The Role and Effectiveness of the Housing Corporation (HC 401-ii) ODPM Committee 30 Mar 2004

Evidence given by Phil Morgan, Chief Executive, Tenant Participation Advisory Service (TPAS); Julian Ashby, Chapman Hendy HACAS, and Peter Williams Deputy Director General and Andrew Heywood, Senior Policy Advisor, Council of Mortgage Lenders (CML); Frances Done CBE, Managing Director, Local Government, Housing and Criminal Justice Services and Roy Irwin, Chief Inspector of Housing, Audit Commission.

Q117 Mr. David Clelland: Given the fact that you support the split between regulation and inspection, do you have any evidence that the housing associations' performance has improved since then?

Mr Morgan: I think it is important first of all to be clear about why we support the split. I remember very clearly listening to a senior official, who is no longer at the Housing Corporation, explaining why he did not favour the same approach to inspection that the Audit Commission took. The Audit Commission from a very early about housing inspections has taken the view that there should be a star rating, and that is something we support, and it has got to be very clear and very transparent. I listened to that individual from the Corporation defend the fact that the Corporation were not going to take such an approach by saying that he thought it would jeopardise their relationship with housing associations. It is at that point that I came to the conclusion that we needed to have a very clear split between regulation and inspection. Inspection needs to be done impartially, heartlessly and professionally. We thought, and we still believe, that that is what the Audit Commission can do for the Housing Inspectorate. There has also now started to become some evidence that with the focus on regulation, the Housing Corporation are starting to be braver about putting housing associations into supervision where that is appropriate. I would not say that from our perspective we regard that as conclusive, nor would I try to argue to you that it is, but I think there is now starting to become some trickle of evidence that the Corporation are taking their regulatory role seriously and certainly as regards the implementation of the Corporation's Involvement Policy, we would regard the role they have got on regulation as being important to back that up.

Q118 Mr. David Clelland: Given the fact that the Audit Commission have no direct responsibility for housing associations, does that not mean that it is going to be more difficult for them to be effective in that role?

Mr Morgan: No, I think the fact that it is independent is a strength, not a weakness. I think it gives it the ability, like I say, to be very critical where it needs to be critical and not have to worry about building up relationships with housing associations in the same way as the Corporation or some similar body would have.

Q119 Mr. David Clelland: Do you think that there are other aspects of the Corporation's responsibility which ought to be hived off to the Audit Commission?

Mr Morgan: Not at this particular point in time. For the reasons I have already outlined, we think it is important that the Housing Inspectorate keeps its strong independence and we regard that as actually strengthening its role to give that critical evidence about inspection and about the performance of housing associations.

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Q129 Mr. David Clelland: In July the Government will be publishing a draft Bill on regional government. Do you think it should contain anything on the interface between the regional boards and regional government?

Mr Morgan: There has been guidance issued on the relationship between regional housing strategies and stakeholders more generally. On the issue of regional housing and regional government, we have got this year, as you are well aware, the referendum, which I think is going to take place in October this year, and one of the things that it will be used to judge is just how far and successfully the regional agenda may develop.

Q130 Mr. David Clelland: Yes, but my point is that in advance of that there will be a draft Bill which will help to guide people when they vote on that issue and what the powers of regional government will be, and I was just wondering whether the Bill should contain anything in terms of the interface between the regional housing boards and regional government should it be successfully voted for in a referendum.

Mr Morgan: I think it is hard to see a situation where you have elected regional government and an elected regional assembly which did not have responsibility for regional housing strategies. There is of course some devolvement of power to regional housing boards and regional housing strategies at the moment and again the referendum is important from two perspectives. The first is whether there is an elected regional assembly, full stop, and the second is whether the electorate in the northern regions think that the development of regionalisation is a good or a bad thing that we use for that purpose as well as just simple elections. Those elections of course are going to result in the regional assemblies being elected from, I think it is, later in 2006. There is still quite a big gap between years in the meantime during which time, whether those elected regional assemblies come on or not, the issue of engagement of stakeholders will remain important.

