mechanical ventilation systems to deal with condensation before it leads to damp and mould.

Whilst social housing providers cannot be blamed for the age of their stock or for government policy, they must certainly take responsibility, where they have failed to respond properly to requests for repairs, have preferred quick fixes to structural problems, have failed to properly investigate the causes of serious disrepair, and have allowed sites earmarked for regeneration to fall into disrepair. We are also concerned that many providers are too passive in monitoring the condition of their stock and relying on tenants to report problems.

We recommend that housing providers put in place systems for regularly monitoring the condition of their stock, rather than relying on tenants to report problems. We also 70 The Regulation of Social Housing recommend that, as part of its review of the consumer standards, the Regulator of Social Housing consider amending its home standard to place a specific requirement on providers to regularly monitor their stock. (Paragraph 50) The treatment of tenants

The presence of a stigma attached to being a social housing tenant is very hard to dispute, although it is difficult to say how prevalent stigmatising views are among contractors and staff working for social housing providers. It is also difficult to say how prevalent other types of discrimination are. If, however, even a small number of contractors or staff in the sector are discriminating against tenants, it is clearly a very serious problem that the sector must respond to immediately.

We call on social housing providers to take stigma and discrimination seriously, not to assume its staff are immune from such prejudices, and to ensure their boards better reflect their communities. We also encourage them to make every effort to encourage diversity among their senior management teams. As part of its review of the consumer standards, we also recommend that the Regulator of Social Housing introduce a requirement on providers to demonstrate that their boards and senior management teams reflect the diversity of the communities they serve.

The power imbalance between tenants and housing providers is one of the biggest problems facing the social housing sector today. One of the most effective ways of empowering tenants, however, is through the establishment of tenants and residents associations, led by tenants themselves, with which providers must engage first and foremost when consulting tenants.

We recommend that, as part of its review of the consumer standards, the Regulator of Social Housing amend the tenant involvement and empowerment standard to require providers to support the establishment of genuinely independent tenants and residents associations, including by providing the necessary funding.

The tenant satisfaction measures (TSMs) and the new access to information scheme are central to the Government’s plans for making the sector more transparent. While we do welcome the steps taken to improve transparency, we must note how underwhelmed the sector is by these proposals. In their current form, we think they could, if implemented properly, make a small but meaningful contribution to the ability of tenants to hold their provider to account.

We urge the Government and the Regulator of Social Housing to work together to ensure the TSMs and the access-to-information scheme are implemented in such a way that tenants can have confidence in their reliability and effectiveness as a means of holding their provider to account. We also recommend that the regulator set out how it intends to monitor and review the performance of the TSMs, with a view to making improvements if they are not delivering for tenants.

We are pleased the Government is setting up the Social Housing Quality Resident Panel, but we believe there is a strong argument for committing now to making it a permanent national voice for tenants, or at least to establishing such a body in The Regulation of Social Housing 71 one form or another. We also have significant concerns about how residents will be selected. If the panel is to speak for tenants, it must be genuinely representative.

We recommend that the Government establish the Social Housing Quality Resident Panel on a permanent basis as the national tenant voice body that tenants representatives have been calling for. The Government should send the strongest possible signal to tenants that it is determined to involve them in the national conversation about how to drive up standards in social housing. To ensure the panel can truly speak for tenants, the Government must also ensure that the selection process is transparent and that the panel includes as broad a mix of tenants as possible.

The commercialisation of social housing can be traced back to the cut to government funding in 2011. Whilst we would like the Government to provide more central funding for specific purposes, such as regeneration, building safety, decarbonisation and new housing, the sector is now clearly dependent on high levels of private investment, and will continue to be so. In many respects, this has had regrettable consequences. Many housing associations have charitable status because they exist to provide housing for those who have difficulty in affording market rent. The interests of private investors, particularly regarding their return on investments, must not outweigh the welfare of tenants.

It is difficult to say for certain whether very large providers are more likely to lose sight of their core responsibility, which is to their tenants, but it seems obvious that there is a tendency for such providers to become more remote and impersonal. If such providers struggle to provide more local and personal housing services, it means they are simply too big and have forgotten their original purpose, which is to provide affordable housing to those who cannot meet their housing needs elsewhere. The Regulator of Social Housing’s tenant involvement and empowerment standard is far too weak on the provision of local services.

We urge all social housing providers, especially the larger ones, to prioritise putting the tenant at the centre of how they deliver housing services, including by relying far less on impersonal and remote methods of communication and increasing the number of local offices with staff who know the area. We also recommend that, as part of its review of the consumer standards, the Regulator of Social Housing significantly strengthen the wording of the tenant involvement and empowerment standard to require providers to deliver housing services that are genuinely local and tenant centred.

