Inside Housing’s Board Member Briefing: consumer regulation

The new regime

The new regulatory regime – which will cover both local authority and housing association providers – will see landlords proactively monitored for the standard of service they offer residents.

This will be achieved through inspections and ongoing reporting of tenant satisfaction measures (TSMs) – 22 measures of services which the sector is already gathering, will be submitted to the regulator in April. These inspections and reviews of the data will lead to social landlords being graded against four consumer standards:

• Safety and quality
• Transparency, influence and accountability
• Neighbourhood and community
• Tenancy

These standards were subject to a consultation which closed earlier this month. A final version is expected in February or March next year, but it would be a mistake to expect them to change greatly. 

“We’ve been clear about the direction of travel. There may be some changes as a result of the consultation, but the broad themes and direction of travel is clear,” says Angela Holden, director of regulatory engagement at the Regulator of Social Housing (RSH).

A starting point should be for every board member to sit down and read through the standards, which are set out in detail in the consultation document and the Code of Practice which has been published alongside them.

Like asking an A-level student to study the marking criteria ahead of their exam, there are many clues in these documents about what needs to be done.

“It seems like a really obvious thing, but as a board member, make sure you’ve looked at the standards, read them and understood where they’re coming from,” says Ms Victory-Rowe.

“The regulator obviously will not tell you what to do,” adds Ms Webster. “But between the standard and the Code of Practice, it’s obvious what they expect you to do. I don’t think it takes a rocket scientist to figure it out.”

After understanding their requirements, the job for boards is to assure themselves that their organisation is complying. But how can this assurance be achieved?

The new regime will see boards pick through a lot of data. There will be 22 separate TSMs, along with key performance indicators (KPIs) from the various arms of the business which are impacted by the standards – as well as more qualitative data about the experience of residents.

The regulator is expecting boards to digest all of this information to build up a picture of how their organisation is performing.

“Really what we want is for boards to be pulling all of the threads together and thinking, ‘What does that tell us,’ rather than looking at one piece of information in isolation and thinking, ‘That’s fine, we must comply,’” says Ms Holden. “For example, we’ve seen providers where the KPIs on repairs have been good, but their satisfaction is really low. If you’re just taking one bit of data in isolation, you won’t see the full picture.”

Organisations should have some sort of formal agreement in place about what data boards need to gain this assurance. “There needs to be real clarity about what kind of assurance you need across the whole customer regulation piece,” says Abigail Davies, a director at Savills Affordable Housing Consultancy. “So there should be an agreement between the board and executive about what you need to have to feel comfortable.”

Overloading the board with KPIs might not be the right way to go. Instead, high-level figures need to be supported by more granular data which executives can explain when they appear before the board.

“You don’t really want more than 20 KPIs at board level,” says Jonathan Cox, director of data at Housemark. “But sitting underneath those headline KPIs, you do need management KPIs that run across the business. And the executive leaders need to be able to articulate what’s driving those headline measures when asked.”

Approached properly, KPIs can be a useful starting point. “As long as they are presented with a trajectory, some comparisons of benchmarks and some contextual commentary, you should be able to use those to see pressure points, and then to start exploring in good time anything that doesn’t look right,” says Ms Davies.

“The whole way through this process, the regulator’s been really clear: the buck stops with the board. This is
your responsibility”

For some areas, the data needed is quite self-explanatory. Safety and quality, for example, requires good, up-to-date data on a housing providers’ stock.

The regulator’s consultation document says: “Registered providers must have an accurate record at an individual property level of the condition of their stock, based on a physical assessment of all homes, and keep this up to date.” This is something that is not quite in place yet at many organisations.

“This is going to be an issue. What we sometimes find is boards think they’ve got good data, but if you drill down through the organisation, and you start speaking to people in the asset management department, you can find a lot of cloned data, or stock condition surveys that are four or five years out of date and which have been updated through desktop assessments,” says Jonathan Walters, deputy chief executive at the RSH.

For the standard on transparency, culture and accountability in particular, it is harder to assess through data whether or not that essentially qualitative measure is being achieved. Data, though, can still be the starting point.

“Fundamentally, reviewing culture is a qualitative exercise, but the quantitative metrics can tell you where to look,” says Mr Cox. “One of the TSMs is satisfaction that the landlord listens to views and acts on them, and if that is 10 percentage points below sector averages, that’s a key indication that area is relatively weak for the business. You might want to investigate the culture of the organisation and lift the lid on that a bit.”

