Local authorities with housing stock must brace for regulatory change

So what will the bill change? A key change that will unleash the RSH is the removal of the ‘serious detriment test’.

In relation to the consumer standards, the RSH has been constrained in taking action unless satisfied that there is actual or potential “serious detriment” to residents.

The RSH has interpreted this to mean “serious actual harm or serious potential harm to tenants”.

The bill proposes to remove this test, which allows for a much more muscular RSH, which can in turn investigate beaches as it deems appropriate.

This is not to say that the RSH will investigate each and every breach, the RSH is likely to continue to take a proportionate approach and prioritise organisational failings, however the sector may find that the RSH has a lower bar for investigation.

Given the RSH has stated that it wishes all registered providers to be transparent and to engage on regulatory breaches early, this will require a more open dialogue between the RSH and local authorities as a matter of course in order to ensure that breaches are being dealt with adequately and that individual issues are not becoming organisational failings that require regulatory intervention.

The bill also amends the current maximum penalty for regulatory offence from £5,000 to an unlimited amount. This will be chastening for some!

“The bill proposes to remove [the serious detriment] test, which allows for a much more muscular RSH, which can in turn investigate beaches as it deems appropriate”

As these changes follow the Grenfell Tower fire, it is unsurprising that the RSH has made it clear that safety should be at the heart of social housing regulation.

As trailed in the white paper, the bill requires all registered providers, including local authorities, to designate an individual to be the ‘health and safety lead’.

This person will be responsible for monitoring compliance with health and safety requirements, especially with regards to the Homes Standard, which requires that landlords “meet all applicable statutory requirements that provide for the health and safety of occupants in their homes”.

These will include fire, gas, electrical, asbestos and water safety regulations. The bill requires that the local authority must ensure that the health and safety lead role (i) has sufficient authority (including, in particular, authority to obtain information) within the provider’s organisation, and (ii) can devote sufficient time to the functions to perform the role effectively.

The bill makes it clear that the designation as health and safety lead includes neither responsibility for compliance, nor liability for the local authority registered provider’s failure to comply with health and safety requirements. Local authorities should think about this designation now and how the role will interface with elected members to ensure they have sufficient comfort regarding ongoing compliance.

The RSH may set standards for registered providers relating to provision of information to their tenants and to the RSH regarding the consumer standards and economic standards. This may include specific information relating to the accommodation, facilities or services.

The RSH will consider a monitoring regime for information provision by RPs and consequences if they fail to do so. Information regarding the remuneration of their executives and income management costs and other expenditure may also be required to be published.

The provision of information will usually need to be accompanied with an analysis of what the information shows.

The additional, more muscular, powers relating to information gathering may represent the biggest cultural shift for local authorities coming out of the bill. Though local authority registered providers are perhaps better placed than housing associations from a transparency perspective due to familiarity with the Freedom of Information Act in respect of council housing.

“There is clearly an appetite to bring the new regulatory regime into force as soon as reasonably practicable, and local authorities need to start preparing now”

A new regulatory measure introduced by the bill are Performance Improvement Plans, or PIPs. These again strengthen the existing methods of voluntary undertakings. The regulator will be able to serve a notice on the local authority, requiring the production of such a plan, to which the local authority will then be held to account. For those that have breached the regulatory standards, where this might have been because of organisational failings rather than an isolated event, establishing compliance mechanisms, signed off by members, will be an important method to avoid the issuance of a PIP notice.

Failure to comply with a PIP can lead to further regulatory intervention.

Even once the bill has received Royal Assent, there is a lot of work to do to bring the new regime into force. Several elements require secretary of state consultation and then a formal direction to be issued to the RSH. To issue new standards, the RSH must also consult first. The RSH will also need to establish the mechanisms through which it will regulate the new standards and create the new establishment to do so.

The RSH is undertaking a substantial amount of work in parallel with the development of the Bill and has indicated that it is likely to publish a further direction of travel document about how it sees this, the likely nature and scope of its revised regulatory standards and the operational side of regulating the standards before the end of 2022. There is clearly an appetite to bring the new regulatory regime into force as soon as reasonably practicable, and local authorities need to start preparing now.

Scott Dorling, partner, and Julian Jarrett, associate, Trowers & Hamlins