It’s finally here: a digest of the Social Housing (Regulation) Act 2023

July 27, 2023

Five years on from the Social Housing Green Paper and over two years on from the Social Housing White Paper, the Social Housing (Regulation) Act 2023 received Royal Assent last week. Sarah Greenhalgh examines a key piece of legislation.

The Social Housing (Regulation) Act significantly enhances the Regulator of Social Housing’s (RSH) role in regulating the consumer standards. During its journey through Parliament, it has also become a ‘patchwork’ of reform, plugging various gaps and picking up on some wider topical issues. Many of the provisions are not yet in force and are subject to further regulations made by the Secretary of State. However, it is anticipated that most aspects of the Act will take effect on 1 April 2024 when the proposed new consumer standards come in.

The key reforms include:

1. Removal of the “serious detriment” test

This will enable the RSH to use its monitoring and enforcement powers in relation to the consumer standards without the need for it to be satisfied that there is (or was) actual or potential risk of significant detriment to residents.

The RSH must still exercise its functions in a way that is proportionate and minimises interference. However, this change brings consumer regulation on par with economic regulation on a proactive rather than reactive basis.

2. Enhanced focus on transparency and safety

The Act amends the RSH’s fundamental objectives to reflect these two focus areas. It enables the RSH to set standards around the provision of information, and enhances requirements around tenant safety. For example, it incorporates:

Awaab's law - requiring the Secretary of State to set out new requirements for landlords to address hazards such as damp and mould within a fixed time period. Consultation is expected on this within the next 6 months, with a view to the requirements taking effect in summer 2024.
The requirement for registered providers of social housing (RPs) to have a health and safety lead.
A duty to ensure that tenants whose safety is threatened are offered alternative accommodation by their landlord on equivalent terms to their existing tenancy (or co-operate with other landlords to do so). This reflects a focus on protecting victims of domestic violence and also a recognition that landlords need to adapt their processes to protect their most vulnerable residents (see the Housing Ombudsman’s (HO) recent call for evidence for its next Spotlight report).
A new ‘Access to Information’ scheme for residents.
New requirements to provide information to residents based on financial metrics (e.g. management costs, executive remuneration).
Giving the HO the power to issue its Complaint Handling Code on a statutory footing, which it has indicated will take effect in 2024. The Act also gives the HO the power to instruct RPs to measure their service against HO guidance on issues such as damp and mould and to change policies, to help drive improvements following complaints from tenants.

3. Addressing gaps and ‘vulnerabilities’

The Act clarifies that the RSH may make re-designation decisions from non-profit to for-profit based on the business model of an RP (e.g. capturing lease-based providers where business plans do not stack up against obligations in leases). Other changes in this area include:

Requiring RPs to notify the RSH where there is a change in subsidiary status (which is already a regulatory requirement at the moment) and to notify if there are certain changes to board members which indicate a change in control.
Introduction of the ‘look through’ power first floating in the White Paper - broadening out the circumstances in which the RSH can request information from third parties to enable it to follow information relating to funds or assets once they have left the regulated sector. A failure to provide the information, or provision of false or misleading information, will be an offence. This is specifically aimed at tackling fraud or misuse of sector funds and will enhance the effectiveness of the regulation of the economic standards.
Closure of other gaps relating to re-registration decisions on conversions from companies to community benefit societies; confirmation as to how the provisions apply to limited liability partnerships. It also confirms how RPs should be treated in the interim period following a re-structure whilst they await the outcome of their re-registration decision.

Interestingly, in the Government’s response to the Levelling Up, Housing and Communities Select Committee inquiry into the Regulation of Social Housing, also published yesterday, it rejected the recommendation from the committee to expand the RSH’s role in monitoring mergers. The Government referred to the Office of National Statistics’ re-classification risk as rationale for this. Instead, it refers to the notifications regime and existing enforcement powers as being satisfactory to oversee such transactions.

4. New Consumer Standards and Inspections

The RSH’s new proactive role will be supported by new consumer standards and an inspections regime, which are expected take effect from April 2024. The consultation on the standards will be published next week.

For private RPs, inspections will be linked to their current in-depth assessment. For local authorities, this will be an entirely new regime and experience. The RSH has undertaken initial pilots and will be embarking on its third pilot in the Autumn.

