It's not just the consumer standards that are changing...

The incoming RSH consumer standards are a catalyst for much wider changes to the regulatory environment for registered providers (RPs) from 1 April 2024, writes Peter Hubbard.

Whilst the core proposals remain consistent with the original RSH consultation paper, there are 11 revised sets of guidance published by the RSH last week to reflect their new integrated regulatory approach. Some of the key repercussions could be missed by RPs who do not review the details of this regulatory reset.

The new inspection regime

Despite the RSH’s understandable reluctance to become an ‘inspector’ of RPs, there is a new inspection regime for large landlords to back up the proactive consumer regulation that is coming into force. This will replace the current IDA programme and will create higher expectations on the RSH to proactively identify RPs who are not up to scratch with the new consumer standards and the existing economic standards. This is consistent with the abolition of the outgoing ‘serious detriment’ test.

The biggest impact of the changes will be on local authority RPs (LARPs) who have not been subject to a proactive housing inspection regime for years. Admittedly, LARPs will not be regulated and inspected on governance and financial viability matters, but the inspections will assess the quality of service outcomes for tenants alongside transparency and accountability to tenants. The changes for local authority housing departments could be seismic.

For private RPs, the key will be ensuring that the different inspection regime that applies to them (also covering the economic standards) places them on a level playing field with LARPs and that the RSH is not tempted to impose a higher bar for them in meeting the new consumer standards.

There will still be a four-year programme of inspections for large (1,000+) landlords but the new consumer gradings will all be important.

New gradings system

Alongside the governance and viability gradings of one to four, there will be new consumer gradings of one to four where C3 and C4 gradings will be deemed non-compliant. There is clear new guidance that an RP assessed at C2 or below will not only develop a plan to drive up improvements but will share those plans with tenants. Non-compliant RPs on C3 or C4 can expect intensive engagement with the RSH and potential regulatory action. What is interesting is that the wording of the gradings does not assume the improvement plans will be agreed by the RSH. Does this mean that the RSH is unsure whether it will have the resources to agree to plans with so many potentially non-compliant RPs? Will the RSH have the skills and expertise to know what needs to be done to reach a C2 or C1 grading?

Factors affecting regulatory engagement

One of the additional guidance notes published last week by the RSH sets out some key questions that they will ask themselves in determining what their regulatory response may be to any given set of circumstances. At first glance, these appear helpful and could be used by RPs themselves to assess how significant a regulatory issue is – this could be helpful for RPs over whether to make a self-referral on a matter to the RSH. However, upon a more detailed review of what has been published, the questions asked and examples given are simply at too high a level to prove useful for RPs in this way and, on balance, are likely there to give the RSH a framework for decisions now that the ‘serious detriment’ test is being abolished.

In the future, RPs will ignore this guidance and these factors at their peril but they are simply not detailed enough to be used as a robust risk framework for deciding how a particular RP itself should respond to an event or series of events.

Greater levels of regulatory transparency

In a similar way to how RPs are to be required to be more transparent with tenants, the RSH has used the opportunity to issue more detail in its guidance about how it will exercise its regulatory powers, the circumstances when it will do so and the specific actions it has available to it. This is therefore creating a more robust and formal framework when it has previously been on a more informal and discretionary basis. For example, the introduction of performance improvement plans has put on a statutory footing a process many of us are familiar with that numerous RPs had to go through as part of previous regulatory engagements with the RSH. 

This framework should enable RPs to have higher expectations of transparency and accountability from the RSH in understanding when it will (not) take action. As RPs are likely going to be responsible for the future full funding of the RSH, this greater level of accountability back to RPs (who will be funding it) is only to be expected. It might be interesting to see how this guidance may be used in the future to hold the RSH to account for the use of its significant and intrusive statutory powers.

Changes to the draft Code of Practice

The draft Code of Practice under the consumer standards is going to be brought in with very few changes from the draft. For example, the need to address the legacy problems of cloning data where physical inspections of individual homes have not taken place remains a key point – sensible five-year rolling programmes of inspection appear to be the minimum threshold. Changes introduced in the final version:

• Reinforce the need for RPs to use a range of sources and every opportunity to gain a better understanding of the condition of tenants’ homes;
• Acknowledge sometimes RPs are not legally responsible for tenants’ homes or communal and external areas – but they should assert their rights over third parties to hold them to account and work with other parties to address wider safety matters;
• Reflect the likely changes under Awaab’s Law and the need to prioritise works following health and safety assessments;
• Underline the need for RPs to communicate back to tenants how their views have been taken into account when making decisions over landlord services; and
• Recognise the need for staff to be trained to recognise and effectively respond to cases of domestic abuse.

Proactive consumer regulation, whilst a long time coming, will create a sea of change in the regulatory environment inhabited by RPs. The regulatory pressure to deliver outcomes for, and be accountable to, tenants continues to increase with a regulator that will be inspecting all parts of an RP’s business.

Peter Hubbard is managing partner of Anthony Collins.

Anthony Collins will be hosting a webinar at 12:30 pm on Monday 18 March where Victoria Jardine, Peter Hubbard and Sarah Patrice will discuss the most important aspects of the regulatory changes. Please book your space.