Whatever external or impersonal forces might be contributing to the very poor treatment some tenants have to endure, ultimate responsibility must lie first with the individuals concerned and then with senior management. We therefore strongly welcome the Government’s review of qualifications and professional training. Ensuring those working in the sector are properly qualified will be critical, as the most important step in improving service standards must be preventing the wrong people from entering the profession in the first place. We also welcome the announcement of an independent quality panel by the National Housing Federation and the Chartered Institute of Housing. (Paragraph 102) 72 The Regulation of Social Housing

We call on the Government to provide an update on the progress of its review of qualifications and professional training in the social housing sector, including a timeline for implementation of any new qualifications. (Paragraph 103) The Housing Ombudsman

The primary responsibility for resolving disputes between tenants and providers lies with the providers themselves, and yet too often their complaint handling processes are inefficient and obstructive. It is understandable if tenants sometimes conclude they have been specifically designed to prevent them from ever referring their complaint to the Housing Ombudsman. It is also quite clear that, as well as adding insult to injury, the inefficiency of some providers’ complaint handling processes is itself contributing to levels of disrepair, since repeated requests for repairs will nearly always also be complaints, and satisfactory resolution will usually involve the completion of remediation or repair work.

The introduction of the Housing Ombudsman’s complaint handling code and complaint handling failure orders must drive improvement and consistency in the way providers respond to complaints. We are pleased therefore that the Government is legislating through the Social Housing (Regulation) Bill to place the power to establish such a code on a statutory footing. It is not clear, however, if this will strengthen the ombudsman’s ability to enforce compliance. We are also concerned that no one is proactively monitoring whether providers have self-assessed against the code, although we are not sure if the ombudsman or the Regulator of Social Housing would be best placed to do this.

If they have not already done so, all providers must immediately review and where necessary improve their complaint handling processes. As part of this, all providers that have not already self-assessed against the ombudsman’s complaint handling code should immediately do so. We also recommend that the ombudsman more proactively monitor providers’ compliance with the code.

We recommend that the Government legislate through the Social Housing (Regulation) Bill to place a legal requirement on social housing providers to self-assess against the Housing Ombudsman’s complaint handling code and to report to the ombudsman when they have done so. To ensure that providers are self-assessing against the code, we recommend that either: (Paragraph 114) • the Government give the ombudsman the power and duty to monitor whether providers are self-assessing against the complaint handling code and whether their complaint handling processes are broadly in line with it; or • the regulator, as part of its review of the consumer standards, introduce a new requirement on social housing providers to self-assess against the complaint handling code and to implement complaint handling processes that are broadly in line with it. The Regulation of Social Housing 73

The Housing Ombudsman’s new power to investigate systemic issues across the sector is an extremely valuable tool for improving quality across the sector, and we disagree strongly with the assertion that this represents any sort of encroachment on the remit of the Regulator of Social Housing.

We encourage the Housing Ombudsman to continue investigating systemic failings across the social housing sector. In response to this report, the ombudsman should identify which further areas it may investigate. We further encourage both the ombudsman and the Regulator of Social Housing to continue co-operating and sharing information, building on each of their roles so their work complements each other, with a view to driving up standards across the sector.

The Housing Ombudsman is supposed to award compensation to cover financial loss and avoidable inconvenience, distress and detriment. We do not think, however, that the levels of compensation being awarded come anywhere close to reflecting any of these things. We also think financial loss should explicitly include loss of earnings incurred when tenants stay at home waiting for repairs teams that do not then turn up.

We welcome the ombudsman’s decision to increase the levels of compensation for the most serious service failings, but even these are inadequate. If the Government thinks tenants in the private rented sector (PRS) should be entitled to compensation of up to £25,000, it cannot argue otherwise for social housing tenants. To tolerate a situation in which social housing tenants are not receiving the same levels of compensation as tenants in the PRS would amount to blatant discrimination. Significantly increasing levels of compensation should also help to concentrate the minds of boards and senior management teams on improving service standards.

The Government must commit to ensuring social housing tenants get the same levels of compensation it has said tenants in the PRS will be entitled to under its proposals for a new ombudsman. We recommend it does this by amending the Social Housing (Regulation) Bill to include provisions setting out that the ombudsman may award compensation of up to £25,000. If not, it should publish its justification for treating social housing tenants and PRS tenants differently. Whether it commits to doing this or not, we call on the ombudsman to immediately increase the levels of compensation it awards. We also recommend that it include among those things for which it may award compensation an explicit reference to loss of earnings incurred when tenants take time off work to wait for repairs teams that do not turn up.

