The Housing Corporation

The way forward

Our approach to regulation
 The Housing Corporation
The way forward Our approach to regulation 1

Contents

2 3 4 6 8 11 14 16 I -X

1 2 3 4 5 6 7 8 >>

Introduction Our Our The Delivering Regulatory Where In summary The

regulatory regulatory regulatory regulation engagement performance Regulatory
objectives approach framework concerns are Code and
identified guidance
 The Housing Corporation
2 The way forward Our approach to regulation

1 >> Introduction
The Housing Corporation regulates registered social landlords, generally
known as housing associations.

2001 saw many changes to the way the Corporation works, following
a comprehensive strategic review. We also consulted on our proposals
for replacing our expectations of housing associations set out in
‘Performance Standards’ with a Regulatory Code, which reflected our
changing approach to regulation and our new strategic objectives.

The consultation was successful. We received many contributions and

a range of views on our proposals, and we published a summary of
responses in November 2001.

This publication is the result. It sets out our approach to regulation.

It incorporates and puts into context the Regulatory Code and guidance
setting out the fundamental obligations of housing associations within
our new regulatory system (see I -X ). We expect all associations to be
working towards these obligations from April 2002.

The Regulatory Code and guidance reflect our general powers as a

regulator. We also have specific powers under Section 36 of the
Housing Act 1996 to issue housing management guidance in defined
areas. The particular elements issued further to Section 36 are highlighted
in the guidance.

Inspection is a new feature of our regulatory system described in this

document. We are also publishing a complementary paper giving more
details of the inspection framework.
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The way forward Our approach to regulation 3

2 >> Our regulatory objectives

2.1 Our regulatory objectives derive from our responsibilities to Parliament, through statute, and to
Government through the Department for Transport, Local Government and the Regions (DTLR).
Our three-year corporate strategy, ’Building on Success‘ (April 2001), sets out our mission:
‘Raising the standard for homes and neighbourhoods.’ We are responsible for investing public money
in housing associations, for protecting that investment and for ensuring it provides decent homes
and services for tenants.

2.2 Our key aims in carrying out this mission are:

! to regulate and to promote a viable, properly governed and properly managed housing association
sector;
! to invest for the creation and maintenance of safe and sustainable communities;
! to champion a tenant focus in the housing association sector; and
! to be a modern, customer-centred, forward-looking organisation, leading change in the sector.

2.3 Our objectives must reflect the policy and external environment in which we, and associations, operate,
and our role of promoting Government policy in the sector. Our objectives include:
! maintaining a viable housing association sector and moving to a fairer, more understandable
rent structure;
! promoting high-quality governance, probity and the reputation of the housing association sector;
! encouraging housing associations to provide decent homes and deliver high-quality and
value-for-money services through continuous improvement.

2.4 In framing our regulatory requirements, we have had regard to the five principles of good regulation
described by the better regulation task force:
! transparency;
! accountability;
! proportionality;
! consistency;
! targeting.
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4 The way forward Our approach to regulation

3 >> Our regulatory approach

3.1 In delivering these regulatory objectives we intend our approach to be:
! outcome-focused. There are many ways for associations to meet the standards expected of
them and it is for them to demonstrate how they meet and exceed these standards;
! based on an expectation that associations will work towards continuous improvements in their
services and will not fall below minimum standards;
! based on the application of objective judgements, formed on available knowledge.
We will take account of the context and environment in which associations operate, the nature of
their service provision, the changing expectations of their customers and the housing market, and
their performance relative to other associations;
! tailored, appropriate and proportionate to the risks associations face. Small associations, such as
almshouse charities or Abbeyfield societies, face different risks from larger ones. Similar-sized
associations have different risk profiles. Our response will be tailored according to our judgement
about the risks and performance of each association, and our knowledge of their work;
! consistent and transparent. We will be open in sharing our judgements.

3.2 Moving towards self-assessment

The launch of our new approach presents housing associations with new opportunities for assessing
their own performance to help streamline the regulatory process. We hope that, over time, this will lead
to our relationship with successful associations becoming less intrusive. In the past, the relationship
between the Corporation and associations relied on detailed scrutiny and called on associations to
provide evidence that minimum standards had been achieved.
In future we are looking to associations themselves to take primary responsibility for monitoring their
compliance with the Code, referring to us details of significant problems and their plans for addressing
them. We will use the information provided by the association to identify issues that may require more
in-depth information, for example, through a structured visit. Two features of our new approach will be:
! an annual compliance statement: The association’s board will consider their compliance with
the Code;
! a regulatory plan: The way our regulatory engagement with individual associations is managed.
This is shared between the Corporation and the housing association. It will provide for a greater
understanding of the Corporation’s main concerns and interests and will provide opportunities for
associations to be pro-active in addressing them.

