Corporate report

Fees statement 2018/20

Published 13 November 2018

Applies to England

Overview

Our purpose

Promote a viable, efficient and well-governed social housing sector able to deliver homes that meet a wide range of needs.

We will achieve this through four priorities:

1. Ensure we have appropriate understanding of sector-level risks
2. Deliver intelligence-led regulation
3. Ensure we are forward-thinking and responsive to changes in the external operating environment
4. Ensure we are an efficient and effective organisation.

Success will look like this:

• Demonstrable understanding of sector risks that informs an approach that can withstand emerging challenges
• Our analyses contribute to sector’s understanding and management of risk
• Significant problems identified and resolved effectively
• Stakeholder confidence in the effectiveness of regulation is consistently strong
• An organisation that continually improves, develops and becomes more effective.

Introduction

The 2008 Housing and Regeneration Act sets out our fundamental objectives and our remit for each of the objectives. We must regulate in a way that minimises interference and (so far as is possible) is proportionate, consistent, transparent and accountable.

Our role for economic regulation is proactive and involves ongoing monitoring and periodic In Depth Assessments of larger providers. Our role for consumer regulation is reactive and therefore we do not have a role in proactively monitoring providers’ performance on consumer standards. We can only use our regulatory and enforcement powers where there has been a breach of a consumer standard (or could be if no action is taken) which has or could cause serious detriment.

Further detail on this and how we regulate can be found in our document Regulating the Standards.

Economic

• to ensure that registered providers of social housing are financially viable and properly managed, and perform their functions efficiently and economically
• to support the provision of social housing sufficient to meet reasonable demands (including by encouraging and promoting private investment in social housing)
• to ensure that value for money is obtained from public investment in social housing
• to ensure that an unreasonable burden is not imposed (directly or indirectly) on public funds, to guard against the misuse of public funds.

Consumer

• to support the provision of social housing that is well-managed and of appropriate quality
• to ensure that actual or potential tenants of social housing have an appropriate degree of choice and protection
• to ensure that tenants of social housing have the opportunity to be involved in its management and to hold their landlords to account
• to encourage registered providers of social housing to contribute to the environmental, social and economic well-being of the areas in which the housing is situated.

Our approach

We adopt a risk-based approach, which is informed by a thorough understanding of significant risks for the sector and for individual providers.

We set clear expectations in our regulatory standards that registered providers must meet.

In the event that significant risks do crystallise, we ensure that we are able to act quickly and effectively to mitigate the impact. We do this in a co-regulatory manner.

Our regulation

• Board and governing body members are responsible for ensuring that providers’ businesses are managed effectively and that providers comply with all regulatory requirements.

• Providers are responsible for demonstrating their compliance to the regulator. We seek assurance from providers as to their management of risks and compliance with the standards.

• Providers are required to communicate with us in a timely manner on material issues and risks.

• Providers must support tenants to hold boards and governing body members to account. They must also support tenants to shape and scrutinise service delivery.

How we do it

Register

Register and de-register providers.

Monitor and analyse risk

Gather intelligence and analyse risk at a sector and sub-sector level to inform our assessment of a registered provider.

Assess and Grade

Analysis of risks and how well registered providers are managing their risks demonstrated through published regulatory judgements and pre-empting issues.

Investigate and Enforce

Where a provider is at risk of issues crystallising, securing solutions to resolve the problems.

Shape and Influence

Identify and communicate emerging trends and risks to the sector and maintain confidence of stakeholders.

Further detail on our regulatory approach can be found in our Regulating the Standards document.

Priority 1: Ensure we have appropriate understanding of sector level risks

What does this mean?

It is important that we understand the risks facing the sector in order to promote a viable, efficient and well-governed social housing sector.

Achieving this will ensure that:

• stakeholders continue to have confidence in the social housing sector
• the sector continues to have access to finance on competitive terms
• the sector continues to contribute to housing supply.

How will we do it?

Monitor and Analyse risk

• Undertake analysis to inform our regulatory approach, our understanding of sector risks and emerging challenges facing the sector
• Undertake specific analyses of key issues to promote understanding and encourage effective responses
• Collect and publish high quality sector and sub-sector analyses including Global Accounts, Quarterly Surveys, Sector Risk Profile, Consumer Regulation Review etc.

Shape and influence

• Maintain effective liaison with stakeholders including government, lenders, rating agencies and the sector
• Provide expert confidential input to government in the development of policies that affect the sector
• Publication of articles, speaking engagements.

Priority 2: Deliver intelligence-led regulation

What does this mean?

Through the collection of intelligence and analysis of information ensure that we continue to meet our fundamental objectives.

How will we do it?

Investigate and enforce

• Deliver regulation, proportionate to the complexity and risk of providers

Monitor and analyse risk

• Prioritise our regulation through collection of intelligence and analysis of key risks

Assess and grade

• Publish regulatory judgements which accurately reflects the assurance we have on a registered provider’s identification and management of risks and their compliance with the standards
• Publish timely gradings under review where there is emerging evidence that risks may not be appropriately being managed

Shape and influence

• Make timely and effective interventions where a provider’s viability is or is likely to be at risk
• Maintain an effective back-stop role when tenants are identified as experiencing or at risk of serious detriment caused by a breach of our standards

Register

• Deliver effective registration and de-registration

Priority 3: Ensure we are forward thinking and responsive to changes in the external operating environment

What does this mean?

To remain effective regulation needs to be forward thinking and able to adapt to changes in the operating environment. This includes adapting to the impact of government policy, housing market changes, changes in registered providers operating models and priorities.

How will we do it?

