Consultation outcome

Annex 3: Business Engagement Assessment

Updated 8 May 2024

Applies to England

Title of proposal	Fees for social housing regulation from 1 July 2024
Lead regulator	Regulator of Social Housing
Contact for enquiries	Strategy, policy and impact team

Date of assessment	February 2024
Net cost to business	N/A
Which are of the UK will be affected by the change(s)?	England
Does this include implementation of Red Tape Challenge comments?	No
Stage of assessment	Final
Commencement date	July 2024
Price and Present Value base years	N/A
Is this directly applicable EU or other international legislation	No

Brief outline of proposed change in regulatory action

1 Section 117 of the Housing and Regeneration Act 2008 (the 2008 Act) sets out the fee- charging powers of the Regulator of Social Housing. Fees must be set in accordance with principles which are subject to statutory consultation and approval by the Secretary of State. Fees are currently charged to private registered providers for initial entry to the register and for proactive economic regulation.

2 RSH has consulted on proposed change to its fees principles and has also reviewed the level of the fees it charges registered providers. This is to ensure that the fees principles align with its new powers in the Social Housing (Regulation) Act 2023 and that it has adequate resources to meet its objectives.

3 Subject to approval by the Secretary of State the revised fees principles and arrangements will apply from 1 July 2024.

Initial registration fee

4 There are two stages to the registration process. In the first stage, applicants are required to provide information that enables RSH to assess whether the applicant meets the eligibility requirements in section 112(2) of the 2008 Act. This is the preliminary application process. In the second stage of the process, applicants need to provide information that enable RSH to determine whether they meet the registration criteria established under section 112(3) of the 2008 Act. This is the detailed application process.

5 - Amendments to Section 17 of the 2008 Act mean RSH can charge a fee for dealing with an application. We propose to charge an application fee of £3,000. This, in accordance with RSH’s two stage registration process, would be payable in two parts - a preliminary application fee of £500 and a detailed application fee for those who progress to this stage of £2,500.

6 Local authorities are subject to compulsory registration and so will not be charged an initial registration fee.

Annual fee

7 Our costs are currently met by fees paid by private registered providers and Government grant-in-aid. In the light of legislative changes Government expects that from July 2024 costs incurred by RSH that are currently funded by Government should be met through registered provider fees.

8 The scale and form of engagement we have with different types of registered provider varies. Private registered providers are subject to economic and consumer regulation, whereas local authorities are only regulated against the Rent Standard and consumer standards. Reflecting our risk-based approach larger providers are subject to more routine regulatory engagement than small ones. To reflect this, we intend to vary our approach to fee setting by size and type of provider.

Table 1. Proposed annual fee arrangements

Funding source	Current (at time of consultation)	Proposed arrangements*	How used
Small private registered provider (PRP) / group annual fee	£300 flat fee per entity	£600-700 flat fee per entity	Contribute to the cost of regulation of small PRPs and maintaining the register
Large PRP / group annual fee	£5.40 per social housing unit	£9-10 per social housing unit	Covers the proportion of overall costs attributable to PRPs, minus any income from small PRP annual fees and initial registration application fees
Large local authority registered providers (LARP) annual fee	N/A	£7-8 per social housing unit	Covers the proportion of overall costs attributable to LARPs
Small LARP annual fee	N/A	£0 flat fee per entity	N/A

• Fee levels given are estimates based on the costs we expect to incur in performing our revised functions once we are fully staffed and operational in 2025-26.

9 The level of the unit rate and fixed fee for all provider types will be reviewed annually.

10 Where rebates are provided they will be calculated separately for large private registered providers and large local authority registered providers.

Accountability and transparency

11 We propose to incorporate information on fees for the upcoming year in RSH’s annual fees guidance. We will then stop publishing a separate fees statement.

12 Our corporate plan will provide details of our planned use of resources, including the proposed split in expenditure between local authorities and private registered providers. Our Annual Report and Accounts provides details of our costs.

13 We are also proposing to continue with a Fees and Resources Advisory Panel to inform our approach to fees. We will expand the membership of the panel to include up to four representatives from the local authority sector, as well as including a representative of the smallest private registered providers.

14 We commit to engage with the sector if we intend to raise total fee income year to year (from the 2025-26 steady state level) beyond the rate of inflation. This will be based on the previous September CPI^{[footnote 1]} figure, in line with the approach used for calculating rent increases.