Both these areas are covered in more depth in section 6

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The way forward Our approach to regulation 5

3.3 Better regulation

The following strands will contribute to our commitment to working for better regulation:
! Evaluating regulation: Taking our objectives and approach together, we will subject ourselves to
regular scrutiny – to evaluate whether we are meeting our objectives. We will commission an
independent review of our regulation – to report soon after April 2003 – on the first year’s
operation of the Regulatory Code. We expect this will become a regular process.
As part of this evaluation, we plan to seek the views of associations – both on our general
approach and their particular experiences. The results of this will contribute to continuous
improvement, and to ongoing review of our regulation processes.
! Learning lessons from regulation: We are committed to improving our processes for sharing our
regulatory judgements and actions with other interested parties. This is to ensure that we and
associations can learn lessons from the experiences of others. From time to time, for example,
we will publish details of occasions when we actively intervened, the resolution strategies put in
place and the lessons to be learned.
We will also continue to produce annual reports on regulation that will provide an assessment of
the sector’s performance over the year.
! Challenging regulatory judgements: We recognise that the success of our regulation relies on staff
making effective judgements that may have a far-reaching impact on housing associations. We will
be developing procedures for resolving regulatory judgements that are challenged.
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6 The way forward Our approach to regulation

4 >> The regulatory framework

4.1 The Regulatory Code

Housing associations are independent bodies, responsible for their own performance and management.
We want associations to share with us a common agreement about the outcomes they should achieve.
The regulatory outcomes we are seeking are straightforward: Viable organisations that are well
governed and well managed.
An extensive round of consultation during 2001 has led us to believe there is consensus on the
principles of how these outcomes are to be achieved. We have grouped the principles in a
Regulatory Code – the fundamental obligations of associations under our regulatory system and
the primary expression of our regulatory framework.
For the board of an association to determine whether it is complying with our regulatory
requirements, it first needs to understand how far the association is meeting its obligations under
the Regulatory Code.
Similarly our primary responsibility will be to make an assessment of an association’s compliance with
the Regulatory Code. Any subsequent regulatory action will refer to the appropriate parts of the
Regulatory Code.

4.2 Regulatory guidance

Running alongside consultation on the Regulatory Code, we also consulted on our proposals for
regulatory guidance to support the Code.
We do not want our regulatory framework to stifle or limit associations’ initiative. Many associations
work in geographically disparate areas, dealing with difficult problems. We do not want to add to these
problems by applying rigid regulations. Nevertheless we regard the guidance as concisely defining our
reasonable expectations: the ten pages of Code and guidance will replace 70 pages of performance
standards.
In assessing an association’s compliance with the Regulatory Code, we will consider whether guidance
has been followed or whether any alternative action by the association is appropriate to achieve the
same objectives. Boards of associations will make similar judgements.
The regulatory guidance incorporates housing management guidance under s36 of the Housing Act
1996. This specifies types of guidance which, subject to consultation and approval by the Secretary of
State, we may take into account in judging whether there has been mismanagement. This is so-called
‘statutory’ housing management guidance. The Corporation has other powers under which it may issue
guidance and take regulatory decisions, without formal reference to the Secretary of State. To simplify
presentation, all the regulatory guidance is collected in one place.
The Regulatory Code and guidance follows section 8
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The way forward Our approach to regulation 7

4.3 Bank of good practice

Our regulatory approach is based on an expectation that housing associations will both meet minimum
standards and work towards continuous improvements in their services. Our new inspection framework,
in particular, seeks to establish how associations are pursuing continuous improvement.
In addition, we believe we have an important role in supporting the development of good practice
in associations – linked to the framework established by the Code and guidance.
Associations will want access to this good practice. But it also provides a reference for the Corporation as
we assess an association’s progress in meeting and exceeding the obligations in the Code. To achieve both
objectives we must set out how relevant and recent good practice can further the pursuit of outcomes in
the Code – bearing in mind that we are only one of several organisations that produce relevant
material.
To support this development, we will be establishing an internet-based bank of good practice.
Under the relevant parts of the Code we will highlight publications and examples useful in supporting
associations’ activities. This will inform our regulation rather than direct it: good practice must not
become the new orthodoxy or stifle innovation. Where we encounter examples of good practice in
inspection or other regulatory visits, we will publicise them accordingly. We will work with the National
Housing Federation, the Chartered Institute of Housing, HouseMark and others in developing,
and continuously improving, the bank.

4.4 Other regulatory information

From time to time we will issue information to all associations. This will be to:
! replace or amend some parts of the Regulatory Code and guidance. We will aim to make changes
only where there is a strong case for change, and following consultation;
! require associations to take action to comply with the requirements of the Code and guidance.
This information will fall within the Housing Corporation ‘Circular’ series;
! bring to associations’ attention something we believe they need to consider seriously, and where
we recommend particular actions. This will be published in ‘good practice notes’;
! feed back information on associations’ performance from information collected from them. This will
be in two principal forms: the ‘Sector study’ occasional publications; and the annual performance
indicator report and website profile.

‘‘ Viable organisations that are well

governed and well managed.
’’
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8 The way forward Our approach to regulation

5 >> Delivering regulation

5.1 During the past year, we introduced new teams equipped with new tools to deliver our new
regulatory system. We have set up the following new regulation teams in new field areas:
! Lead Regulation;
! Financial Appraisal;
! Regulatory Arrangements for Small Associations (RASA);
! Inspection.

Teams will work together to ensure consistent and co-ordinated regulation. Our regulation and
investment teams have also created close working links to inform each other’s work and to ensure
that we have a joined up approach to the regulation of each housing association.

