An update from the Regulator – reading between the lines – Spring 2023

May 2023.
The social housing sector, like many, finds itself in challenging economic conditions not seen in decades.

At the recent NHF Housing Finance conference, the Regulator of Social Housing (RSH) made clear it recognises the sector is doing a difficult job in very challenging times. However, it is nonetheless relying on good boards and good management teams, to address the very broad agenda of challenges Registered Providers (RPs) face. There is much to do, and the sector must rise to these challenges.  

Economic backdrop

After a long period of relatively benign economic conditions, those tailwinds in the previous economic cycle have now become headwinds. The regulator has been repeatedly telling the sector to test its business plans against the economic stresses in their annual risk updates, and those stresses have now moved out of the realm of theory to reality.

The Regulator’s analysis from the quarterly surveys and, the annual global accounts of the sector show how it previously traded margin growth and delivery of new units, at the cost of reprofiling investment spend. Some might observe that these trade-offs are now seeing risks crystallise for some Providers. Margins, more broadly are now coming under strain; at an overall sector level they have dipped below 20%. This is reflected in the trend in revision of grades from both credit rating agencies and the RSH’s regrading several RPs viability to V2. In this climate, the recent rent cap of 7% for providers in England should be taken as a great result. Considering the economic challenges, the RSH took the opportunity to remind the sector of the two principal sets of stakeholders it has to deliver for - current tenants of social housing, and future ones. There was a signal that this could be a theme they explore further, with providers needing to set out how the needs of both groups will continue to be met.


Following a series of regrades from V1 to V2 of a growing number of Providers over recent months, the regulator was keen to reaffirm that the V2 grading is an acceptable and a fair way, for it to measure the financial capacity of the organisation to manage downside risk.

Linked to this, it was interesting to note that the RSH again highlighted the G15’s living wills procedure guide, developed by the G15 in co-ordination with the RSH. The Regulator encouraged providers of all sizes to look at this procedure, which takes its lead from the banking sector in setting out guiding principles to ensure a managed and orderly recue in the event of a provider in distress not being able to continue. It is in effect, an extension to the Asset and Liabilities register - already a well-established regulatory requirement. And, it was noted that the living wills document was described as ‘not currently a regulatory requirement’. Providers should familiarise themselves with this helpful guidance here.

A shining light on stock quality, and not a positive one

Events in the sector, most recently those involving cases of damp and mould, the tragic case of Awaab Ishak, the resulting inquest and, the actions in response from the RSH, the Housing Ombudsman and the DLUHC have shone a light on stock quality and, the treatment of residents. It highlighted some uncomfortable realities for some providers - both housing associations and local authorities. This has impacted the reputation of the sector and invited further media scrutiny.  The sector needs to reflect on the lessons to be learned from these cases. All sector leaders should be challenging their organisations on their understanding of their stock quality, and the extent to which damp and mould is present.

The RSH pointed to a potential barrier for providers in responding effectively to this case - to genuinely reflect how this looks from outside the sector. This echoes the focus the RSH has previously set out on Board decision-making - trade-offs made for their organisations, and the need to be better at continually explaining these strategic choices to all stakeholders. Most importantly tenants and doing so in a spirit of accountability, transparency and honesty. This picked up a theme the regulator has discussed previously, one of Boards and Providers needing to be better at ‘owning their narrative’ and being genuinely accountable both for what goes well and what doesn’t and, being better at talking externally about it. For the Regulator, stock quality will become a key regulatory focus. They will challenge the sector to demonstrate that it knows its stock and its tenants better than it currently does.

Good quality data will be crucial to meeting challenges

To rise to these challenges, Boards will need assurance over stock quality and crucially the quality of the data underpinning the decisions they make. The importance of data quality and how Boards get assurance over it, and their organisational understanding of their data should not be news to social landlords; this has been a feature of many publications and speeches from the RSH. That this topic continues to remain a key focus suggests there is further providers can go to reach a much stronger position.

The data challenge is also being driven by deeper scrutiny from lenders. For example, understanding the percentage of properties being put into change where there are damp and mould issues. Providers might also expect questions on the carbon output of their homes, as sustainability-linked lending increases. Providers will only be able to respond to this level of scrutiny if they have greater granularity over their stock and property data.

Consumer regulation and the Housing Ombudsman’s work

There was a helpful revisiting of the focus and remit of the RSH and the Housing Ombudsman, and that they are very different. The RSH’s focus is Providers at an organisation level, and focussed on the outcomes set out in its Standards. The Ombudsman’s focus is quite different in that engagement is at tenant and individual level so naturally has a different lens and focus. It is important for Boards and wider stakeholders to understand these differences in remit given the increasing prominence of the Ombudsman’s findings on individual providers and its wider lessons learned reporting. It is worth remembering that despite the differences in remit, there is a memorandum of understanding between both organisations, setting out how they work together and share information. The RSH regularly reminds the sector there is very regular contact between each party.

Get in touch

If you have any questions or would like to discuss the topics featured, please get in touch.

Contact us