Monitor and analyse risk

• Evaluate emerging trends and risks

Shape and influence

• Ongoing evaluation of our regulatory framework to ensure it keeps pace with emerging risks

• Continue our dialogue with key stakeholders to ensure we understand, and where required provide expert advice on, the development of policies that affect the sector

• Further develop our contingency planning in the event of major and/or systemic failures

Priority 4: Ensure we are an efficient and effective organisation

What will we do?

Ensure that we are carrying out our role in the best way possible.

How will we do it?

Monitor and analyse risk

• Make increasing use of automated data analysis

and

• Invest in our people; through recruitment, training and leadership to ensure we have the right resources, expertise and capability
• Ensure a rigorous focus on enhancing staff skills and learning from our regulatory engagement and casework
• Consult the Fees and Resources Advisory Panel and other regulators to learn and share good practice
• Continue to review our structure and efficient use of resources to demonstrate on-going effectiveness
• Deliver our role whilst capping fee increases at no more than 1% per annum.

Our successes: What have we delivered?

Since the last fees statement, we have:

• successfully implemented fee charging
• transitioned to a standalone organisation
• updated contingency planning arrangements in light of the new housing administration arrangements
• started work on delivering an expanded data and analysis capacity to enable a more detailed understanding of current and future risk exposures
• continued to monitor our approach to provider engagement, ensuring that our activity is flexible and tailored to the risk exposures of individual providers
• delivered a revised IT system to manage our intelligence on registered providers
• consulted on a new Value for Money Standard that clarifies and updates expectations
• reviewed and simplifying our de-registration policy and procedures
• developed a range of stakeholder survey and analysis tools to inform our regulatory approach and test its application.

Our measures: How will we know we have delivered?

In the next six months, we will measure how we have delivered our priorities, by:

• ensuring that the initial months of the standalone regulator run with minimum disruption, in particular through the work of our People Strategy
• continuing our Maintaining Assurance Programme review of our regulatory approach
• continuing to work with MHCLG to inform how it takes forward proposals from the green paper
• continuing to deliver an expanded data and analysis capacity to enable a more detailed understanding of current and future risk exposures
• continuing to monitor our approach to provider engagement, ensuring that our activity is flexible and tailored to the risk exposures of individual providers
• implementing the feedback from stakeholder survey to ensure that we engage with all stakeholders in the most effective way

Over the next three years we will continue our work to promote a viable, efficient and well-governed social housing sector able to deliver homes that meet a wide range of needs. We will:

• challenge ourselves to be an efficient and effective regulator while responding to a fast changing external operating environment
• continue to regulate risks to ensure that stakeholders trust and have confidence in our judgements and the management of risks within the sector
• seek feedback to ensure that our stakeholders trust that we will take action where necessary to ensure confidence in the sector is maintained, and access to finance on competitive terms continues
• build on our existing approach to measuring our successes In doing this, we will ensure we have flexible capacity to be able to prioritise emerging issues as they arise.

Fees statement 2018/19

In our Decision Statement on the introduction of fees we committed to publishing information on our budget each financial year including the split between grant in aid (from our sponsor department – MHCLG) and fee revenue; the cost of key functions and the fee level for the year. Our budget and fee level for 2018/19 is set out below.

Fee income is generated from a mixture of annual fees and initial registration fees. Grant in aid will continue to cover the cost of non-routine regulation including consumer regulation and any registration costs not covered by initial registration fees. We formed a Fees and Resources Advisory Panel alongside existing stakeholder engagement arrangements to enable engagement on fees with a range of stakeholders, and to provide increased transparency.

Regulator of Social Housing budget: 1 April 2019 - 31 March 2019

	Staff costs £000	Non-staff costs £000	Total £000
Direct regulation costs	13,074	1,616	14,690
Corporate support costs
Finance and performance	73		73
Facilities	48		48
HR	78		78
IT	455	298	753
Other	8		8
Sub-total	662	1,098	1,760
TOTAL	13,376	2,714	16,450

Cost allocation to function and fee levels 2019/19

Costs by function	Revenue from fees £000	Revenue from GIA £000	Total £000
Register	105	694	799
Assess and grade	9.304	373	9,677
Investigate and enforce		2,629	2,629
Monitor and analyse	2,242	90	2,332
Shape and influence	974	39	1,013
TOTAL	12,625	3,825	16,450

Fee levels 1 April 2018-31 March 2019

Registered providers < 1,000 units	£300 flat fee per annum
Registered providers > 1,000 units	£4.74 per social housing unit
Initial registration fee	£2,500

• Total fee income will increase by a maximum of 1% per annum over the Spending Review period, which runs to the end of the 2019/20 financial year.
• The costs in this plan are based on an overall annual budget of £16.45 million. There is some potential headroom in the above costs to allow for additional recruitment that is planned. Should there be any underspend on fee-funded costs there would be a proportionate refund of the annual fee to providers.
• The corporate support costs are allocated proportionately through each of the functions.

Budget and fee levels 2019/20

As part of our commitment on fees we set up a Fees and Resources Advisory Panel. The terms of reference and membership of the panel can be found on our website.

Feedback on the previous fees statement was gathered through the Fees and Resources Advisory Panel and the positive reaction to it has meant we have made minimal changes to it. Following our transition to a stand alone organisation we will be preparing a more detailed corporate plan for 2019/20 and we will discuss with the Fees and Resources Advisory Panel the interaction between that document and this fees statement.

In order to allow registered providers to plan for their fee levels, a maximum fee income and indicative fee level is set out below. This is based on our commitment not to increase fees by more than 1% per annum over the Spending Review period which runs to the end of the 2019/20 financial year. The fee per unit below is based on the Statistical Data Return 2017/18 figures.

Fee levels 2019/20

Maximum total fee income	£12.75m
Registered providers <1,000 units	£300 flat fee per annum
Registered providers >1,000 units	£4.72 per social housing unit
Initial registration fee	£2,500