Posted 21.09.12
The Regulation Committee of the Homes and Communities Agency (HCA) is stepping up to the challenge of a more diverse and complex sector. Speaking at the National Housing Federation (NHF) Conference, Regulation Committee Chair, Julian Ashby, highlighted the importance of regulation. He called for a more tailored approach as the Regulator's remit expands to cover both for profit and not for profit registered providers, in what is an increasingly risky operating environment.
As a result, the HCA's Regulatory Framework will need amendment to take account of different approaches - regulation needs to be tailored in order to achieve a comparable outcome. The areas that will need amendment or elaboration include ring-fencing and the consents regime.
He said:
"These changes are challenging for us as a regulator. Our remit covers registered providers (be they for profit or not for profit), but it does not cover unregistered entities - whether they be parents, subsidiaries, associated companies or joint ventures.
"While unregistered organisations have the potential to cross subsidise social housing or provide other benefits in their own right, they also have the potential to undermine or threatened the viability of a registered association and put social housing, its tenants and lenders at risk.
"The way we can get assurance as a regulator is likely to differ between for profit organisations, those with for profit or unregistered parents, groups with registered parents and stand-alone registered providers.
"In order to deal with this level of increasing complexity and 'profit'/'not for profit' interface, we will need to take a more risk based approach and tailor our focus to the nature of the registered provider, its aspirations and its financial headroom."
In his speech, Julian Ashby emphasised that this new territory means a significantly riskier operating environment, meaning an emphasis again on HCA's continued requirement on stronger governance and risk management and an 'iron grip' on treasury management.
Boards will need to ensure that they understand their exposure to a fragile housing market, ensuring they fully understand both the risks and opportunities of diversification, including in subsidiaries and joint ventures.
However, he also emphasised that there is no cause for concern as the sector is well placed to deal with these challenges - the sector is making surpluses of £1 billion a year.
He said:
"Standing still is not an option. And the number and diversity of challenges have reinforced the Regulator's view that providers need to drive substantial improvements in value for money in order to give headroom for higher risk ventures and to provide a margin of safety if multiple risks crystallise.
"We want providers to grow and use capacity to provide more homes. We are not asking them to avoid risk, but to manage it effectively."
