Reactive regulation is very much still regulation

Posted: 29th January 2019

2018 saw a series of smaller providers come under regulatory scrutiny, and this looks set to continue in 2019. Following reactive engagement, Bespoke Supportive Tenancies (BeST) are being added to the Gradings Under Review list having just passed the 1,000 homes mark. And as new private investment continues to increase in the registered provider market, much of it going to smaller providers, it is worth remembering that all providers, regardless of size, must understand and comply with the requirements of the Regulator of Social Housing (RSH).

The ‘1,000 home threshold’ often looms large in the minds of those working with and for small providers, particularly those who are making the most of opportunities to grow. Past 1,000 homes, and the prospect of an in-depth assessment, more regulatory returns and greater scrutiny and review can be a source of concern for smaller providers.

Below that magic number and a ‘light-touch’ regulation approach is the order of the day with fewer returns, no gradings, and what some may see as an ability to work ‘under the radar’. However, the keyword in light-touch regulation, is regulation. While the RSH’s risk-based approach might see many smaller providers freed from the more onerous obligations of their bigger counterparts in the sector, the RSH is and has been clear that the same standards apply regardless.

And of course, this is as it should be. Tenants in the homes of smaller providers deserve no less than those with landlords with over 1,000 homes; the reputation of the sector needs protecting just as much; and so do the more than 90,000 valuable social housing assets, held by sub-1,000 home providers.

Many smaller organisations have embraced the robust framework of governance and business planning that the regulatory standards provide, understanding the benefits to their organisations of adopting a tested approach to effective and prudent social housing management. For others, though, a lack of capacity, inexperience or understanding may be a barrier to compliance. It is clear for organisations unable or unwilling to comply with the regulatory framework the RSH will intervene, regardless of organisational size, to protect social housing, as has been clearly demonstrated in the past year.

What does all this mean for the ‘sub-1,000’ providers? Well, as ever, boards and executives need to be considering their own effectiveness, and the effectiveness of their control framework. Being well intentioned, though incredibly important, isn’t good enough.  They need to be understanding their operating environment, horizon-scanning and identifying and managing risks to their organisation (particularly when engaging in new or novel activity for the sector), and they need to have robust and properly stress tested financial plans in place. Hoping it will be alright on the night, won’t cut it with the regulator. They will look for evidence, that plans are in place or can be put in place to manage identified risks.

For many this will be business as usual, as the activity described above forms the backbone of good organisation management. But for those for whom this is news, let the lessons of recent regulatory notices be a warning. Be proactive, don’t wait for the regulatory knock on the door.

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