5.2 Lead regulation

Lead regulation teams have prime responsibility for ensuring that all aspects of our regulatory
engagement with each lead-regulated housing association (i.e. those with over 250 homes) are
co-ordinated and reflect our risk assessment. Each lead regulator will be responsible for a portfolio of
associations. We are increasingly regulating associations within ‘group structures’. Where associations
are set up within groups, the lead regulator will have responsibility for the entire group.
Lead regulators will ensure that the level of regulation reflects our assessment of risk by producing a
regulatory plan for each association or group, communicating this throughout the Corporation and to
the association, and by monitoring progress against the plan. The lead regulator will also collate,
maintain and evaluate data about each association (relying on specialist advice from colleagues as
appropriate). Assessment of an association’s governance performance will be a standard responsibility
of each lead regulator.

5.3 Financial appraisal

Financial appraisal teams are responsible for assessing the overall financial position of associations,
ensuring that they:
! identify key current and longer-term financial risks;
! remain viable;
! operate efficiently; and
! charge an appropriate rent to their tenants.

Financial appraisal teams will assess associations’ financial strength and exposure and their operational
control mechanisms, as well as reviewing: financial returns, business plans, particularly for larger
associations, focusing on short and longer-term financial viability and financial risk; and the association’s
long-term financial position.
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The way forward Our approach to regulation 9

5.4 Regulatory Arrangements for Small Associations (RASA)

For associations with fewer than 250 homes, we have developed specific and separate ‘Regulatory
Arrangements for Small Associations’ – though our approach is not based rigidly on this number.
To achieve effective regulation of such a diverse range of organisations, we balance our responsibilities
to promote high-quality governance with an acknowledgement of the particular circumstances of a
group that includes almshouse charities, Abbeyfields, supported housing providers and co-ops.
We will continue to apply a scale of regulation that takes account of the size and scope of their
operations and the nature of their activities, history and objectives.
Specialist RASA teams in each of our field areas will:
! process new registration and de-registration applications;
! assess small association performance against the Regulatory Code;
! assess the service delivery of small associations; and
! provide support, advice and guidance along with dissemination of best practice on issues relating
to small associations.

5.5 Inspection
Inspection will inform our overall regulation and how we develop views on and assess housing
associations. It will focus on the service on the ground and the consumers’ experience. We are aiming
to inspect associations with 250 or more homes within three years. We will also have a small annual
programme of inspections of associations with fewer than 250 homes.
The objectives of inspection are to:
! assess compliance with the parts of the Regulatory Code relating to service delivery;
! support associations’ work on continuous improvement and assess how far Best Value
principles are driving it;
! place the consumer closer to the sector’s work.

Further details are set out in ‘Inspection: our approach’, published alongside this document.

‘‘ Teams will work together to ensure

consistent and co-ordinated regulation.
’’
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10 The way forward Our approach to regulation

5 >> Delivering regulation continued

5.6 Regulation and investment
We aim to invest for the creation and maintenance of safe and sustainable communities – investing in
new homes, regeneration and supported housing that meets local and regional needs.
Part of our regulation function is to ensure that such public investment is safe-guarded, not only in
the short term but for many years, to contribute to successful communities. Our assessments of
associations’ performance, across a range of their activities, will help to ensure that our substantial
investment resources are not spent in a way that jeopardises the delivery of this objective. Our regulatory
knowledge will contribute to making such an assessment. Furthermore, information collected on
associations’ performance by our investment teams will also inform our regulation.

5.7 Regulation staff code of conduct

In all our regulation work, we expect our staff to meet the standards set out in our new code of
conduct. In commissioning regular reviews of our regulation, we will be consulting stakeholders to
evaluate our success and to inform our approach. The extent to which our staff have adhered to this
code of conduct will form part of the evaluation process.
We expect regulation staff to be:
! courteous in all their dealings with housing association staff, board members, residents and tenants,
dealing with people sensitively and in a manner that recognises and respects diversity;
! targeted and proportionate in focusing on relevant aspects of the association’s work;
! professional and efficient, acting in the best interests of present and future tenants and
residents of the association and of the association itself;
! impartial and objective in the way they evaluate each housing association;
! open and transparent in communicating their judgements to association staff, in a clear
and frank manner;
! timely in reporting back to associations;
! honest and fair in the way they report their findings, ensuring that their conclusions accurately
and reliably reflect the association’s activities;
! consistent in the way they apply standards and make judgements;
! committed to promoting innovation and effective solutions and encouraging continuous
improvement and excellence.
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The way forward Our approach to regulation 11

6 >> Regulatory engagement

6.1 The basis of our regulatory engagement will be:
! a housing association’s own statement of compliance in respect of the Regulatory Code
and guidance;
! our cumulative knowledge of the association, based on available information;
! our assessment based on risk factors.

We will use this to develop, and review, a regulatory plan with each lead-regulated association.
This will lead to an annual and public assessment of the association’s performance.

6.2 Annual compliance statement

The association’s own assessment of its compliance with the Regulatory Code will be an important
part of the development of the regulatory plan. We believe that moving towards greater reliance on
self-assessment is positive and consistent with our regulatory objectives.
In recent years our Regulatory and Statistical Return has required associations to certify the extent of
their compliance with regulatory requirements using a tick-box self-assessment form. We believe this
has been only partially successful.
To develop this approach, we will be asking the chairs of associations with more than 250 homes to
confirm to the Corporation the board’s own assessment of compliance with the Regulatory Code and
guidance. This may follow the board’s consideration of advice from the executive. We also expect
associations to state the areas where they aim to do the most work in the coming year to address areas
of weakness. We will require this to be returned by the end of June each year.
The new Code and guidance will apply from 1 April 2002. Performance information received at
31 March 2002 will be assessed against the then current regulatory requirements. However,
in completing their annual compliance statement we will expect an association to look forward to
April 2003 and consider which areas of work it will prioritise. This will inform our regulatory plan
for the subsequent year.

