TSA NEWS RELEASE

Thursday 18 September

New Tenant Services Authority Chairman says social housing sector is “off the pace”

The chairman of the new social housing regulator, the Tenant Services Authority (TSA), delivered a firm message to housing associations yesterday (Wednesday 17 September) when he said that the social housing sector had “fallen off the pace”.

Anthony Mayer, delivering his first speech (full speech below) as Chair of the TSA at the National Housing Federation Conference in Birmingham said, “There is far too big a gap between the best and worst performing housing associations in terms of the deal they give to their tenants and their engagement with their tenants. And compared with private sector service providers the sector as a whole has fallen off the pace in terms of consumer focus.”

The TSA has been established to champion the needs of tenants across England, giving protection in time to some ten million people.

Anthony Mayer told delegates, “It is not my job here today and it will not be the job of the Tenant Services Authority to tell you how to do your job in respect of your tenants. In practice you will need to use a variety of approaches to the engagement of your tenants, including the harder to engage groups whose main wish is just to get on with their own lives.

“The priorities of the tenants as to what needs fixing will vary hugely both between neighbourhoods and between housing stock profiles. Tenants in older stock might want a greater focus on maintenance. But tenants in a high crime rate area might want a greater focus on 24/7 high visibility management. The key is to listen to tenants and not to tell them.

“The TSA, as the new regulator, marks a clean break from the Housing Corporation and will have a much greater and clearer focus on tenants and the deal they get from their landlords.

“The TSA will not be a reincarnation of the Housing Corporation. In everything we do, we will think what does this mean for tenants and potential tenants. We will be a sole purpose regulator and not an investor as well. We will be an independent regulator. We’ll focus our interfaces with housing associations on problem areas and not across the piste. And finally, we will be regulating all providers of affordable housing – homes owned by both housing associations and local authorities.”

ENDS

ANTHONY MAYER’S SPEECH TO NHF CONFERENCE: 17 SEPTEMBER 2008

Thank you for inviting me to open the 2008 NHF Conference.

It’s nice to be back!

For those who have never heard of me, I was Chief Executive of the Housing Corporation for more or less the whole of the 1990’s. Since 2000 I have been Chief Executive of the Greater London Authority.

At the start of my third week as Chairman of the Tenant Services Authority, what changes do I see after 8½ years? The demise of the fondly remembered, for me at least, Housing Corporation. A new funding and regeneration agency. A new regulatory agency which will cover the whole of the affordable housing sector. A large number of mega-associations who cross subsidise new homes for rent through housing for sale. A major and welcome Government initiated focus on meeting the needs of tenants. The credit crunch. The largest ever housing investment programme. A construction industry in one of its down turns. Fewer lenders. Higher lending margins. Falling house prices. Varying levels of tenant satisfaction and apparently many RSLs lagging behind ALMOs in service delivery.

Interesting times to say the least.

I want to use this speech to introduce the Tenant Services Authority, the TSA, the new social housing regulator.

Let me start with a few milestones for the TSA:

We will be open for business on 1 December this year. We have just completed the interviews for our new Board. If the Minister gives the go-ahead to the Board appointments in the fairly near future, the Board will meet for the first time on 22nd October. We will be a small Board with a strong variety of backgrounds and skills to bring to the task of shaping the future of the social housing regulatory framework. And yes, I am pleased to say I have a very strong expectation that we will have two excellent tenant board members.

We will issue our standards framework on which our new regulatory regime will be based this time next year, after extensive consultation. We do not have all the answers. That is why in the months ahead we will be talking to tenants, providers, lenders and other stakeholders up and down the country to ensure we understand what excellence in the provision of services to tenants looks like and, together, how we secure it.

If all goes to plan, we will regulate local authority housing from 1 April 2010 thereby for the first time securing a level playing field in terms of the quality of tenant service delivery to four million households or some ten million people in England

These are early days for me after 8 ½ years out of the social housing sector and no day to day involvement in it.

So please treat my following observations as still emerging, and still capable of refinement.

I have three observations. First, I want to cover the TSA’s approach to regulation. What will be different? What will be new? Second, I want to cover the impact on Housing Associations of the Government’s strong support of the Cave Report on the regulation of social housing. Third, I want to cover the short and medium term prospects for the Housing Association sector.

So first, the TSA’s approach to regulation.

There will be a much greater and clearer focus on tenants and the deal they get from their landlords. The general consensus is that the Housing Association sector, as a whole, does a reasonably good job. But reasonably good is not good enough. As Martin Cave nicely put it “there is insufficient evidence that the status of being a not for profit organisation is, in itself, a sufficient driver for improved service delivery”.

There is far too big a gap between the best and worst performing Housing Associations in terms of the deal they give to their tenants and their engagement with their tenants. And compared with private sector service providers and ALMOs, the sector, as a whole, has fallen off the pace in terms of consumer focus.

I and my Chief Executive, Peter Marsh, have already developed a strong, shared vision of what the TSA is here to do. Our new Board will further refine that vision.

