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Government to cover £6.25m shortfall from fees regime delay

The English social housing regulator has decided to delay the introduction of a new fees regime for registered housing providers until October 2017 following consultation, meaning it will miss out on £6.25m of fees income for the 2017/18 year.

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The Homes and Communities Agency (HCA) had originally planned to introduce fees from April 2017.

The timing was criticised by the National Housing Federation and a number of respondents to its recent consultation also raised concerns, arguing for a delay on the basis that early introduction would impact on existing budgets and business planning for 2017/18.

The change means registered providers will pay a total of £6.25m for 2017/18 - meaning the regulator will lose out on the same amount - before full fee charging is introduced in 2018/19. With a fee increase cap of 1 per cent in place on the £12.5m 2017/18 income, the maximum amount to be recovered by fees in 2018/19 will be £12.625m.

The Department for Communities and Local Government will make up for the £6.25m shortfall in the first year.

The plan is to charge an annual per unit fee of £4.72 for associations with more than 1,000 homes. The fees are set based on the number of social housing units owned by that provider, at group level where the parent is registered, and as reported in the statistical data return (SDR). To put that into context, a group with 20,000 social homes would need to pay almost £95,000 for the year.

Following consultation in December 2016, the initial registration fee of £2,500 will remain the same but will only be charged to those who apply to register on or after 1 October.

Those with fewer than 1,000 homes will pay a flat fee rate of £300.

However, the smallest organisations - with under 60 homes - will not need to pay should they de-register, and where a complete de-registration application is made by 1 September 2017.

Following the consultation, there will also now be sector representation via a Fees and Resources Advisory Panel, after calls for fee-paying providers to be able to ‘consider the operational effectiveness of the regulator’.

The regulator said this will be done ‘in such a way as to ensure the independence of the regulator is not fettered or the confidence of stakeholders such as lenders or ratings agencies diminished’.

There were also a small number of concerns that non-payment of fees could ultimately result in a regulatory downgrade. Some said this may be ‘disproportionate’ for non-payment unless it led to discovery of wider governance failures, with one suggestion to publish names of those who have not paid fees. The HCA said the points had been ‘noted’ and publication of the names of those who do not pay will be considered.

Julian Ashby, chair of the HCA regulation committee said: ‘Thank you to everyone who participated in the consultation and our various discussions around fees.

‘I’m pleased to see a high level of support for our proposals, which were described as fair, simple, transparent and practical. In our approach to implementing fee charging we have carefully considered the impact on existing budgets and business planning for 2017/18 and noted the affordability challenges raised by some of the very small providers.’

Timing

To put the fees regime in context, it would have generated more than 85 per cent, or £12.5m, of the regulator’s £15m indicative budget for 2017/18, which would ‘help maintain an appropriate level of resource’. The remainder would be provided by government through gift in aid, which will support reactive work.

The consultation received 89 responses from large providers, and 56 from smalls.

Of those, 52 respondents raised concerns about the timing of the introduction, and argued for a delay on the basis that early introduction would impact on existing budgets and business planning for 2017/18.

In addition, some were concerned about the proposed limit of a maximum 1 per cent increase in fees, citing the ‘value for money (VFM) culture’ which the regulator is keen to promote as well as the 1 per cent rent reductions to which registered providers are currently subject.

Some suggested that the regulator should not limit itself on future budget changes and considered that some flexibility on fee levels.

There will remain a cap on the maximum increase to total income raised from fees to 1 per cent per annum until the end of current Spending Review period in 2020, from a base of £12.5m.

The regulator said it will proceed with the proposed 1 per cent per annum cap on total fee income, but will commit to keeping costs - which are particularly driven by staff costs - and therefore the fee charges, to the minimum necessary.

‘We agree that the regulator must be transparent and accountable to stakeholders over VFM,’ it added in its decision notice.

Regulatory change

The regulator was granted powers to charge fees under the Housing and Regeneration Act 2008. It set out initial proposals in a discussion paper in 2014 and held a further statutory consultation at the end of 2016. 

The plans come against a backdrop of continued central government funding cuts and an increasingly complex social housing sector, resulting in the HCA’s move to mechanisms such as in-depth assessments (IDAs). The sector currently has a no loss of default record, which the regulator is keen to uphold.

It also comes as the regulator prepares to move out of the HCA to become a standalone entity - a move which has been welcomed by lenders - and amid a major push from the government and the sector itself for housing providers to improve and display their efficiency.

The decision statement said: ‘The case for charging fees was strongly supported by many respondents and a number, including representative bodies stressed that effective regulation is essential to enable providers to access the investment needed on attractive terms and that introducing fees was the best way of ensuring this continued.’

Mr Ashby added: ‘Introducing fee charging complements the HCA review conclusion to establish the regulator as a separate legal entity. We’re committed to keeping our costs low and therefore the fee level reasonable and proportionate, while maintaining effective regulation.

‘We will establish a Fees and Resources Advisory Panel to ensure that there is accountability for fees charged.’

Hear from Julian Ashby at the Social Housing Finance Conference on 11 May 2017. See the conference information here.

Regulatory fees: consultation results

Following the outcome of the consultation, the regulator said it will introduce:

  •          a one-off flat-rate registration fee of £2,500 for successful registration with the regulator
  •          a fixed annual fee of £300 for providers with fewer than 1,000 social housing units
  •          an annual per unit fee of £4.72 for large providers with 1,000 or more social housing units – with the fee charged at group level rather than for each individual entity on the register.

Taking account of points raised in the consultation responses, the regulator has also committed to:

  •          waive fees for 2017/18 for providers with fewer than 60 social housing units, where a complete de-registration application is made by 1 September 2017 and it has a reasonable chance of being completed by the financial year end
  •          a cap on the maximum increase to total income raised from fees to 1% per annum until the end of current Spending Review period in 2020 from a base of £12.5 million
  •          introduce a Fees and Resources Advisory Panel alongside existing stakeholder arrangements
  •          publish an annual fees statement in addition to the transparency information it already publishes.

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