6.3 Information we will use

The other main source of information we will use to plan our regulatory engagement will come from
associations. We must ensure that the information we require is relevant to this – and to the
association’s own management. Our requirements have changed, and in some respects have grown,
over the years. We wish to be clear on the information we require, and to minimise the extent to
which information needs to be produced solely for the Corporation.
We expect to seek three groups of information from associations, although the information in each
group may change from time to time and is not exhaustive. This is set out on the following page.
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12 The way forward Our approach to regulation

6 >> Regulatory engagement continued

Group 1 Group 2 Group 3

This is information required in a format
we specify and to a fixed timetable.
This includes:
This is information the association This is information the association will
produces mainly for its own business have for its own purposes and which
purposes but to which we also require we may ask to see from time to time
access. The timing and frequency will – we will not expect it to be supplied
be tailored to individual associations. routinely.
We do not expect these necessarily to
be separate documents; often the
business plan may incorporate many of
the other things listed.

" audited annual accounts;
" external auditors’ management
letter and the association’s response;
" internal controls assurance statement;
" financial returns – FV3 and/or FV5
as appropriate;
" COntinuous REcordings of lettings
and sales (CORE data);
" Regulatory and Statistical Return,
which includes the association’s
performance indicators (which are in
turn published by the Corporation
annually);
" annual compliance statement;
" bids for capital and revenue funding
(where an association chooses
to bid).
" internal controls assurance annual
report to the board;
" business plan;
" asset management/reinvestment
strategy, incorporating progress
against Decent Homes targets;
" risk management strategy;
" BME/diversity action plan.
" management accounts;
" management reports on progress and
performance in key business areas,
including areas in group 1 and 2;
" rent restructuring plan;
" sustainable development action plan;
" terms of reference for and
delegations to board, committee
and staff;
" Best Value improvement plans –
or equivalent;
" budget;
" tenant involvement action plan.

We may also request information following a significant event within the association, such as a merger or a proposed stock
transfer. We will also receive and use appropriate information from third parties relating to particular associations.

6.4 Our assessment based on risk factors

In forming judgements about the extent of our regulation activity, we will be informed by the
Corporation’s accumulation of knowledge about the housing association, its activities and operating
environment.
The regulatory plan will be informed by balancing our knowledge of the association’s performance
across all aspects of the Code – and coming to a judgement. In part, this will be influenced by
regulatory priorities we establish.
Many associations operate complex businesses carrying out a range of activities. Respondents to our
consultation raised concerns at our proposals to apply the Code and guidance to all of an association’s
activities. We believe that parts of the Code can and should be applied to the association as a
whole – to enable us to form an overall view. We will consult an association about those activities
where parts of the Code and guidance may not apply. We will also welcome associations’ own
assessments as part of the annual compliance statement.
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The way forward Our approach to regulation 13

6.5 The regulatory plan

The regulatory plan sets out our regulatory engagement with an individual housing association with
more than 250 homes. Each plan will reflect an association’s unique circumstances. It also sets out the
routine elements of our regulatory tasks, such as the review of business plans and accounts.
Implementing the plan will:
! address any known areas of actual or potential material non-compliance with the Code;
! review progress towards compliance, as appropriate – for example, after a new registration or after
an agreement of an action plan with the association;
! enhance our knowledge of the association and how it operates.
We will put our proposed plan to the association for comments before producing an agreed plan.
Our level of activity will be tailored to reflect an association’s size, activities and risks. For example,
we might:
! attend an association’s board meeting;
! carry out a structured visit to examine a particular subject – for example, an association’s progress on
promoting diversity in all activities or review its approach to risk management;
! bring forward or put back a proposed inspection;
! seek more information from an association after a desktop review of, say, financial returns.

6.6 Regulatory ’outputs’

We will follow up significant regulatory activity promptly with written information to the association
setting out our judgement. This may be in the form of a letter or a report. We will ensure that any
reports are:
! clear about any action we require the association to carry out;
! balanced, highlighting areas of good performance as well as areas of concern.

In line with our commitment to transparency, our reports will increasingly be made public. We are
committed to publishing all inspection reports from April 2002. We will also seek to share our
regulatory assessments with the principal stakeholders of associations, for example, partner local
authorities and lenders, for their information.
We will also publish (on our website, at least) our assessment of each association’s performance that
informs our investment allocation decisions.

‘‘ We believe that moving towards greater

reliance on self-assessment is positive and
consistent with our regulatory objectives.
’’
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14 The way forward Our approach to regulation

Where performance concerns

7 >> are identified
7.1 If housing associations do not comply with the Regulatory Code, we can take action to ensure that
the underlying issues are addressed. Such action can range from requiring associations to implement
minor improvements to using statutory powers to enforce change. Where we consider performance
failures to be significant, we place an association under ’supervision’. We aim to ensure that supervision
cases are identified as early as possible, managed accountably and resolved as quickly as possible.
We use various information and techniques to assess the performance of associations across the whole
range of their activities. We place importance on ensuring that our staff recognise problems and are
aware of their significance and potential implications.

