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Regulation warning for Welsh Government

Current arrangements for the regulation of housing in Wales are ‘unsustainable’ and risk being compromised by a lack of resources.

That is the blunt warning to Welsh Government in a performance report just published by the Regulatory Board for Wales (RBW), which says a fundamental debate is needed about plans for the future.

The report says that:

‘The RBW believes regulatory resources are below the minimum level needed to continue to deliver the existing framework safely and adapt to regulatory needs and demands.’

The good news is that the RBW thinks the current co-regulatory model is working well:

‘It is providing a strong balance between assurance and improvement and is consistent with the overall direction for regulation nationally and internationally.’

The RBW says current arrangements do not go far enough to address the commitment to put ‘tenants at the heart of regulation’ and it remains committed to improving them.

The current approach and focus is seen as ‘re-establishing approach and focus is re-establishing confidence and credibility in the overall regulatory framework with the sector, lenders and stakeholders.

Most of the sector is seen to be demonstrating good governance, financial management and viability, and strong delivery of services to tenants and service users.

However, the report warns that:

‘There remains too many specific instances of significant governance failings that have given rise to both intervention and a wide range of additional regulatory involvement. RBW are also concerned that self-reporting of regulatory matters to the Regulator is not happening consistently across the Sector.’

Currently, seven housing associations have non-standard regulatory judgements, with three under increased scrutiny for governance and financial viability and two for governance and two subject to intervention, one for governance and financial viability and one for governance.

However, managing serious cases is currently estimated to take up 20-25% of the team’s capacity and there have been delays in other ‘critical areas of regulatory work’.

The RBW argues that core activities and regulatory intervention are running at much higher levels than when the framework and regulatory team were established and goes on:

‘The Regulator does not have the capacity to continue to deliver some of these functions in the long term or respond effectively to support involvement in intervention or enhanced regulatory support where it is needed at individual Associations. This clearly enhances the risk both of compromising core work and compromising the Regulator’s ability to identify governance and financial concerns quickly.

That means a more fundamental debate is needed about ‘the nature, form and functionality of regulation the Welsh Government may wish to see in the future and which it would be prepared to resource with the necessary skills and capacity’.

The debate should include national discussion about how regulation of the sector should be resourced in future, including the fee-based model used in England.

And it should also include ‘domain regulation’ of both housing association and local authority landlords as seen elsewhere in the UK.

In Wales, housing associations are regulated by the RBW and local authorities by the Wales Audit Office.

However, the report argues that ‘there is an increasingly‐recognised inconsistency and inequality in the nature of housing regulation between the local authority and housing association sectors, increasingly seen as disadvantageous to local authority tenant participation and access’.

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