5. Increased enforcement powers

These include:

Performance Improvement Plans or ‘PIPs’ – these bridge the gap between the current use of voluntary undertakings by the RSH and the use of other enforcement powers. PIPs will relate to breaches of the consumer and economic standards, or where providers have failed to comply with transparency requirements. Tenants can request copies of PIPs and, where there is a failure to comply, compensation may be payable to those who suffer as a result.
Removal of the cap on fines for non-compliance (so they are now unlimited).
The right for the RSH to undertake surveys on properties directly (including the power to obtain warrants for access and undertake emergency repairs where there is a serious risk).
Widening enforcement powers relating to registered charity, local authority and for-profit providers.
Increased powers for the RSH to remove officers of providers, where encountering unreasonable resistance.
Adjusting the grounds upon which the RSH can hold an inquiry.

6. ‘Professionalisation’ of the sector

The Act gives the RSH power to set standards on the competence and conduct of all staff ‘involved in the provision of housing management services’.

The Government’s response to the Select Committee recommendations confirms that the revised consumer standards will set mandatory qualification requirements for senior housing managers and executives. These requirements will extend to arms length management organisations (ALMOs) and tenant management organisations (TMOs). The Government will make directions to the RSH as to the specific qualification requirements.

Select Committee recommendations requiring the consumer standards to include additional requirements around the diversity of executive teams: the Government has indicated is the responsibility of the RSH.

7. A more joined up approach informed by lived experience

The Act requires the RSH to set up an Advisory Panel which includes those that the RSH views as representing the interests of lenders, local authorities, tenants and landlords (as well as representatives from the Great London Authority, Homes and Communities Agency and the Secretary of State). The role of the panel is intended to inform the RSH on a ‘wide range of matters’ – including key sector issues and risks.

In addition, the Act also requires the RSH and HO to co-operate and to prepare, published and regularly review their Memorandum of Understanding (setting out how they work together) and to consult each other when making changes to their respective schemes or standards.

8. Energy efficiency

The Act was amended during its passage through Parliament to include an additional fundamental objective for the RSH to ensure that homes are energy efficient.

Requirements for the Secretary of State to publish a strategy on reducing energy demand for social housing properties and a power for the RSH to set standards as to the energy efficiency of accommodation, facilities and services provided in connection with social housing were proposed by the House of Lords and then subsequently rejected in the Commons.

If that wasn’t enough…

The Government response to the Levelling Up, Housing and Communities Select Committee inquiry into the Regulation of Social Housing was also published yesterday.

In addition to the references above, it includes wider responses as follows:

Recommendation to further fund regeneration and removal of the ‘additionally’ requirement in relation to grant funding: the Government accepted the former (see the recent Homes England announcement around grant for regeneration), but it has not adopted the latter.
Recommendation for the Government to set out its plans to fund one-for-one / like-for-like replacement of every home under the proposed (and long-trailed) extension of the right to buy to RPs (and whether this might result in the re-classification of private RPs into the ‘public sector’): the response to this element references only changes made in relation to councils homes and one-for-one replacement with no reference to how the extension will work beyond saying it is a Government policy.
Recommendation for the Government to provide an update on access to funds for RPs to remediate their stock to meet building safety requirements and provide an assessment of the total cost of such works (and the consequential funding gap): the Government’s response references existing pools available and confirms a new Mid-Rise Scheme for buildings between 11-18 metres in height.

Unsurprisingly, the tone of the Government response is very much geared towards landlords taking responsibility for their landlord duties and promotion of existing policies and the Act, with little further detail about how energy efficiency measures, new homes and regeneration or remediation works will be funded (perhaps an answer we will get from the Levelling Up Committee inquiry on social housing finances and sustainability).

Next steps

First: breathe! There is a significant amount of detail here.

And we have more to come: consumer standards consultation to be published next week*; then how ‘compliance’ with the standards will be graded; specifics around the Access to Information Scheme; outcomes from the Decent Homes Standards Review; what the ‘qualifications criteria’ will be and who it specifically applies to; and the cost of enhanced regulation – to name a few.

Watch this space.

Sarah Greenhalgh is a Partner at Bevan Brittan.

* Update: the Regulator of Social Housing has now published the consultation. It can be viewed here.