7.2 Categories of unacceptable performance

Our regulation now emphasises continuous improvement rather than requiring associations to meet
a large number of detailed requirements. However, if, in our judgement, housing associations do not
meet minimum standards and have no acceptable plans to do so, we will actively intervene. Where we
identify such concerns, we place associations into one of three categories:
! Continuing regulation
If there are minor performance concerns, we will agree an action plan with the association to
address them. Regulation teams will monitor progress towards resolution in a routine manner
through the regulatory plan.
! Intervention status
This covers associations where serious concerns have been identified and we believe that an
agreement can be reached between us and the association about an action plan for dealing with
the issues. We may suspend funding. The association will remain in this category until we are
satisfied that the agreed changes have been made.
! Enforcement status
This covers cases where serious concerns are identified, and the association is unable or unwilling
to deal with them. We are likely to suspend funding and use our statutory powers (see 7.4).
We publicise this information through press announcements and by informing the main
stakeholders, including private lenders and local authorities. We may also instigate a statutory
inquiry into an association’s affairs where we believe there may have been mismanagement or
misconduct. All enforcement and other high-profile cases come under the scrutiny of our
Board’s Regulation and Supervision Committee.

The term ’supervision’ covers only those cases that are categorised as intervention or enforcement.
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The way forward Our approach to regulation 15

7.3 Impact of supervision on investment

If a housing association is placed under supervision, we will always consider its suitability for continued
capital and revenue funding, and will assess the risk, if any, to public funds. As a result, we may
suspend funding. This will usually take the form of delaying access to previously agreed allocations.
Only in extreme situations – for example, where there is major fraud – would we impose a freeze on
the flow of cash to an association on committed schemes. We may also attach conditions to new
allocations of money. These conditions will relate to the underlying performance failures, and will only
be lifted when we are satisfied that the necessary improvements have been made.

7.4 Statutory powers

The Housing Act 1996 gives us access to a range of powers that could assist in handling supervision
cases. These include general powers to obtain information and to enter premises. The following are the
main powers we are most likely to use in enforcement cases:

! power to make appointments to governing bodies

We can appoint new members to the governing body of an association to give the governing body
the extra support it needs to resolve problems and improve performance.
! power to direct an inquiry into the affairs of an association
We may institute a statutory inquiry into an association’s affairs if we believe there has been
mismanagement or misconduct.
! power to intervene where an association is threatened with insolvency
We can intervene if an association is facing impending insolvency. Our powers are triggered when
a creditor seeks to enforce debts owed by the association, or where the association resolves to
wind up.

‘‘ Our regulation now emphasises continuous

improvement rather than requiring
associations to meet a large
number of detailed requirements.
’’
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16 The way forward Our approach to regulation

8 >> In summary

! Our objectives are to promote viable organisations that are well governed and well managed.
! These objectives will be matched by housing associations carrying out their functions effectively.
! Our new regulatory approach and framework are now in place, ready to start in April 2002.
! Our approach will be subject to regular evaluation ensuring we continue to provide
effective regulation.

Our new framework is summarised in the diagram below.

Effective housing association performance

• governance
• strategy
• delivery
• self assessment

Our regulatory objectives

Viable organisations that
are well governed and
well managed

Our Regulatory Approach

Clear regulatory Appropriate delivery
framework of regulation
• Code • area teams

• guidance • management of
knowledge
• good practice
• understanding
context
• assessment of
compliance
• reporting
 The Housing Corporation
The way forward Our approach to regulation I

>> The Regulatory Code and guidance

 The Housing Corporation
II The way forward Our approach to regulation

Notes

This is the Regulatory Code – the fundamental obligations of housing

associations in meeting the Housing Corporation’s regulatory requirements.

Regulatory guidance is shown alongside the Regulatory Code. In assessing

an association’s compliance with the Code we will consider whether
guidance has been followed or whether any alternative action taken by
the association is appropriate to achieve the same objectives.

The Regulatory Code and guidance reflect our general powers as a

regulator. We also have specific powers under Section 36 of the Housing
Act 1996 to issue housing management guidance. This specifies types of
guidance which, subject to consultation and approval by the Secretary of
State, we may take into account when judging whether there has been
mismanagement. This so-called ’statutory’ housing management
guidance is denoted by an asterisk*.

We use the term resident to include all types of legal occupier

(for example, tenant, almshouse resident, leaseholder and licensee) of
the association. A tenant is a resident who pays rent and holds a secure,
assured or assured shorthold tenancy or a licence to occupy
accommodation.
 The Housing Corporation
The way forward Our approach to regulation III

The Regulatory Code and guidance

Housing associations must be independent (except where they are subsidiaries of other housing associations) and
properly constituted not-for-profit organisations.