Why is the change proposed? Evidence of the current problem?

15 The Social Housing (Regulation) Act 2023 will change our objectives and powers to enable us to implement the regulatory reforms needed to deliver the vision set out in the social housing white paper. The new Act adds safety, transparency and energy efficiency to our consumer objectives and changes the way we apply our existing powers as well as granting us new powers to take appropriate action when things go wrong. Our new inspections regime will be looking at new sources of evidence and assurance, including information from tenants, to ensure landlords are delivering the outcomes we expect. We will be looking for assurance that the service outcomes tenants experience and provider accountability arrangements are consistent with the expectations in our new consumer standards.

16 Our expanded consumer regulation remit, which for the first time includes undertaking proactive regulation of local authorities, means we need to ensure we have the right skills and capacity to enable effective regulation to continue. It is therefore an appropriate review point for RSH’s fee regime and the various fees we charge.

17 We need to recover the full cost of our regulation. The new Act also amends Section 117 of the 2008 Act giving RSH the power to charge fees for dealing with an application for initial registration and to recover costs that are incurred, or likely to be incurred, by RSH in the performance of any of its functions.

Which types of businesses will be affected? How many are affected?

18 The 2008 Act does not place any restrictions on the types of businesses that may apply for registration. However, to join the register applicants must be English bodies, provide or intend to provide social housing in England, and meet the criteria set by RSH. Every year we receive around 100 applications from a wide range of organisations of various size, type and complexity, including both profit-making and non-profit.

19 Annual fees will affect private registered providers of social housing (PRPs) and local authority registered providers (LARPs). No other businesses will be affected. As shown in table 2 there were 1,614 providers registered with us on 31 March 2022 (1,396 PRPs and 218 LARPs). 25% of LARPs own fewer than 1,000 units of social stock each compared to 83% of PRPs. 24% of LARPs own 10,000 or more units of social stock compared to just 6% of PRPs^{[footnote 2]}.

Table 2: Number of registered providers of different types

Large PRP	Small PRP	Large LARP	Small LARP	Total
238	1,158	163	55	1,614

20 The profile of social stock owned by provider type is set out in figure 1 below.

Figure 1: Registered provider social housing stock owned by provider type^{[footnote 3]}

Registered Providers	General needs social rent (low cost rental excluding Affordable Rent)	Affordable Rent general needs	Supported housing social rent (low cost rental excluding Affordable Rent)	Affordable Rent supported housing	Low cost home ownership
Private registered providers (PRPs)	1,930,869	315,857	387,693	15,837	246,114
Local authority registered providers  (LARPs)	1,419,475	32,505	101,628	4,715	6,106
All registered providers (RPs)	3,350,344	348,362	489,321	20,552	252,220

Table 3: Average general needs (social) net rents (£/week), England^{[footnote 4]}

PRP	LARP	All registered providers
98.05	89.53	94.31

Table 4: Average supported housing (social) net rents (£/week), England^{[footnote 5]}

PRP	LARP	All registered providers
95.60	78.10	91.49

How will the change impact these businesses?

21 In developing the new proposals, RSH has considered carefully what the impact would be on registered providers. A number of options have been considered in relation to the initial registration fee and annual fee. This assessment however focuses on implications for registered providers arising out of the proposals which were set out for statutory consultation. This assessment has been updated in light of the feedback provided by respondents.

Initial registration fee

22 We currently charge a £2,500 fee on initial entry to the register with all remaining costs of registration met by Government grant-in-aid. This fee level was informed by responses to a 2014 discussion paper asking what level of fee would not deter applicants from registration and was further consulted on in 2016.

23 The proposed changes will see applicants pay at the point of application, rather than on successful registration. Charging at the point of application, rather than on registration, recognises that there is a cost to RSH to consider an application regardless of whether it is successful or not.

24 We are mindful of the risk that higher registration fees have the potential to act as a barrier to entry and want to balance income generation with not dissuading good quality applications recognising the value of a regulated sector that can meet a range of needs. In relation to the current fee there is no evidence to suggest it has deterred registration applications. We anticipate that moving to a fee on application, rather than at registration, will help focus applicants on the importance of preparedness and deter speculative applications, particularly at preliminary stage. This will have a positive impact on applicants if they are better prepared ahead of application. The fee has not increased since it was introduced and therefore, in real terms, it is lower than that initially consulted on. We therefore consider that a combined total fee for both elements of the application of £3,000 will not deter good quality applications.

