How should we regulate social housing in Wales? Former chair of the Regulatory Board for Wales Deep Sagar has some ideas.
Why regulation?
When I went to stay in a hotel recently, I noticed I was given accommodation on payment of rent. As I went in I saw that the tap in the bathroom was not working well. I called reception and they sent a plumber in to fix it immediately. I realised they did all of that because they were afraid that if unhappy I might not stay with them next time but go to another hotel and I might tell other people. All of that could lead to their business not making a profit. Thus competition and the profit/price mechanisms give customers the right service in many sectors. However, in renting social housing, ie state-supported cheaper housing, competition and the profit/price mechanisms do not apply. Regulation to ensure consumers are protected while use of state-supported money is sound so that the service remains sustainable is the logical answer.
Co-regulation
Many regulators use the term ‘co-regulation’ to suggest that their regulation is participatory and in partnership with those regulated. No-one will disagree about having an empathetic relationship and everything that goes with that. Thus talking to housing associations and asking them for self-assessments is essential. Without data regulation would be unjustifiable. But one must remember that it is natural when being inspected to put your best foot forward. So, a self-assessment can only be a limited perspective. That has to be verified by other credible sources of data.
The whole purpose of the exercise is to come as close as possible to the objective truth. Without looking at alternative sources of information that is just not possible. Some think that requiring the association to publish the self-assessment means anyone disagreeing can provide their information direct to the regulator. That is a tall order. In Wales I was told that many associations were not publishing on their web site (all of us will know it can be made quite difficult to access the right document on a busy web site). Also, expecting busy or disinterested people to be scrutinising jargon-filled business documents is asking for a bit much.
Protecting tenants
What are the most important services tenants should get? Housing must be safe, of good quality and at the right rent. Thus, measuring safety, quality of repair and maintenance, and rent should be the main measures. I do not favour flaky concepts such as customer
engagement. Almost anyone can say they have great engagement without being subject to data that could say different. Data on customer provision can be verified by looking at the number and type of complaints with the association and those reaching the ombudsman. In addition, a sample of customers could be asked directly how they feel about safety, quality, rent and other services, for example. Sometimes local media reports can be useful. Based on all the information available the regulator could decide if a direct inspection was necessary.
Protecting public money and assets
Auditor comments and audited accounts clearly give a reasonable picture of a provider’s liquidity or financial viability. Note these are not management accounts but those certified by independent auditors. Having looked at that considering ‘value for money’ becomes important. The problem is that no-one has ever defined what good value for money is. Thus, it is better to focus on if money is being used well on the most important activities. These are borrowing, new building, repair and maintenance, and executive pay. Data available should be cross-checked with lenders and by comparing with other associations in similar circumstances. Is the cost of borrowing, expense per new build, repair, executive and the like relatively reasonable?
Legality
I don’t think regulators should meddle unnecessarily. In principle, after making sure of the protections that markets would have provided, providers should be left on their own to use their initiative as they best wish. However, regulators miss a trick if they do not consider compliance with legality in general. How well is the provider doing with regard to complying with other laws and regulations that apply? That should tell a regulator a lot. Thus, asking for a provider’s record with tax, health and safety, employment law and the like would help. If an association has discrimination complaints upheld against them surely that should matter to a regulator working on behalf of the state that subsidises?
Public value
One concept I favour is to encourage state-supported organisations towards creating more tangible public value. The exact instrument for that should be open to the provider. Thus, asking for evidence and considering whatever the association feels appropriate should be fine. Some might tout their decarbonisation towards net zero, others might point to employment creation or to supporting the homeless. All should be fine as long as an auditor verifies what is claimed.
Flaky fashions
I have already referred to so-called customer engagement disparagingly. By and large regulating inputs should be avoided in favour of regulating outcomes or proxy outputs. Thus, regulating an input such as governance can only be justified if there was incontrovertible evidence it causes good tenant protection or financial viability. In principle it should of course — but then it might be better to regulate for good management — but examples abound of how Enrons of the world pulled the wool over the eyes of the most detailed corporate governance invented. In my experience courage is the most important attribute a governor can have. The courage to ask a difficult question; the courage to say no; the courage to disagree. How do you ever regulate for courage?
Deep Sagar was chair of the Regulatory Board for Wales until it was dissolved by Welsh Government in July