They must operate financially sustainable and efficient businesses and should be committed to, and primarily focused on,
providing good and responsive housing and related services and amenities for those whose personal circumstances
make it difficult for them to meet their housing needs in the open market. In doing so they will conduct their business
according to the following principles:

Regulatory Code Regulatory guidance

1 Viable 1 Viable

1.1 Housing associations must operate viable businesses, 1.1 a The association’s business plan demonstrates its
with adequate recourse to financial resources to meet priorities and strategy for achieving its objectives
their current and future business and financial including commitments to residents, lenders and rent
commitments: restructuring requirements.

1.1.1 based on a coherent and robust business plan; b The association’s business planning is informed by
asset management information, which is reviewed
1.1.2 fulfilling their loan-agreement covenants. regularly.

c Accounts and returns are submitted on time and

demonstrate that the association is, and will continue
to be, solvent.

d Financial policies and procedures are evident.

They ensure that the governing body has sufficient
and timely financial information to inform its
decision-making processes.

1.2 Housing associations must operate a framework that 1.2 a The association’s risk management framework
effectively identifies and manages risks: highlights key risks and how they are to be managed.

1.2.1 identifying all major risks that might prevent them b The governing body regularly reviews activities and
achieving their objectives; policies and all new business decisions and there is
a clear case for the proposed or existing direction of
1.2.2 with the necessary arrangements to manage risks and the association.
mitigate their effects.
c Approved terms of reference for the governing body
and other committees and delegated authorities for
staff are in place.

