In April of this year the Homes and Communities Agency (HCA) published a discussion paper aimed at amending the regulatory framework governing social housing assets, with the intention that Registered Providers’ (RP) purely social housing stock would be protected from the possible effects of exposure to risk in non-social housing activity undertaken by RPs.
A significant measure amongst the proposals made in the discussion paper was that purely social housing stock held by RPs would be 'ring-fenced' from non-social housing stock, including measures to ensure that social housing activity was carried out by a specific corporate entity with non-social housing activity being restricted to a set percentage of an RPs turnover.
Following on from the responses received by the HCA to the proposals made in the discussion paper, the HCA have announced that they will not be pursuing the ring-fencing initiative in regard to not for profit RPs. However, in relation to for profit RPs or those not for profit RPs with unregistered parent companies the ring-fencing proposals may still apply.
The proposals in the discussion paper have come in the wake of the 2010 reforms to the regulatory code which gave RPs a greater deal of flexibility in cross funding of social housing activity by non-core activities. These reforms were designed to assist RPs to operate in a climate of decreasing public funding.
Opposition to the ring-fencing proposals included assertions that funding of social housing activities by non-social housing development and non-core commercial activity made ring-fencing impractical, and that it would be extremely difficult to impose a single regulatory measure that would be effective in the context of the diversity of RPs activities, and this has been recognised by the HCA.
Those responding to the discussion paper also submitted that there were sufficient controls within the existing regulatory framework to protect the core social housing stock.
As part of its focus on recovery planning, however, the HCA does envisage alternative proposals applying to not for profit RPs and for profit RPs with registered parent companies. These include:
- Maintaining an asset register
- Greater assessment and scrutiny of risk when assessing new ventures together with effective controls
- 'Stress-testing' of assets so that, for example, the impact of multiple serious exposures can be planned for
- Planning for worst case scenarios so that exit strategies can be assessed.
A full 12 week consultation on detailed proposals is planned.