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Q197 Mr. David Clelland: Could you tell us what risks there are for associations and their lenders now that the government seems intent on increasing the number of homes built every year by housing associations?

Mr Williams: I do not think that is a risk, it is an opportunity in lending terms. Obviously there is the point we touched on earlier about making sure that investment is soundly based. There is, however, the issue of the use of modern manufacturing techniques which is central to that investment process.

Mr Heywood: One area where I think there is a risk is in the Housing Corporation target to build 50 per cent of its stock in 2004-06 using modern methods of construction. That is not a risk because modern methods of construction are good or bad per se; but we have got a situation where there is a large unresolved issue with the previous generations of modern methods; there are something over a million houses out there; about 800 different designs, 300-400 of which are unmortgagable due to defects of one sort or another; significant association between previous generation of MMC and low demand; and, therefore, as lenders we would very much like to see coming in with the commitment to use modern methods (which is clearly sensible, there has to be innovation and there should be innovation) proper standards, possibly through certification which is something we have ourselves been working on with the Building Research Establishment to ensure that we do not repeat mistakes of the past. What we want to see is the next generation being successful. Houses that in 30, 40 and 50 years people will want to live in. The lender interest, in that sense, very much ties in with the consumer, because the lender's ultimate interest is: "Will this property stand as security for a mortgage loan of up to 30 years?" meaning, in effect, "Is it going to last for 60?" That is very much a consumer perspective.

Q198 Mr. David Clelland: What should be the Housing Corporation's role be in ensuring that quality is maintained?

Mr Heywood: We feel the Housing Corporation could have and could still take a stronger view in terms of working with housing associations to make sure they have looked at issues such as longevity, whole life cost, repairability, adaptability - can this building actually be adapted over the course of its life to meet changing requirements - insurability, another major issue. It could also have and it could still work with external bodies such as the BRE, to make sure there is certification which addresses those particular issues that relate to modern methods, which do tend to be longevity, long-term demand, repairability and whole-life cost.

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Q212 Mr. David Clelland: It has been put to the Committee that housing associations could face the risk of duplication and double the regulation. How could your remit from the ODPM and the current protocol between you and the Corporation be made more robust to avoid "turf wars"?

Ms Done: Roy referred to a statement we issued last September, and we are conscious there will be some associations that have not really the changes on board in terms of what that means. I think there is an education programme and discussion programme to take place around that. The key thing for us is that relationships are established at board level, senior management level, regional level and day-to-day inspection level. I think it is really important that we keep those well under review. We are due to meet the chairman and chief executive of the Housing Corporation within a matter of weeks to start that particular ball rolling. It will be very much focused around the new proposals for our inspection regime, and how we can make absolutely sure that, whilst there is obviously a connection in relation to governance arrangements, we make the burden on associations as little as possible. We have a real range of experience in that, as the Audit Commission, because we are very, very much working with our other audited bodies and inspected bodies about trying to roll back, in that case, regulation and inspection; but in this case we have a real interest in reducing the inspection burden. Clearly that cannot be done until we have been through a first phase of working on the new methodology, and agreeing with the Housing Corporation to what extent associations can benefit from having a good result from their inspection and that we can draw back. That is not something for us to decide; that is something we need to discuss with the Housing Corporation; and it will be for the Housing Corporation to decide.

Q213 Mr O'Brien: In your submission to the Committee's evidence you say that you believe "there is over-regulation within the public sector generally, and we favour some rationalisation of regulatory bodies". Does it not make sense to have different bodies undertake the role of regulation and inspection of housing associations?

Ms Done: I think that is not a matter for the Audit Commission to decide. We are very enthusiastic about doing the inspection role, because we have a great deal of experience in that and it makes sense completely to bring together in the same team of inspectors, with the real expertise that we have, the whole social housing field.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.