d There are internal control systems. Their effectiveness

is regularly reviewed by the governing body and
reported in the annual report.
 The Housing Corporation
IV The way forward Our approach to regulation
Regulatory Code
2 Properly governed
2.1 Housing associations must operate according to the
law and their constitutions:
2.1.1 maintaining their independence unless they are a
subsidiary of another housing association;
2.1.2 complying with all statutory and regulatory
requirements.
2.2 Housing associations should be headed by an effective
board with a sufficient range of expertise – supported
by appropriate governance and executive arrangements
– that will give capable leadership and control.
2.3 Housing associations must maintain the highest
standards of probity in all their dealings:
2.3.1 acting to maintain the good reputation of the sector,
and not bringing it into disrepute;
2.3.2 fostering positive relations with stakeholders;
2.3.3 conducting their business so they are accessible,
accountable and transparent to residents and other
stakeholders;
2.3.4 only entering into relationships with other organisations
when the rights and obligations are clear to all.
Regulatory guidance
2 Properly governed
2.1 a The association demonstrates its independence by
conducting its affairs without undue reference to or
influence by any other body, unless it is part of a group
structure where operating arrangements between
group members are documented.
b Membership policies and governing body composition
do not compromise the association’s independence.
c Individual governing body members act in a personal
capacity and not as nominees/representatives of any
other body, unless the constitution so provides.
2.2 a Effective governance arrangements can be framed
around the following questions:
To what extent does the governing body perform its
key governance roles well?
To what extent does the governing body work
well together?
To what extent does the governing body comprise
appropriate people?
b The governing body is diverse, reflecting the
communities the association serves, and has a range
of skills, experience and up-to-date knowledge.
c Organisational and management structures reflect
the association’s business objectives.
d The governing body meets regularly. It ensures that
the association acts within the terms of its constitution
and relevant legislation.
2.3 a A code of conduct for the governing body and staff,
together with a payments and benefits policy, is in
place. Sound procurement practices are in place and
contractual arrangements or partnerships with other
bodies are clearly defined and documented.
b The association maintains a dialogue about its strategic
objectives with its key stakeholders.
 The Housing Corporation
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2 Properly governed
2.4 Housing associations must protect public investment:
2.4.1 using their social housing assets only for social
housing purposes;
2.4.2 ensuring that their social housing assets are not placed
at risk by non-social housing activities.
2.5 Housing associations must seek and be responsive to
residents’ views and priorities:
2.5.1 reflecting these interests in their business strategy;
2.5.2 giving residents and other stakeholders opportunities
to comment on their performance;
2.5.3 enabling residents to play their part in decision-making;
2.5.4 providing opportunities for residents to explore, and
play their part, in how services are managed and
provided.
2.6 Housing associations must deal with the Corporation
in an open and co-operative manner, notifying any
anticipated or actual breach of the Code or anything
that might significantly affect associations’ ability to
fulfil their obligations under the Code.
V
Regulatory guidance
2 Properly governed
2.4 a Any material changes in activities are considered by
the governing body, contained in the business plan
and – where necessary – reported to the Corporation.
b Public funding invested in the association is protected
by, and non-social housing activities are managed
within, the association’s risk management framework.
2.5 a * The association is effectively accountable to its
stakeholders. Current information about its activities
is widely available to residents and other interested
parties.
b * Residents, housing applicants and others have ready
access to an effective complaints and compensation
policy, administered effectively. Independent Housing
Ombudsman recommendations are actioned.
* The association considers a range of methods and
c
opportunities to consult and obtain feedback from
residents. It seeks to make an agreement, developed in
partnership with residents, setting out how they will
be involved, consulted and informed and how this will
be resourced, measured, monitored and reviewed.
d * Where they so wish, residents are supported,
enabling them to obtain the knowledge and skills to
play an effective part in investment in, and
management of, their homes and neighbourhoods.
They are encouraged and supported to explore options.
2.6 a Any areas where the need for improvement is identified
are considered by the governing body and actions
agreed with the Corporation.
b Annual and other returns are made promptly to the
Corporation and other regulators.
*Areas that comprise statutory housing management guidance.
 The Housing Corporation
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2.7 Housing associations must demonstrate, when carrying
out all their functions, their commitment to equal
opportunity. They must work towards the elimination
of discrimination and demonstrate an equitable
approach to the rights and responsibilities of all
individuals. They must promote good relations between
people of different racial groups.
Regulatory guidance
2 Properly governed
2.7 a The association is fair in its dealings with people,
communities and organisations with which it has
relationships and takes into account the diverse nature
of their cultures and backgrounds.
b The governing body has adopted an equalities and
diversity policy that covers all aspects of equalities
and includes race, religion, gender, marital status,
sexual orientation, disability or age.
c Specifically in relation to black and minority ethnic
(BME) people, the policy incorporates targets
associations should set in the following areas:
* 1. Lettings: are proportionate to BME housing need,
or census data where this information is deficient,
in the area where the association has homes.
An association specialising in particular client groups
establishes different targets based on ethnicity data
available for such groups.
* 2. Tenant satisfaction: is at least as high as for
non-BME tenants.
* 3. Dealing effectively with racial harassment:
the association establishes targets for reporting,
victim support and satisfaction, and action taken
against perpetrators.
4. Governing body membership: the proportion of BME
new appointments and re-appointments to the governing
body is the same as under ‘Lettings’ above.
5. Staffing: new appointments and promotions achieve
the same levels of representation, at all levels of the
organisation, as under the application of the
‘Lettings’ criteria.
* 6. Representation in tenants/residents associations:
reflects the ethnic mix of the association’s tenants in
the relevant area.
7. Employment performance of suppliers, contractors
and consultants: as a criterion for award of work or
contracts and a condition of doing business, associations
should pass on requirements in respect of staffing,
customer satisfaction and dealing with racial harassment
(set out above) to their consultants, contractors and
suppliers.
*Areas that comprise statutory housing management guidance.
 The Housing Corporation
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3.1 Housing associations must set rents which move
towards target social rents and are, on average, below
those in the private sector for similar properties and
which reflect size, property value and local earnings.
3.2 Housing associations must have management
arrangements, resources, skills and systems which are
appropriate to their circumstances, scale and scope of
operation, and ensure that their activities:
3.2.1 are adequately monitored;
3.2.2 are undertaken efficiently and effectively;
3.2.3 are backed by proper systems of assurance for internal
control.
3.3 Housing associations must aim to deliver continuous
improvements and value for money in their services:
3.3.1 using Best Value techniques, challenging what they
do and how they do it, making comparisons with
others, consulting people affected by their services and
establishing whether they are providing the service,
either directly or through a third party, at competitive
standards and prices.
VII
Regulatory guidance
3 Properly managed
3.1 a * Rents are set in accordance with the rent restructuring
formula.
b * All residents have information about their landlord’s
rent policy and rent levels across the association’s stock
and in the relevant local authority area. All residents
have information about their service charges including
costs that their charges cover, how charges are
budgeted and increases calculated.
3.2 a * The governing body receives regular reports on all
areas of the association’s performance. The association
benchmarks its performance against other associations
and organisations.
b All lettings and sales are recorded in the COntinuous
REcording of lettings system (CORE).
* Services can be demonstrated to be relevant and
c
accessible to customers and potential customers.
d * There are clear contractual arrangements, and
reporting and review mechanisms for the use of
partners or agents.
3.3 a * Service provision is subject to challenge and change.
The wishes of residents, and others, are balanced
against available resources within a clear and
transparent framework, according to the principles of
Best Value. Progress in working towards improvements
against a range of national and local performance
indicators will be publicised by the association.
b * Housing services and supporting functions are reviewed
to ensure continued relevance.
*Areas that comprise statutory housing management guidance.
 The Housing Corporation
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3.4 Housing associations must develop and manage
good-quality homes that seek to meet people’s needs
and preferences now and in the future, ensuring that:
3.4.1 the homes their residents live in are well maintained
and in a lettable condition;
3.4.2 maintenance is carried out effectively and responsively
and in ways that reflect residents’ preferences;
3.4.3 necessary investment in the future of their stock is
made a key priority;
3.4.4 standards of new development provision are met.
3.5 Housing associations must provide good-quality
housing services for residents and prospective residents:
3.5.1 by seeking to offer a choice of home, while giving
reasonable preference to those in priority housing need;
3.5.2 by offering the most secure form of tenure compatible
with the purpose of the housing and the sustainability
of the community;
3.5.3 with agreements that clearly set out residents’ and
landlords’ rights and obligations;
3.5.4 by being responsive to the individual characteristics
and circumstances of residents;
3.5.5 by using lettings policies that are fair and reflect the
diversity of their client groups;
3.5.6 by providing high standards of customer care.
Regulatory guidance
3 Properly managed
3.4 a Permanent housing is sustainable, demonstrated by a
commitment to effective protection of the environment
and prudent use of natural resources.
b * Housing stock is maintained in a lettable condition
that exceeds statutory minimum requirements.
c * Progress in achieving the Decent Home Standard is
monitored.
d * There is a responsive repair service that meets legal
and contractual obligations and is efficient and
effective. It has published service standards and is
sensitive to the needs of vulnerable residents.
e * All equipment and building components meet required
legislative and regulatory standards.
f New developments comply with ‘rethinking
construction’ principles, as advised by the Corporation.
g Sinking fund payments made by leaseholders are held
in trust.
3.5 a * Services are shaped around customers’ needs.
b * Housing Corporation Resident Charters are provided to
applicants and residents.
c * Legal repossession of a property is sought as a last
resort.
d * Strategies are in place to tackle antisocial behaviour.
e Residents who exercise a purchase right receive timely
written information about their property.
*
f Vulnerable and marginalised residents are provided
with appropriate responsive housing services. Support
and care arrangements (including liaison with other
agencies) are in place, where appropriate.
*Areas that comprise statutory housing management guidance.
 The Housing Corporation
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Regulatory Code Regulatory guidance

