The Regulator of Social Housing (RSH) has not quite launched a consultation on the future economic regulation of social housing, but it has invited discussion on its proposals.
If that sounds a little convoluted, it surely reflects the importance of the matter. As the organisation puts it, with the launch of a discussion document today, its proposals are aimed at updating and “future-proofing” economic regulation to “help the sector achieve more and better social homes”.
The discussion document sets out the regulator case for the change, along with its preliminary proposals. Ahead of a formal consultation on revised standards planned for 2027, RSH says it wants to hear the sector’s views by the end of September.
Setting out its case, RSH says the current framework has failed to keep pace with a sector under mounting pressure, and change is therefore essential.
As RSH explains, in the decade since economic regulation was last comprehensively reviewed, the sector has changed substantially. Housing associations have built around 550,000 homes since 2015, while annual spending on repairs and maintenance has almost doubled to £10bn. But financial margins have fallen by more than a third over the same period, squeezed by the aftermath of the pandemic, high inflation and rising borrowing costs. There have been more cases of landlords in financial distress requiring rescue by others.
The document states that the sector “is likely to remain under significant financial pressure over the next five to 10 years” and that governance and risk management must reflect that reality.
Jonathan Walters, chief executive of RSH, said: “Our focus is simple: a more efficient, financially resilient social housing sector – and a modern regulator that drives it.
“We want landlords who invest for the long term, improve safety and quality, manage risk, and deliver more and better homes for current and future tenants.
“We are inviting a sector-wide conversation on the challenges ahead and how regulation can better support the delivery of more and better social homes for the future.”
Central to RSH’s proposals is the idea that every social landlord should demonstrate five essential characteristics: being centred on social housing, operating with sufficient independence and autonomy, being financially sustainable, able to deliver effectively, and capable of failing safely.
Core social housing
The regulator is considering whether to introduce an explicit requirement – potentially linked to the proportion of social housing assets or turnover – to ensure that social housing remains the core purpose of any registered provider, rather than a peripheral activity.
On financial resilience, RSH is weighing whether to publish minimum performance benchmarks on key financial metrics, and to require large landlords – those with more than 1,000 homes – to carry out a standardised set of stress tests and publish the results alongside mitigation plans. The approach mirrors models used by other regulators, including the Bank of England and Ofgem.
The regulator also signals a tougher line on accountability for development. With the government having committed £39bn through a 10-year Social and Affordable Homes Programme alongside a £2.5bn loan scheme, RSH is considering requiring each private registered provider to publish an appraisal of its development capacity, and set itself targets for the number of new social homes it will deliver.
On disposals, RSH is examining whether landlords should be required to demonstrate how the long-term value of social housing is preserved when homes are sold or transferred – reflecting concern that publicly subsidised stock, once lost from the sector, is very difficult to recover.
The document also outlines a more risk-based approach to regulatory engagement. RSH intends to regulate higher-risk landlords more actively while reducing oversight of those presenting lower risk. It is considering more intensive scrutiny of smaller landlords with unusual or evolving business models, and enhanced requirements for the largest housing associations – some managing up to 100,000 homes – which it describes as strategically important to the wider sector and economy. Failure at such a provider, the document warns, “might call into question the financial sustainability of the whole sector”.
The regulator also raises the prospect of acting below the level of individual landlords to address localised failures, and of intervening more swiftly when landlords are slow to address identified weaknesses.
The discussion document explicitly acknowledges tensions between encouraging innovation and protecting tenants, particularly as new financing models – including for-profit providers and structures separating ownership from management – become more prevalent in the sector.
Image credit: Monster Ztudio/Shutterstock
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