25 In the light of the removal of Government grant-in-aid, we will need to recover any costs not met through initial registration fees by the annual fees paid by the private registered providers that are already on the register. Charging at point of application, rather than on registration, will ensure a greater share of fee income is apportioned to those seeking to join the register. The resource required from large private registered providers will vary year to year depending on how many applications we will receive and how far they progress. However we envisage that any shortfall would represent a small fraction of the overall fee we anticipate collecting from large private registered providers.

26 The majority of respondents to the statutory consultation were supportive of this proposal. It was described as sensible and recognising the need for some form of financial contribution from applicants looking to join the RSH register. We heard feedback that the total application fee of £3,000 is unlikely to discourage potential applicants and by keeping the entry barrier low, RSH has struck the right balance between generating income in support of effective regulation and not disincentivising smaller or less well-resourced new entrants to the sector.

Annual fee

27 The impact of our fee proposals on registered providers depends on RSH’s total costs year to year. In line with Government policy our intention is to move to full fee recovery from the current position of 83% of all costs being recovered through fees. At the same time our overall cost base is going up for the reasons explained elsewhere in this document. We will therefore see an increase in the proportion of costs recovered through fees as well as an increase in overall fee income.

28 In general, our assessment is that the increase in fees is offset by the benefits registered providers derive from being part of a regulated sector. For example, private registered providers benefit through lower borrowing costs and better capital weighting of debt. And all registered providers benefit from the reassurance provided to stakeholders from doing business with a regulated organisation and assurance on consumer regulation following regulatory engagement.

Large providers

29 Our proposed approach to calculating fees for large providers recognises that the cost of regulation broadly increases in line with size.

30 The private registered provider sector continues to demonstrate a resilient overall financial position, committing to record levels of expenditure in their existing stock and seeking to maintain consistent levels of development. This is taking place within a challenging economic context with increased costs and constrained income, tightening the financial headroom in the sector.

31 We do not have a role in regulating the financial viability of local authorities. However, it is clear that many of the financial pressures facing private registered providers are also impacting on local authorities. Local authority registered providers generally have lower rents than private registered providers yet face similar demands for investment and cost increases. Several respondents to the consultation told us about the financial challenges facing registered providers, and local authorities in particular.

32 Table 3 and 4, above, set out the average net rents across the sector. The fee levels we have proposed for large providers represent just 0.2% of the average annual social net rents per unit^{[footnote 6]}. Our assessment is therefore that our fees will remain affordable to these providers and should not significantly impact on services to tenants.

Small private registered providers

33 The increase in the small private registered provider annual fee from £300 to £600-700 is the first increase in this fee since 2017.

34 In developing our proposals we are mindful of the need to ensure that our fees regime does not create a barrier to entry or to remain in the sector or impede the ability of the sector to continue to meet a range of needs. RSH recognises the benefits smaller providers bring to the sector. We have carefully considered the impact on small businesses and do not consider the proposed fixed fee levels to be unsustainable even for very small private registered providers. These providers derive the benefits of being part of a regulated sector and it is our view that it is reasonable to expect them to pay towards the cost of regulation.

35 Some respondents to the consultation highlighted the differential impact of a fixed fee on the very smallest providers compared with those with nearly 1,000 units. Recognising how diverse the small provider sector is we intend to expand membership of the Fees and Resources Panel to include a representative of the very smallest providers.

Small local authority registered providers

36 No changes in the fee arrangements for these providers is proposed at this time.

Accountability and transparency

37 By avoiding duplication of our activity, providing details of our planned and actual costs, and ensuring that fee payers are appropriately represented within our advisory panel we consider that our proposals around accountability and transparency will have a small positive impact on the sector.

---

1. CPI means the general index of consumer prices (for all items) published by the Office for National Statistics ↩

2. Source: Statistical Data Return 2021-22, Local Authority Data Return 2021-22 ↩

3. Source: Statistical Data Return 2021-22, Local Authority Data Return 2021-22 ↩

4. Source: Statistical Data Return 2021-22, Local Authority Data Return 2021-22 ↩

5. Source: Statistical Data Return 2021-22, Local Authority Data Return 2021-22 ↩

6. Source: Statistical Data Return 2021-22, Local Authority Data Return 2021-22 ↩