It is clear from the evidence we received during this inquiry, and from the constituency casework we deal with, that generally tenants are not aware of the Housing Ombudsman. We welcome the work the ombudsman has done recently to raise awareness of its service among tenants and agree that this could partly explain the increase in the number of complaints being referred to it. Providers, however, are very clearly not doing enough to inform tenants of their right to take a complaint to the ombudsman. It is possibly too easy for tenants to miss sentences inserted into correspondence and links on websites if they have not been made prominent. (Paragraph 132) 74 The Regulation of Social Housing

We encourage all social housing providers and the Housing Ombudsman to adopt a co-ordinated strategy to increase awareness among tenants of the ombudsman. As part of that, providers should routinely send letters and leaflets specifically about how they can complain to the ombudsman, as well as including this information in all other correspondence. Every single piece of correspondence about a complaint that providers send to tenants should inform the latter of their right to complain to the ombudsman and how to go about it. This should also explain that if tenants take legal action they cannot also refer their case to the ombudsman. We also recommend that the Regulator of Social Housing, as part of its review of the consumer standards, introduce a requirement on housing providers to ensure tenants are aware of their right to take a complaint to the ombudsman.

It appears that some local authorities might have misinterpreted the Housing Health and Safety Rating System enforcement guidance, and as such are not inspecting private providers. We welcome the Minister’s reiteration that a council can inspect a property owned by a private provider and issue an enforcement notice, although we note the significant pressures on local government finances at the moment. Perhaps more than anything else, these inspections could provide social housing tenants trapped in potentially unsafe homes with the reassurance that they can turn to someone independent of their housing provider who will advocate on their behalf.

We strongly recommend that the Government immediately make it clear to local councils that they have a duty to inspect all unsafe homes, irrespective of who owns it, including, if necessary, by producing new enforcement guidance. This must include setting out that there is nothing preventing a council’s environmental health team from inspecting properties owned by that council and issuing it with a non-legal warning. (Paragraph 138) The Regulator of Social Housing

We welcome the removal of the serious detriment test, which has obstructed the effective regulation of the consumer standards for far too long.

The Regulator of Social Housing is independent of the Government and is alone responsible for the interpretation of its statutory duties. It interprets its duty to minimise intervention and act proportionately to mean that it should only find a provider non-compliant with the consumer standards if it also finds evidence of systemic failure. The application of this ‘systemic failure’ test has resulted in perhaps the most passive consumer regulatory regime permissible under the Housing and Regeneration Act 2008. It has also opened up a clear and worrying gap between the remit of the Housing Ombudsman, which investigates individual complaints, and that of the regulator. As happened at the Eastfields estate, it is possible under the ‘systemic failure’ test for a provider to be guilty of very serious mismanagement affecting dozens of tenants and not be found in breach of the standards.

We did not find the explanation by the Regulator of why Clarion could be compliant in the case of Eastfields to be convincing, especially given the comparison with Croydon Council and Regina Road. Croydon had been found guilty of systemic The Regulation of Social Housing 75 failure because it “simply did not have the systems to identify that things were going wrong”, whereas Clarion “had those systems and processes in place” yet still allowed things to go wrong. The former suggests incompetence; the latter suggests indifference; but our view is that both constitute systemic failure.

To ensure that the consumer regulatory regime does not continue to let down tenants whose providers are responsible for serious mismanagement that does not meet the ‘systemic failure’ test, we strongly urge the Regulator of Social Housing to reconsider its interpretation of its duty to minimise interference and act proportionately. In particular, we recommend that it scrap the ‘systemic failure’ test and report back to us on how it plans to change its approach. We also recommend that the Government amend Clause 4 of the Social Housing (Regulation) Bill to require the regulator and the Housing Ombudsman to set out in their memorandum of understanding how they intend to prevent gaps between their respective remits.

If the Regulator of Social Housing engages as little with tenants as seems to be the case, we are deeply concerned. It is impossible for the regulator to even give the appearance of putting tenants at the centre of its consumer regulation if it does not seem interested in their experience, even where a provider has failed tenants as badly as Clarion did at Eastfields.

We recommend that the Government use the Social Housing (Regulation) Bill to amend the Housing and Regeneration Act 2008 to place a much clearer requirement on the Regulator of Social Housing to engage with tenants whenever it investigates possible breaches of the consumer standards. Whether or not the Government does this, we call on the regulator to place tenants at the centre of its approach to regulation, to talk to tenants whenever it investigates a potential breach of the consumer standards, and to incorporate engagement between itself and tenants into its definition of co- regulation.