3 Properly managed 3 Properly managed

3.6 Housing associations must work with local authorities 3.6 a * Lettings and sales policies are flexible, non-
to enable the latter to fulfil their duties: discriminatory and responsive to demand, while
contributing to the need to be inclusive and the need
3.6.1 to the homeless and people in priority housing need; to ensure sustainable communities.

3.6.2 to the vulnerable and those covered by the b * Associations are able to demonstrate their co-operation
Government’s Supporting People policy. with local authorities in homelessness reviews, in the
formulation of homelessness strategies, and in the
delivery of local authorities’ homelessness functions.

c * When requested to do so by the local authority and

to such an extent as is reasonable in the circumstances,
associations provide a proportion of their stock to local
authority nominations and temporary accommodation
to the homeless.

d * Criteria are adopted following consultation with local

authorities for accepting or rejecting nominees and
other applicants for housing.

e * Applicants are excluded from consideration for housing

only when their unacceptable behaviour is serious
enough to make them unsuitable to be a tenant and
only in circumstances that are not unlawfully
discriminating.

f* Lettings policies:
• are responsive to local authority housing duties;
• take account of the need to give reasonable priority
to transfer applicants including applicants from
other associations;
• are responsive to national, regional and local
mobility and exchange schemes;
• are demonstrably fair and effectively controlled.

*Areas that comprise statutory housing management guidance.

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3.7 Housing associations must demonstrate that their * New homes meet long-term priority needs in the area
3.7 a
strategies and policies are responsive to their economic in which they are developed.
and social environment and link into regional and
local housing strategies. b * The association co-operates and contributes to local
authorities’ strategic enabling role.

c Associations will be able to demonstrate their

contribution to the objectives of neighbourhood
renewal and regeneration either directly or through
partnership, particularly when working in
deprived areas.

d The association demonstrates a commitment to

sustainable development and works towards
incorporating economic, social and environmental
objectives in its activities.

*Areas that comprise statutory housing management guidance.

The Housing Corporation
The way forward Our approach to regulation

Contacts
We describe our new area regulation teams in section 5

For information on how regulation is carried out, you can contact the relevant office. Further information
on any aspect of this publication can be obtained from our Regulation Policy team. We welcome all
feedback.

North Regulation Policy

Serving Yorkshire and the Humber,
the North East and North West. Maple House, 149 Tottenham Court Road,
London W1T 7BN
Telephone: 020 7393 2000 Fax: 020 7393 2111
Leeds
Email: enquiries@housingcorp.gsx.gov.uk
St. Paul’s House, 23 Park Square South
Leeds LS1 2ND
Telephone:0113 233 7100 Fax: 0113 233 7101
Email: northeastern.info@housingcorp.gsx.gov.uk

Manchester
Elisabeth House, 16 St. Peter’s Square
Manchester M2 3DF
Telephone: 0161 242 2000 Fax: 0161 242 2001
Email: northwest.info@housingcorp.gsx.gov.uk

Liverpool
Colonial Chambers, 3–11 Temple Street
Liverpool L2 5RH
Telephone: 0151 242 1200 Fax: 0151 242 1201
Email: merseyside.info@housingcorp.gsx.gov.uk

Central
Serving the East of England,
East Midlands and West Midlands.

Leicester
Attenborough House, 109/119 Charles Street
Leicester LE1 1FQ
Telephone: 0116 242 4800 Fax: 0116 242 4801
Email: east.info@housingcorp.gsx.gov.uk

Wolverhampton
31 Waterloo Road, Wolverhampton WV1 4DJ
Telephone: 01902 795000 Fax: 01902 795001
Email: westmidlands.info@housingcorp.gsx.gov.uk

London
Serving Greater London.
Waverley House, 7–12 Noel Street, London W1F 8BA
Telephone: 020 7292 4400 Fax: 020 7292 4401
Email: london.info@housingcorp.gsx.gov.uk

South
Serving the South East (excluding London)
and South West.

Croydon
Leon House, High Street, Croydon
Surrey CR9 1UH
Telephone: 020 8253 1400 Fax: 020 8253 1444
Email: southeast.info@housingcorp.gsx.gov.uk

Exeter
Beaufort House, 51 New North Road, Exeter EX4 4EP
Telephone: 01392 428200 Fax: 01392 428201
Email: southwest.info@ housingcorp.gsx.gov.uk
The Housing Corporation
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Availability in other formats

This publication or summary can be provided in other languages, on audio tape or in other formats on
request from the publications section of the Housing Corporation.

c Copyright The Housing Corporation. Published January 2002