The Regulator of Social Housing (RSH) has opened a consultation on its proposals to adapt the way (and amounts) it charges registered providers of social housing (RPs) for being regulated.

If implemented, the impact of these changes would be felt at various points within the social housing sector:

• Organisations applying to become registered in the first place will be charged an application fee of £3,000 (payable in two instalments matched to the application process itself) rather than a (successful) registration fee of £2,500, as currently happens.
• Local authority RPs (LARPs) will be charged an annual fee for the first time. LARPs with more than 1,000 units of social housing will pay a proposed £7-£8 per unit. Those with fewer than 1,000 units will not pay anything (the costs of regulating them will be met from the fees paid by the large LARPs).
• Private RPs (PRPs) – both for-profit and not-for-profit – with over 1,000 units will pay a proposed £9-10 per unit per year, and those with fewer than 1,000 units will pay a £600-700 flat fee per year.

All figures cited in the consultation are estimates at this stage. The principle underpinning the changes is that from 1 July 2024, the RSH must become self-funding, and so must replace the income it currently receives from the Government (which pays for the regulation of LARPs, consumer regulation, investigation and enforcement, and applications) with income from those it regulates.

On top of this, the RSH’s own costs of regulation are facing a very steep rise as it moves to proactive consumer regulation, with the additional resourcing that this will entail. The fees payable by RPs will be calculated based on estimated expenditure and are likely to increase periodically in line with the RSH’s own costs.

The consultation stipulates the principle of separation between the future regulation of PRPs (subject to direct regulation in respect of both the Consumer and Economic Standards) and LARPs (only regulated in respect of the Consumer Standards). Fees paid by PRPs will be ringfenced to offset the costs of regulating PRPs, and likewise, fees paid by LARPs will only be used to regulate LARPs. Interestingly, the RSH has indicated that, if its actual costs of regulating LARPs fall short of the fees paid for the period in question, the excess will be rebated to the LARPs who have paid them (at least initially) - an offer seemingly not to be extended to their PRP siblings.

So what will this mean in practice for the social housing sector?

Based on the RSH’s own figures from 2022, amongst PRPs 83% (1,158) own fewer than 1,000 units. Based on the proposed charges this would see the RSH’s fee income from those providers rise from some £347,400 per year to between £694,800 and £810,600 (the annual fee rising from the current £300 flat fee to £600-£700 per PRP). The remaining costs of regulating PRPs would be borne by a variable annual fee levied against the 238 (17%) PRPs with more than 1,000 units, based on the amount of stock they own. For a PRP with 5,000 units, its annual fee would rise from £27,000 to an estimated £45,000 - £50,000, For a PRP with 100,000 units, the annual fee would be £900,000 - £1,000,000 per year (up from £540,000 currently).

For LARPs, the costs of regulating the 55 (25%) of them that hold fewer than 1,000 units will fall solely to the 163 (75%) LARPs that hold more than 1,000 units.

How these higher charges will be met is a significant concern, particularly at a time of costs and wage inflation and still-rising interest rates. Whilst the RSH says, in its impact assessment that accompanies the consultation, that 'the proposed reforms to the fee charging regime are aimed at registered providers rather than tenants', inevitably it is tenants’ rents that will largely fund the RSH’s increased charges.

The sector is already gearing up for rent increases in April 2024 (with the looming prospect of the overarching rent settlement from 2026 onwards) to the backdrop of a continued cost of living crisis and predicted surge in fuel poverty come the winter. The prospect of such a steep rise in the cost of regulation is not likely to be a welcome one for RPs and their tenants.

Clearly, the RSH is mindful of the double-edged sword of diligently schooling those it regulates to demonstrate value for money at every turn. The consultation is careful to emphasise the benefits to the social housing sector of having an 'independent, strong and credible regulator'  including 'lower borrowing costs and better capital weighting of debt' and '… the reassurance provided to stakeholders from doing business with a regulated organisation and assurance on consumer regulation following regulatory engagement'.

The salient questions are perhaps not the ones the consultation asks, which go to the detail of how the RSH’s costs are inevitably to be passed on to RPs, but instead how the RSH is accountable to those it regulates for delivering the sort of regulation the sector needs. Strong and effective regulation depends on clarity, consistency, fairness, competency, proportion and transparency in the approach and workings of the regulator.

The consultation notes that the RSH has set up a Fees and Resources Advisory Panel 'to engage with stakeholders in relation to the fees we charge and the way fees are used', but this does not of itself provide a means by which the RSH is accountable for the way it regulates and its effectiveness in doing so. 

Regulators in other sectors – notably education and social care – are regularly, often publicly, called to account both by those they regulate and by those on whose behalf they are regulating.

Might the RSH therefore expect in future more robust and direct challenge from its own de facto funders, RPs themselves? Time will no doubt tell.  

The consultation closes on 31 October 2023 and submissions can be made online here.

Victoria Jardine is a partner in our housing governance team. Contact her at Victoria.jardine@anthonycollins.com