We want to create a new form of regulation for social housing that is seen as a model for consumer focused regulation in the 21st century. It means putting the question “what does this mean for tenants – now and in the future” at the heart of everything we do. It means ensuring we are on top of our game when we review the financial health and governance arrangements of providers – especially those whose business plans are at greater exposure from the current tightening of the lending market, the capacity of the construction industry and the reduced demand for housing for sale. And finally we want to create a regulator that uses the power of the information and knowledge it holds to be a thought leader and market shaper – working in partnership with tenants, Housing Association Boards and Executives in the process.

The TSA will not simply be a reincarnation of the Housing Corporation. In everything we do, we will have tenants interests in mind. We will be a sole purpose regulator and not an investor as well. We will be an independent regulator. We focus our interfaces with Housing Associations on problem areas and not across the piste. And finally, we will be regulating all providers of affordable housing – homes owned by both housing associations and local authorities.

There is no single recipe either for effective engagement of tenants or the determination of tenant priorities. The starting point for each and every landlord should be a vision, translated through into their business plan, that meeting the needs of tenants is their top priority. At one level this may mean asking the question: what is the point of increasing the volume of your product if your product –the provision of decent social housing – is off the pace? At another level you have to ask yourselves are you really treating tenants like knowledgeable customers whose rent pays your salaries? 

I know that some of you will say tenant involvement will drive up your cost base and reduce your efficiency. If that is where you are starting you need to start again. The deal given to tenants is the product after all! Involving consumers in the choices that have to be made between affordable costs and outcomes must always improves the end result.

It is not my job here today and it will not be the job of the Tenant Services Authority to tell you how to do your job in respect of your tenants. In practice you will need to use a variety of approaches in engaging with your tenants, including the harder to engage groups whose main wish is just to get on with their own lives.

And in practice the priorities of tenants as to what needs fixing will vary hugely both between neighbourhoods and between housing stock profiles. Tenants in older stock might want a greater focus on maintenance. But tenants in a high crime rate area might want a greater focus on 24/7 high visibility management. The key is to listen to tenants, including leaseholders and shared owners, and not to tell them.

The corner stone of our regulatory regime will be our standards framework, the deal given to tenants. We need to establish which standards matter most and – working with tenants and providers – review the approach to regulation most likely to lead to a transformation in tenant engagement and service delivery.

Later this year we will be launching a national consultation with tenants and stakeholders to start defining our standards framework. We will engage with tenants on a “what they realistically want” basis rather than a “having things done to them” basis. We will go out of our way to talk to those tenants who would otherwise see us as irrelevant. Those people who would never come to a public meeting matter too.

From 1 December through to the spring next year, we will be consulting informally on our emerging ideas. The more buy in we get the better.

Next summer we will produce a draft of the standards framework for formal consultation.

Once the standards framework is launched this time next year, we will expect each and every Housing Association to meet those standards and to produce plans for remedial action if they don’t. Regulatory action will be a last resort.

The next element to the TSA’s new approach to regulation will be more psychological, to use a word not often used in this hall. In the post “Cathy Come Home” days a generation of Housing Corporation and Housing Association staff grew up together. And as funder as well as regulator of social housing the Corporation had a proprietorial interest in what individual Housing Associations were up to. There was an understandable element of a parent child relationship. A cuff on the ear here and there; but an essential protective kindliness in all weathers. With the creation of a new and single purpose regulator, those days have now gone. We have no financial stake in housing associations and little historical baggage. Associations will be treated as adults. More devolved responsibility to them but less sentimentality. Interesting times lie ahead.

The final new key element of the Tenants Services Authority will be a move away from generic regulation of individual housing associations to issue based regulation. If that sounds like gobbledegook let me explain. The fact is that the body of associations are too big, too complex and too sophisticated for across the board regulation. In terms of knowing what is going on in individual associations we will initially be relying on a range of data sources, ranging from Audit Commission inspection reports, financial data, external auditor reports, tenant satisfaction surveys, the Housing Ombudsman, Local Authority and tenant complaints. Rather than covering the whole range of an individual associations’ activities and structures we will focus on particular highlighted issues through review meetings with the boards, Executives and Tenants of individual associations. If we are happy that the appropriate remedial action is being taken or will be taken then fine – we will walk away. If we are not happy, then to put it politely - this is a conference speech – there will be a graduated response.

There you have an overview of the TSA’s approach to regulation.

I now turn to the second of my observations, the impact on the Housing Associations of the Government’s strong support of the Cave report, as translated into the 2008 Housing Act.

At the heart of the Cave report is the principle of co-regulation which he defines as “self-regulation subject to the backbone of intervention by the regulator on a big exception basis”

The impact of this approach will be profound for Housing Associations. After all it is the Board and not the Executives of Housing Associations who are responsible and accountable for the strategic direction and governance of Housing Associations.

In exercising our regulatory responsibilities we will, as a starting point, be looking to the Boards and not the Executives of Housing Associations to account for themselves and their stewardship of their Association.

Many Associations will see this approach as entirely familiar and entirely proper. A number will not.

Uncomfortable as it is to say, the Housing Association sector has over the years been largely Executive led. Nearly all the big beasts in the sector have been Executives. That nearly all of them have done a first class job is not the point.

