An Assembly committee has warned housing associations about potentially ‘serious risks’ of diversification if it is not managed effectively.
And a report by the Public Accounts Committee (PAC) also calls for more transparency in the sector and for tenants to be given more power and information to properly scrutinise what associations are doing for them.
The PAC investigated the regulatory oversight of housing associations in the wake of reclassification of the sector by the Office for National Statistics and subsequent deregulatory measures by Welsh Government to make it clear that they are private sector bodies.
It said the regulatory change was a ‘step in the right direction’ and was generally working well.
However, the committee was told how that some associations are now investing in student and nursing accommodation, independent maintenance services, or retail and other commercial opportunities, all of which are outside their core purpose of providing social housing.
The Assembly Members recognised the potential benefits of diversification, noting that surpluses generated from commercial activities can be reinvested in providing new housing and services for tenants. But they warned of serious risks if these activities are not managed effectively.
The committee wants to see greater clarity on how the Welsh Government oversees diversification, particularly in cases where it is undertaken by a non-registered social landlord subsidiary.
It also made a series of recommendations about regulation designed to promote greater openness and transparency while maintaining the sector’s independence.
In particular, the AMs call for the Welsh Government Regulation Team to ensure that the process for setting senior management pay is robust and with appropriate disclosure in the annual accounts.
Nick Ramsay AM, chair of the Public Accounts Committee, said:
‘Generally we found governance and regulation within the sector to be working well enough for housing associations to be granted more autonomy, but in return we think they should do more to be open and transparent in their decision making.’
‘We do, however, have concerns about how some housing associations are diversifying away from their core purpose.
‘In recognising the benefits this can bring in terms of further investment in housing and services for tenants, we believe there should be greater clarity on how this activity is overseen by the Welsh Government.’
Clarissa Corbisiero-Peters, deputy chief executive of Community Housing Cymru, said:
‘We welcome the publication of today’s report by the Public Accounts Committee, which follows a robust and lengthy inquiry into the regulation of housing associations in Wales. The report recognises the vital role housing associations play in tackling the housing crisis, and concludes that the new regulatory framework is a step in the right direction to make housing association regulation more open, transparent and accessible.
‘The report recognises the increasingly diverse work of housing associations, including the provision of support services, and the building of homes for first time buyers and student accommodation. As independent social businesses, this diversification allows housing associations in Wales to generate further investment, which makes the public money we receive go further and allows us to continue to focus on our core purpose of providing affordable homes.’
She said associations would work with Welsh Government on improving transparency and accessibility of information for tenants.
And she also welcomed the committee’s recommendation that associations should be allowed to consider whether to pay board members.
Matt Dicks, director of CIH Cymru, said:
‘The report rightly highlights the role tenants have in providing expertise and insight to inform the current and future direction of housing policy. There is already a large amount of good practice in engaging tenants in this way but CIH Cymru will continue to work in partnership with the regulator to ensure that the support given to tenants, in order to properly scrutinise landlords, continues to grow and remain robust.
‘We also welcome that the report recognises the central role that diversification will have to play in the sector to ensure that it is able to meet the challenges of welfare reform and economic uncertainty, and the need for the Welsh Government to provide reassurance by ensuring its regulation team have the capacity and skills to meet challenge of regulation in this area.
‘The remuneration of board members is a recommendation that many of our members will welcome. The flexibility to set board member remuneration will provide an additional draw as members seek the best talent and expertise to enhance and strengthen their combined experience. Finally, our members are committed to working closely with the regulator to ensure that the process of senior management’s pay remains open and transparent.’