Legislative Reform (Regulator of Social Housing) (England) Order 2018 — House of Lords, 2018-05-23
Topic: Housing
George Young (Conservative, Centre-right): My Lords, the draft order we are considering today is, I hope, a largely uncontroversial one. Indeed, it passed through the other place without a debate. It seeks to establish the Regulator of Social Housing as a stand-alone body. It implements the recommendation in the Tailored Review of the Homes and Communities Agency to establish a stand-alone regulatory body for social housing. In so doing, it removes any possibility of a potential conflict by separating out the regulatory function from the organisation, which is also responsible for investment. It will not, however, change how registered providers of social housing are regulated or how they operate on a day-to-day basis That is not to say that this change is insignificant. The change will ensure the continuation of independent and robust regulation of the social housing sector. At the moment, the regulation of social housing is the responsibility of the regulation committee, a statutory committee of the Homes and Communities Agency. While the organisation responsible for undertaking this function refers to itself as the Regulator of Social Housing, it remains legally part of the Homes and Communities Agency. It is independent from government and is crucial in underpinning investor confidence in the social housing market In 2016, the then Department for Communities and Local Government conducted a tailored review of the Homes and Communities Agency. The review was forward-looking and focused on the challenges faced by the agency. In respect of regulation, the review found there was a compelling case for change of the regulator’s structure. In recent years, the Homes and Communities Agency has expanded into commercial investments. This makes the agency, in some cases, both a secured creditor and regulator of registered providers. This potential conflict of interest did not exist when the decision was made to incorporate social housing regulation within the Homes and Communities Agency as, at that time, the agency’s funding predominantly focused on grant-making I should make clear that existing governance arrangements and an operational "ethical wall" have ensured that information has not been inappropriately exchanged between the regulation and investment functions. However, the financial landscape of the sector continues to evolve and become more complex. Because of that, it becomes ever more important that the Homes and Communities Agency and the regulator are best positioned to adapt to such changes and that commercially sensitive information is safeguarded. Moreover, it is crucial that the regulator is perceived to be adept at handling such complexities, so as to uphold lender confidence The regulator’s role and functions are set out in the Housing and Regeneration Act 2008, as amended by the Localism Act 2011. As a result, changes to primary legislation are needed to deliver a stand-alone regulator. We have used the powers in Section 2 of the Legislative and Regulatory Reform Act 2006 to deliver these changes through a legislative reform order. The order ensures that social housing regulation is made more consistent with better regulation principles by providing for greater accountability and transparency for regulatory activities. I should also make an important point about legislative reform orders. They are intended to be used either to reduce the overall burden of regulation or to ensure that regulation is carried out in a more transparent or proportionate manner. They cannot be used to create new, or vary existing, regulatory functions. That means the current provisions on the regulatory and enforcement powers of the regulator contained in Sections 192 to 269B of the Housing and Regeneration Act 2008 remain effectively unchanged by this legislative reform order. These provisions set out the regulatory framework, for example around the economic and consumer standards that can be set and how they are monitored. They also cover enforcement powers at the regulator’s disposal, for example, to impose penalties or to award compensation in the event of failure by a housing association. So—to anticipate points that noble Lords may wish to make—changes to how the sector is actually regulated are better considered as part of the forthcoming social housing Green Paper. What this legislation will do, however, is to put in place the arrangements for a robust and independent regulator ready to adapt to any policy changes that may arise from these reviews A crucial part of the process of delivering changes through a legislative reform order is that there is public consultation on both the changes proposed and the use of a legislative reform order to deliver them. The department conducted a consultation in early 2017. While the number of responses was relatively small, they were overwhelmingly in favour of the move, including from the sector and investors I turn briefly to the specifics of the LRO. In effect, this order reverses the changes made by the Localism Act 2011 and removes the regulator from the Homes and Communities Agency, thereby making it a stand-alone, independent body. The detailed provisions that do this are set out in Schedule 1 to the order. Part 1 of the schedule establishes the regulator and transfers functions from the HCA to the regulator. Part 2 makes amendments to other legislation consequent upon the creation of the regulator. Part 3 provides for the transfer of property, rights and liabilities from the HCA to the regulator. Finally, Part 4 of the schedule provides for transitional and savings provisions consequent upon the transfer of functions To conclude, the creation of a stand-alone Regulator of Social Housing is a necessary change that will ensure that the sector continues to be regulated effectively. This is essential if we are to ensure that the financial markets continue to have confidence in the sector and to allow housing associations to invest in providing the homes that we need. I commend this order to the House, and beg to move.