The social housing sector has commercialised and diversified almost beyond recognition since 2011. That nothing has gone seriously wrong yet should be no cause for complacency, especially as we enter a period of rising inflation and interest rates. A single failure in the sector could be catastrophic, particularly given that the assets of housing providers primarily comprise people’s homes. We therefore welcome the strengthening of the regulator’s powers in the Social Housing (Regulation) Bill. At the same time, however, the Regulator of Social Housing needs the skills and capacity to continue to regulate the economic standards effectively. Having an adequately resourced regulator is not, as was suggested to us, a sign of failure in the sector.

We are also uncertain about the argument that any increase in the regulator’s powers would prompt the Office for National Statistics to reclassify the social housing sector as belonging to the public sector and so push its debt on to the government balance sheet. The primary consideration should be the interest of tenants, not where the debts sits. In any case, the sector’s debt is fairly insignificant compared to the overall public debt. We understand that the regulator’s consent powers in respect of mergers was one of the reasons the ONS reclassified the sector in 2015, but it should be possible to give it a stronger role in monitoring mergers that stops short of such a consent power. (Paragraph 184) 76 The Regulation of Social Housing

We disagree with the regulator’s assertion that intervening to shape the market - for example, to encourage providers to consolidate their stock in particular areas - would take the regulator beyond its duty to minimise interference. As we have stated elsewhere, we think it should reinterpret this duty, as its current interpretation has resulted in a regulator that is simply too passive.

We urge the Government and the Regulator of Social Housing to make sure the latter has the resourcing, skills and capacity to continue to regulate the economic standards properly. As part of this, the Government must first assess the regulator’s capacity now to understand the complex financial and corporate structures proliferating in the sector. We also recommend that it keep an open mind about increasing the regulator’s powers to regulate the economic standards, even if this would mean the sector being reclassified. In particular, we recommend that the Government give the regulator more of a role in monitoring mergers to ensure tenants, not shareholders, are at the centre of any decision to restructure.

The removal of the ‘serious detriment’ test will make it much easier for the regulator to inspect providers proactively and to survey properties where it has reason to suspect serious disrepair. We welcome this development as perhaps the most important reform of the consumer regulatory regime. We appreciate that proactively surveying properties could be burdensome, if done on a large scale, but we do not think the regulator should limit itself to using its powers to survey only reactively.

We urge the regulator to publish details as soon as possible of how it plans to use its enhanced regulatory powers under the Social Housing (Regulation) Bill, particularly those on inspections and surveys, and to place them at the centre of its new proactive regime for regulating the consumer standards. Even if it only commits to using its power to survey reactively, we urge it to use the power to provide immediate relief to tenants forced to live with serious disrepair.

Whilst understanding the advantages of a relatively light touch regulatory regime, we still find the regulator to be extremely reticent and passive in its use of its enforcement powers. It is appropriate for the regulator to punish providers responsible for the most serious service failures. If used sparingly, the power to impose fines would have a negligible impact on the sector’s financial position. The fact that the Government is legislating through the Social Housing (Regulation) Bill to remove the cap on fines suggests it agrees with us that the regulator should be fining providers, at least in the most serious cases of service failure.

We recommend that the Government make it clearer to the regulator that its statutory duty to minimise interference does not preclude it from using its enforcement powers. We call on the regulator to make more use of its enforcement powers, especially in the most serious cases.

We are not convinced that requiring all social housing providers to register with the Regulator of Social Housing would necessarily prompt the Office for National Statistics to reclassify the sector as part of the public sector. It might well be the case, but without a definitive statement from the ONS, it is not possible to come to a firm conclusion. This question aside, and notwithstanding the question of how to The Regulation of Social Housing 77 define “social housing”, there seems no justification for abandoning even one tenant to an unregulated social housing provider. We agree, however, that mandating registration might require an amendment to the definition of social housing in the Housing and Regeneration Act 2008.

We recommend that the Government invite the Office for National Statistics to make a public announcement on whether requiring all social housing providers to register with the Regulator of Social Housing would prompt a reclassification. If the conclusion is that it would not, we recommend that the Government amend the Social Housing (Regulation) Bill to mandate registration through whatever mechanism it deems most appropriate, and if necessary to amend as appropriate the definition of social housing in the 2008 Act.

We are concerned that potentially extremely vulnerable residents in receipt of unregulated support services do not currently benefit from the protection of regulation by the Care Quality Commission. We are encouraged by the Government’s stated commitment to improving standards in supported housing, but it is impossible to say from the few details provided so far whether the proposals will go far enough. We will return to this subject in our upcoming report on exempt accommodation. (Paragraph 213) 78 The Regulation of Social Housing