A little but telling illustration. The last non-Executive Chairman of the National Housing Federation was Sandra Edwards in the early 1990s.

The expectations of both Government and the Tenant Services Authority in respect of co-regulation will entail a profound challenge to the Boards of Associations. Boards are going to need to demonstrate that they have the necessary expertise, range of skills and training to exercise their responsibilities. If and, as necessary, to attract the necessary skills proper and appropriate levels of remuneration will have to be paid.

All in all a fairly seismic challenge and an opportunity for people who want to give their own time to being Board members of social landlords.

My final observation relates to the short and medium term, prospects for the Housing Association Sector.

I remain resolutely optimistic in the medium term, if less so in the short term. Let me explain.

In the short term I see the following challenges for Associations:
In the first place, the combination of a tighter market for refinancing loans, pressures on poorer working households to have enough money pay their rents and the increasing difficulty of selling homes for shared ownership to balance the books will all have a profound impact on the business plans of individual Associations. Adequate cash flow will be the over-riding key to success or failure.

In the second place will be reputational risk. The Government have a huge expectation that Associations will collectively deliver the goods in terms of the hike in the production of new sub-market price housing. They have put up the funds for the sector to deliver – some £8.4bn over three years to fund the supply of 180,000 new affordable homes in 2008 to 2011. Their expectations are high and made higher by the increasing difficulties of newly forming households to access the owner occupied sector. And they, and the Homes and Communities Agency are not sentimental.

The response of the construction industry to the credit crunch and the current house price correction has been to batten down the hatches until the storm is over. This response may also well be correct for those Associations whose balance sheets are overstretched – particularly those with land banks, those who have diversified from social housing for rent and those who are relying on asset sales to cover their running cost losses. The battening down the hatches may well not be correct for the sector as a whole. Put baldly, if the Housing Association sector does not deliver its share of the required and funded outputs of new homes, then the Government will look elsewhere. In our new role we will play our part to referee the tensions implicit in our objectives between building new homes and maintaining viability.

So yes, in the short-term - the next year to eighteen months until the United States housing markets settles and the UK lending market regains its nerve – I see to put it mildly challenges for both the Housing Association sector in general and some over extended Housing Associations in particular.

But equally, yes, in the medium term I am entirely confident in the prospects of the sector as a whole.

In the first place the value of the sector’s realisable assets is significantly higher than its liabilities. Taken together it has a balance sheet that any hedge fund manager or asset stripper would salivate over if ever they were allowed in, which they won’t be.

In the second place, there will always be a market for publicly subsidised below market price housing for those several million households who cannot afford to pay a market price for a roof over their heads.

In the third place, whatever the immediate tightness in the number of players in the private sector lending market and their increases in margins, the financial robustness of the social housing market is unassailable. Steady and long term cash flow substantially funded through Housing Benefits from Government. A first charge for private lenders. A State regulated product. The long term need for that product.

Provided the private sector lending market acts rationally, as they always do in the end, in finding their own equilibrium then the medium term financial prospects for the Housing Association sector are in my view benign. The issue will not be the volume but the price of private sector lending to the sector. What that price will be in the medium term I do not know. That sufficient volumes of private sector lending into the Housing Association sector will continue when the price is right I do know.

The creation of the TSA provides a unique opportunity to take social housing regulation and the deal given to tenants to the next level. Change is coming. In the period ahead, we want to hear from you how we can make that change possible

Thank you.

ENDS

For further press information contact: Terry Sefton 020 7393 2118

Notes to Editors:

1) Following the passage of the Housing and Regeneration Act in July 2008 the Housing Corporation’s regulatory functions will be carried out by the Tenants Services Authority (TSA). The TSA will be responsible for the regulation of social housing across England. Initially responsible for the regulation of housing associations, in time, the development of the TSA is set to mean that local authority owned and ALMO managed stock will be under a common regulatory regime - giving the same protection to four million households (some ten million people) in England. The TSA will formally come into existence in December 2008.
 
2) The Tenants Services Authority has been established to:

• champion the needs and aspirations of tenants, leaseholders and residents - both those within and those as yet unable to access affordable housing;
• promote choice for tenants and providers of affordable housing; and
• challenge providers of affordable housing services to meet or exceed the highest standards of organisational effectiveness and service delivery.

3) Biography of Chairman of the Tenant Services Authority Anthony Mayer:
Anthony Mayer comes to the TSA having been Chief Executive at the Greater London Authority, a role he held for eight years. Prior to this he was Transitional Chief Executive at Transport for London, a role he took on after nine years as Chief Executive of the Housing Corporation.
Anthony Mayer began his career at the Department of Environment, before moving on to NM Rothschild and Son, where he became Managing Director of Finance and Administration.

4) Tenant Services Authority timeline:

• The TSA will formally launch in December 2008.
• The first phase of tenant consultation on key priorities will be completed between December 2008 and February 2009.
• Development of the TSA’s new framework – an open consultation with tenants and landlords based on tenant priorities - will be finished by spring 2009.
• The progressive implementation of the new framework will be finalised by autumn 2009.
• The target date for the inclusion of local authorities in the regulatory system is spring 2010.