Providing greater clarity on regulation in uncertain times – new Regulating the Standards guidance issued

While we continue to await details of the Social Housing Bill, which will provide the Regulator of Social Housing (RSH) with the legislative powers required to deliver the proactive consumer regulation approach promised under the social housing white paper, the RSH’s latest iteration of ‘Regulating the Standards’ (RTS), issued earlier this month, provides greater clarity on the RSH’s approach to assessing compliance of registered providers of social housing (RPs) against the current requirements of the regulatory standards.

Alongside a number of small changes (which are summarised in the Annex to the RTS), the latest RTS updates the RSH’s previously published model to the scoping of In-Depth Assessments (IDAs) to reflect the RSH’s current approach in relation to assessing the role and performance of an RP’s board. The RTS also provides further guidance on the RSH’s approach in two key areas, which we explore below.

For-profit RPs (FPRPs)

The growth of FPRPs looks set to continue, both in terms of number (we understand there are over 60 currently in the process of seeking registration with the RSH) and size, with some existing FPRPs nearing or reaching the 1,000 unit mark.

Linked to this latter point, ahead of the RSH’s first regulatory judgements for FPRPs, the main substantive changes within the RTS relate to the RSH’s grading of “large” FPRPs (those with 1,000 units or more) following an IDA.

Within the RTS, the RSH acknowledges that FPRPs have different capital structures and cash flow dynamics and are often subsidiary organisations which depend on a larger group of connected companies in order to undertake their activities. However, the RSH stresses that FPRPs must still meet the requirements of the regulatory standards and the RSH recognises that there is a “qualitative difference” from groups headed by non-profit RPs and this will impact on the nature of the judgement about the RP.

Narrative regulatory judgements about FPRPs will therefore include an explanatory statement to clarify that the RSH’s judgement only deals with the FPRP and will not cover the non-registered entities within the wider group or their capacity to provide support to the FPRP. However, FPRPs should keep in mind that the RSH will take into account any risks to the FPRP arising from its relationship with the wider group entities. The RSH will use an asterisk alongside an FPRP’s grade (e.g. G2*) in order to ensure that the assessment can be recognised as being for an FPRP as opposed to a non-profit RP.

Small providers

The RTS also provides some more clarity on the approach taken by the RSH to “small” private RPs (i.e. those with fewer than 1,000 units), which has been an area of significant regulatory focus over the last eighteen months.

This includes confirmation that the RSH may ask for specific returns such as the Quarterly Survey from small providers in exceptional cases. We anticipate this might include where there are significant financial weaknesses or where an RP has experienced a period of rapid growth, which links to areas where we have seen small RPs, particularly lease-based providers, experience recent regulatory or financial issues.

The RTS also clarifies the RSH’s approach to placing small RPs on the Gradings under Review list in the event that the RSH is investigating a matter which may result in the RP’s compliance being re-assessed. This confirms the approach we have seen taken to date, with small RPs remaining on the Gradings under Review list until an issue is addressed or, more often, a regulatory notice is issued.

If you have any questions or would like more detail in relation to the changes within the new RTS or about anything in this article, please contact Ellen Damlica, Solicitor, or Gemma Bell, Partner.

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