Board members would also be well-advised to spend some time outside of the boardroom. 

“Board members should be on social media and should be aware of what’s being said about the organisation,” says Catherine Little, also a director at Campbell Tickell. “They should also be prepared to go to an event where there are tenants, a walkabout or a social event. Nothing beats an unfiltered, direct conversation with a couple of the people they are there to serve.”

“Board members need to get out and about in some way. Simply standing in the customer contact centre for a while can be really enlightening,” says Ms Davies.

“You do need to be a little bit careful because your own experience can feel a bit more valid sometimes, but it can be really useful to gain that perspective.”

Boards are going to be required to show the regulator that this ‘tenant intelligence’ has not just made it to the boardroom, but is influencing decisions across the business.

“It isn’t enough to just take tenant data. Boards now need to be able to evidence they’ve taken that data and tenant intelligence, and it’s worked its way all the way up through the organisation and onto the board table,” says Ms Webster. “This requires a different approach to board meetings. The discussion around the board table needs to evidence the fact that tenant intelligence has worked its way all the way up through the business.”

How it will be enforced

From April, housing providers with more than 1,000 homes – both local authorities and housing associations – will face inspections in the form of in-depth assessments (IDAs). 

How this will be approached with regard to consumer standards is currently being piloted with a number of providers.

While IDAs have been part of the governance and viability standards for years, and will be familiar to housing associations as a result, the consumer standards will involve a much wider examination
of the business.

“Our approach to inspections will be similar to what [providers] have already seen through the IDA,” says Ms Holden. “But it is a broader set of issues that we’re looking at.”  

“I think it will touch more of the organisation than an IDA currently does,” says Ms Davies. “And, obviously, it will involve conversations with residents in a way that current IDAs don’t.

“We can expect more conversations, more time on site, a bit more probing and obviously it’s going much wider across the business.”

For local authorities, who are not currently subject to IDAs, the process will be new. And organisations with fewer than 1,000 homes must remember that they are still subject to the standards, even if they won’t be proactively inspected.

A new grading?

Currently governance and financial viability are graded on a scale from G1 to G4 and V1 to V4, with a two or above required for compliance.

While no official announcement has yet been made, it seems likely that consumer standards will use a similar rating scale, adding a ‘C’ grade to the existing G and V.

“When you go out and speak to tenants, it’s a really clear message that they want something really simple, really direct,” says Mr Walters.

“Tenants have seen what happens if someone’s downgraded from G1 or V1, they can see the board takes that really seriously, and they want something analogous to that. We’ve got to work that through, but it’s not an unreasonable request.”

“I think meeting the consumer standards is going to be harder, frankly, than meeting governance and viability standards, and I think the sector should be ready for that”

The regulator is also clear that the top grading – whatever form it finally takes – will be tough to achieve.

“At this point it would be unlikely that there will be many getting that top score… but that is where providers should be aiming towards, absolutely,” says Ms Holden. 

“I think meeting the consumer standards is going to be harder, frankly, than meeting governance and viability standards, and I think the sector should be ready for that,” adds Mr Walters. “There are going to be some challenging judgements coming out. We will be proportionate, we will be risk based, we will be co-regulatory, we will be all the things I hope we always are. 

“But providers shouldn’t expect they are always going to get a clean bill of health on the consumer standards straight away. There are challenges out there and I don’t think providers should expect the regulator to come in and find there aren’t any problems.”

Those in the know suggest that the expectation is that the majority of grades in the first batch will be C2.

“I think the regulator’s expecting, from what I’ve read between the lines, a lot of C2s,” says Ms Little.

What should boards do if they do find they are struggling to comply with the standards? 

“First of all, don’t be defensive about it. Do not get back to the regulator and say, ‘You’re wrong, we’re brilliant.’ Instead, you need to be analytical. Work out exactly where it is you have fallen down. Do you really understand where the gaps are? You’ve got to be really clear about that before you can have a plan for improvement,” adds Ms Victory-Rowe.

“You need to have a plan and a timeline for improvement,” adds Ms Davies. “If you can say, ‘This is where we’re going to improve, we’ll have done it in six months or 12 months,’ that’s much better than saying, ‘No idea regulator, what do you reckon?’ The regulator will judge those two things very differently.”

All in all, this is a major challenge and a major change. Much of the success comes down to boards. There are six months left to prepare, and those who fare best will be the ones who use them well.