Rent setting by RPs – a warning from the regulator
The Regulator of Social Housing has just published an addendum to its Sector Risk Profile document relating to rent setting and poor rent data.
Essentially, the Regulator is increasing pressure on boards to ensure that their RPs have adequate processes in place to comply in full with what has become a very complex rent regime. In particular, they have indicated that in future they will be issuing Regulatory Notices where problems are identified and (if over 1,000 units) will investigate whether or not to downgrade the RP's governance in the Regulatory Judgement (RJ).
In a complex regime, it is easy for RPs to get things wrong. Some examples that we have seen include:
- Converting social rented units to affordable rent or to intermediate rent where the RP is not entitled to do so
- Not checking ongoing compliance with all elements of a particular exception – especially relating to Specialised Supported Housing or Temporary Social Housing.
- Misapplication of the 'relevant years' or the re-let rent provisions in the Welfare Reform and Work Act 2016
- Resetting affordable rents to 80% of market where they are not entitled to do so
- Converting care homes to extra care without applying the rent regime requirements appropriately
- Confusing affordable rent and intermediate rent assets
Some mistakes can lead to legal as well as regulatory compliance problems.
While the Welfare Reform and Work Act regime ends in April, it is important to recognise that the new Rent Standard is not simply a reversion to the position before it came into effect and the new base line requires RPs to have been compliant with both the WRWA and the predecessor regimes.
It is also easy to get into difficulties in the data returns (NROSH+) by misunderstanding the definitions and miscategorising properties or changing categories between years! Whilst much of an RP's housing stock ought to be straightforward to categorise there are often other assets at the margins, often acquired many years ago (or inherited through a series of mergers) that are much more difficult. In some cases, non-social housing assets have been wrongly identified as social housing or vice versa. Data return errors are regarded as a separate kind of problem by the RSH which relies upon these returns to do its regulation. The addendum operates as a warning to RPs and it is likely to be less forgiving of such errors in the future if RPs have not taken note of this.
In addition, for the first time, the Rent Standard applies to Local Authorities.
There is no room for complacency – and both boards and executive teams should take time to ensure that they are getting rents right and have appropriate assurance processes in place to ensure this.
Please click here to view the addendum.