Regulation fees for English social housing providers: why it makes sense for the sector


Toby 240x260The Homes and Communities Agency today concludes a consultation on its proposal to introduce fees for regulating private registered providers of social housing in England from April 2017. This relates to the statutory powers granted under the Housing and Regeneration Act 2008.

The proposal is for a one-off fixed fee for all successful applications for initial registration and an ongoing annual fee to fund the majority of costs of social housing regulation, with the remainder funded by government grant.

While charging fees for regulation is a well-established practice in other sectors, there has been a degree of opposition to this proposition, with some providers seeing a regulation fee as yet another cost for them to bear in an already tough sector environment, and expressing some scepticism over the ability of the regulator to effectively control costs and demonstrate Value for Money. However, we think any scepticism is misplaced and are in favour of the introduction of fees, for a number of reasons.

Firstly, although we have an extremely successful regulator, which now oversees in excess of 1,500 organisations, £7bn of investment in new housing supply (over the 12-month period ending September 2016) and £81.5bn of private debt (of which £67.2bn is currently drawn), the mounting challenges faced by the housing sector demand future-proofed, credible and effective regulation. While Theresa May’s Government appears to be taking a more practical approach to housing than under David Cameron, the fact remains that housing providers are under significant pressure to generate income and take more risks, whilst still maintaining their financial viability. More varied and complex financing structures are becoming the norm in the sector, necessitating a regulator with first-rate knowledge of matters of finance and risk. Providing the regulator with an independent source of income will allow it to maintain and invest in the required levels of skill and expertise to regulate an increasingly complex sector.

Secondly, allowing the regulator to generate its own income will increase its independence from Government and make it less subject to vagaries of different administrations. This will enable the regulator to plan for the long term and maintain stakeholder confidence. However, it will be important for the regulator to ensure that its use of this income is transparent and accountable, and to publish regular Value for Money statements to satisfy stakeholders that fees are being used appropriately.

Thirdly, charging a fee for regulation will mean that providers are actively invested in the effective operation of the regulator, essentially giving stakeholders a genuine stake in the regulator and its performance. This in turn will sharpen providers’ focus on ensuring that regulation is material to their needs, ultimately providing the regulator with a wider group of genuine stakeholders to approach in future consultations.

Our view is that it is in the sector’s interests to have an independent, financially sustainable regulator with the necessary skills to regulate an increasingly complex and varied sector. It is our opinion that the introduction of fees for regulation will go some way to helping achieve this aim.