The Social Housing (Regulation) Bill (the Bill) had its first reading in the House of Lords on 8 June 2022. The Bill follows the Government's proposals to strengthen the regulation of the social housing sector in the Social Housing White Paper (the White Paper), which was published in November 2020.
Proactive consumer regulation
The key changes in the Bill will mean that the Regulator of Social Housing (RSH) becomes a proactive consumer regulator.
The biggest change in the Bill is the removal of the "serious detriment" test. This test currently requires the RSH to have reasonable grounds to suspect that a breach of the consumer standards has caused or could cause ‘serious detriment’ to a register provider's (RP) tenants or potential tenants before taking any regulatory action.
This removal puts consumer standards on an equal footing with the economic standards and will provide a basis for the RSH to regulate the consumer standards proactively.
Increasing safety and transparency for tenants
The first clause of the Bill amends the RSH's fundamental objectives to specifically reference safety and require that RPs act in a transparent manner with their tenants.
These themes are followed through elsewhere in the Bill.
Safety
In response to one of the Hackitt report recommendations about responsibility RPs will be required to designate a person to act as a health and safety lead within the organisation. The Bill requires that this must be an employee or officer of the RP so the role cannot be outsourced although there are slightly different arrangements for local authorities in relation to elected members. Importantly for those taking on the role, the Bill clarifies that the health and safety lead is not liable for breaches and legal responsibility for ensuring compliance with health and safety requirements remains with the RP.
Transparency
The RSH will have a power to direct RPs to collect, process and publish information concerning their performance in relation to the regulatory standards. This is the mechanism through which the RSH will impose and enforce compliance with the Tenant Satisfaction Measures that it will set. It has already consulted upon the extensive range of information that it proposes to require.
The Bill also introduces new powers for the RSH to set standards for RPs in relation to providing information to their tenants and to the RSH. This includes an "Access to Information Scheme", which would enable tenants to request information from their RP. Whilst the Government has suggested this is similar to how the Freedom of Information Act works for council housing, the scope within the Bill is limited to information about accommodation, facilities or services provided in connection with social housing. The introduction of the Freedom of Information Act has had some significant implications for decision making and information collection within local authorities and even with reduced scope may have significant implications for RPs. The RSH can also set standards about providing information to tenants on how much RPs are spending on executive remuneration and how income, management costs and other expenditure are being spent.
Transparency is an area where the Secretary of State can issue a Direction to the RSH and we await further details of how it is proposed to work in practice.
Naming and shaming
The Government has made it clear that it intends to "name and shame the worst offenders". However, whilst in practice this may mean more publicity around them, the Bill itself does not appear to provide any tools to do this in addition to the existing RSH practice of publishing regulatory notices and regulatory judgements where RPs have breached the standards and the increased tendency of the Secretary of State of Housing Minister to comment on such matters.
Of course, we may see more regulatory notices and regulatory judgements being published in any event with a more proactive consumer regime.
Enforcement and sanctions
The RSH will have a number of new enforcement powers under the Bill and there are also new sanctions for under-performing RPs.
Performance Improvement Plans (PIPs) are a new enforcement measure being introduced. The RSH may issue a PIP notice in the case of specific breaches by an RP, including where an RP has failed to comply with the regulatory standards including transparency requirements, or where the interests of the RP's tenants require protection. A PIP is a plan which the RSH will be able to require RPs to produce and follow. This provides the RSH with a more proactive enforcement tool than the current use of voluntary undertakings which as the name implies must be volunteered by the RP. Where an RP fails to comply, the RSH can impose a financial penalty and/or award compensation to those who suffer as a result.
Perhaps one of the most significant new enforcement tools for the RSH is in the introduction of unlimited fines. Historically, the RSH has not used its fining powers, but such powers were in any event capped at £5,000. While the RSH has in recent comments to the select committee and others shown no strong indications of a change to its approach to fines the changing nature of the sector and the changing nature of regulation (and of residents' expectations on the back of this) may, over time, lead to the RSH reviewing its approach to using fines as an enforcement tool. A contrasting approach to such matters is that taken by the Health and Safety Executive which regards substantial fines based on turnover to be an appropriate approach irrespective of for profit or not for profit status.
The RSH will be able to enter properties to undertake surveys at 48 hours' notice (rather than the 28 days' notice which is currently required). This is supplemented with a power for the RSH to undertake (or appoint someone to undertake) the remedial work and to recover the cost from the RP. The remediation power requires there to be a failure to maintain that has caused an imminent risk of serious harm to the health and safety of occupiers or others, shown by a formal survey undertaken by or for the RSH and failure to comply with an enforcement notice. There are supporting powers of entry either without or with a warrant (with differing notice requirements and thresholds).
There has been significant publicity about these additional powers, but the current indications from the RSH are that it would continue to operate on a co-regulatory basis as its fundamental approach to regulation and so the expectation would be that the RP and its board would be primarily responsible for identifying and addressing problems with the RP's housing stock and so these powers would only be used where that was not happening.
De-registration
The Bill includes a significant clarification of the law in relation to the compulsory deregistration of an RP for failure to meet a regulatory standard.
This will provide a simple legal basis for removing an RP from the register where it is in breach of a standard. It is expected that this would only be used where the breach is significant and the RP is unwilling or unable to rectify the position, but the Bill does not require this to be the case. This could have a significant impact on those RPs' wider operations; for example, maintenance of RP status is a common requirement of funding agreements. It also has important implications for individual residents in respect of their rights and may affect their benefit entitlements. Given the wider sector importance of this to both RPs and to other stakeholders we would hope that the RSH would issue clear guidance as to when it would expect to use this power before it becomes law.
Electrical safety standards
The Bill gives the Secretary of State the power, by regulations, to impose electrical safety duties on all landlords.
Alongside the Bill, the Government has published a consultation on electrical safety standards for social housing, which includes specific proposals around mandatory checks on electrical installations for social housing at least every 5 years and mandatory PAT testing on all electrical appliances provided by social landlords as part of a tenancy.
Listening to tenants
The RSH will be required to set up an Advisory Panel which will include tenants, RPs, secured creditors of RPs, local housing authorities, the GLA, the HCA and the Secretary of State.
Other changes
The Bill makes a number of other changes to the regulatory regime, including a number of specific amendments relating to extension of some powers to for-profit RPs as well as clarifying that LLPs can register and how the legislation applies to them.
The constitutional notification regime has also been updated, with new notifications being required for changes of name and registered office.
There is an enhanced power for the RSH to require third parties to provide documents or information which the RSH believes are relevant to its regulatory functions. The intention behind this change appears to be to make it easier for the RSH to investigate and pursue potential frauds or mismanagement where the key information may be held outside the RP itself.
There are some detailed provisions relating to the statutory moratorium on dealings with an RP's property when the RP or its creditors are taking actions relating to insolvency or similar problems.
Next steps
The second reading of the Bill is scheduled for 27 June and we will be carefully tracking the progress of the Bill as it makes its way through Parliament.
However, even once the Bill has received Royal Assent, there is a lot of work to do to bring the new regime into force. Several elements require Secretary of State consultation and then a formal Direction to be issued to the RSH. To issue new standards, the RSH must also consult first. The RSH will also need to establish the mechanisms through which it will regulate the new standards and create the new establishment to do so.
The RSH is undertaking a substantial amount of work in parallel with the development of the Bill and has indicated that it is likely to publish a further direction of travel document about how it sees this, the likely nature and scope of its revised regulatory standards and the operational side of regulating the standards before the end of 2022 and there is clearly an appetite to bring the new regulatory regime into force as soon as reasonably practicable.