The social housing regulator

Successful places

with homes and jobs

A NATIONAL

AGENCY

WORKING

LOCALLY

NHF Risk Conference

– Changes to the

Regulatory Framework

The social housing regulator

Life is getting more

complex for providers Gone: 30 year money from

banks

Gone: 50% plus grant rates

Going: Welfare underwriting

rents in full

At risk: local government

funding – Supporting People

Complex choices for Boards

Opportunities and risks

A more cyclical model?

The social housing regulator

But some cyclical factors are

hiding the impact

The social housing regulator

Sales are increasingly funding

the subsidy gap

Sales

620

971 898 638 516

734

1,405 1,736

1,536 1,470

940

606

583

538

508

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2014 2015 2016 2017 2018

Ho

usi

ng

sale

s as

% o

f to

tal t

urn

ove

r

£ (

mill

ion

)

1st tranche shared ownership Properties developed for sale Fixed asset sales Revenue a % of all turnover

The social housing regulator

What did “Cosmo” tell us?

Creeping risk profile made

business unsustainable

Weak governance

Poor controls

Complex finance

Commercial exposures to

non-social housing

You should learn the

lessons

The social housing regulator

It’s not just Cosmo

Dubious rationale and process

for mergers

Development problems

Poor grasp of risk flows and

risk in he round

Treasury / security mishaps

Boards with inadequate skills

and grip

Tardiness / economy with the

truth

The social housing regulator

Providers can’t always

answer the ‘simple’ questions

What is this organisation

for?

Why are we doing this?

What happens if it goes

wrong?

How do we know that [gas

servicing] is OK?

If I was putting my own

money at risk, would I do

this? What return would I

want?

The social housing regulator

Regulatory Framework

In the light of the changes in the sector we have been

looking at how the regulator needs to evolve

Consulting on changes to the Framework

Protection of social housing assets is priority

– Protect taxpayer investment

– Protect tenants

– Maintain investor confidence: continued growth in supply

The social housing regulator

Framework Changes

Fine tuning on-going but expected requirements:

Don’t put assets or viability at undue risk

Skills and capabilities of board to match activities

Active stress testing

Maintain records of assets and liabilities

Boards to certify compliance to Governance and Financial

Viability Standard

The social housing regulator

What are we going to expect

on stress testing?

You need to understand risk flows and risk in

aggregate

It needs to be comprehensive and forensic – so

asset/liability register likely to be pre-requisite

Deal with “what ifs” (e.g. can we really walk away from

that non-recourse JV / subsidiary?)

You need to know what kills you

Outputs should inform business plan and risk-appetite

You should consider (and where necessary embed)

stabilisers / controls

The social housing regulator

What should RPs be doing

Robust stress testing

Establishing appropriate controls

Challenge yourselves on skills and capabilities

Focus on risk flows

Question

– What could bring my business down?

– Under what circumstances?

The social housing regulator

What next

Currently finalising framework

Publish decision early January

Full framework to be published March 2015

New framework comes into effect April 2015