A new regulatory framework for Wales

In January 2022 the Welsh Government (WG) published its new Regulatory Framework for Housing Associations Registered in Wales (the Framework) and accompanying short-form guidance, following its consultation exercise which ended on 25 August 2021. 

The Framework replaces WG’s 2017 standards with a new set of ‘regulatory standards’ that housing associations (HAs) will need to meet.

These new ‘regulatory standards’ also include clear standards around tenant engagement and what is expected of HAs in terms of hearing their tenants’ voices.

Tenant involvement
The Framework is now outcome focussed and gives much greater prominence to tenant involvement. There is an increased focus in the Framework on proactively engaging with and listening to tenants. This goes a step further than the 2017 approach of putting ‘tenants at the heart of regulation’ to ‘enabling and supporting’ tenants to become involved in strategic decision making and the delivery of services.

The previous performance standards have been replaced with regulatory standards.

WG’s judgments given to RSLs against each of the two regulatory dimensions (governance and financial viability) are now colour coded as compliant (green and yellow) and non-compliant (amber and red) as follows:

Compliant

1. Green – The HA meets the regulatory standards and will receive routine regulatory oversight.
2. Yellow – The HA partially meets the regulatory standards and has the potential to be able to achieve the required improvements with increased regulatory oversight.

Non-compliant

1. Amber- The HA partially meets the regulatory standards and is unlikely to be able to achieve the required improvements without regulatory intervention.
2. Red – The HA partially or wholly does not meet the regulatory standards and it is necessary for the Regulator to take statutory action.

Self-evaluation – WG requires that self-evaluation against the regulatory standards is carried out at least once a year. The 2017 framework required it to be carried out ‘regularly’. Both frameworks require self-evaluation to be ‘readily accessible to tenants’. The Framework extends this to ‘other audiences’ as well and specifies that consideration should be given to ‘people without access to digital channels’.

Regulatory assessment

New approach to regulatory assessment – The Framework sets out a new approach to regulatory assessment. WG has stated that it will start with Transition Regulatory Reviews (TRR) (commencing immediately on publication of the 2022 Framework). Key features of the TRR are:

• Assessment of the HA’s self-evaluation and improvement plans – compliance with new regulatory standards;
• Assessing a HA’s financial viability – longer term;
• Oversight of a HA’s governance and service delivery;
• New judgment.

WG will, during the course of the 2022/2023 financial year introduce:

1. Full Regulatory Assurance Reviews (FRAR); and
2. Regulatory Assurance Reviews (RAR).

Each year WG will undertake either a FRAR or RAR of each HA.

Key features – FRAR

• An In-depth assessment of the strength and accuracy of the HA’s self-evaluation and improvement plan – compliance.
• Frequency to be determined by contextual assessment process.
• The scope and focus determined by factors including sector risk profile, size, complexity, self-evaluation and regulatory intelligence.
• Can also be triggered at any time if material concerns identified.
• New judgment.

Key features – RAR

• Light touch – intervening years between FRAR.
• Assessment of self-evaluation and improvement plan/compliance.
• Financial viability assessment.
• Confirmation judgment.

The different regulatory judgment types will lead to different levels of ongoing interactions with the Regulator.

Performance standards (PS) vs Regulatory standards (RS)

We have set out below the headline differences between the PS and new RSs.

• Leadership and governance – RS1 expands on PS1 to include equality and diversity commitments and requirements to have a diverse board as follows:
  • Sets and delivers measurable, evidence-based commitments across all areas of its business in relation to equality, diversity and inclusion (including anti-racism and tackling hate crime) reflecting the diversity of the communities it works in and with;
  • Has a diverse board, reflecting the communities the HA works in and with, and has the skills and knowledge required to be effective; and
  • RS1 also incorporates PS.2 – tenant involvement – requiring greater tenant involvement in the decision-making process. ‘Enables and supports tenants to influence strategic decision making’ (RS1f) rather than tenants being ‘effectively involved in strategic decision making’.
• Risk management – RS2 and PS.3. RS2 includes a requirement to have a disaster recovery plan, which is not so explicitly stated in PS.3, which has presumably been introduced in response to the pandemic;
• High quality services – RS3 and PS.2. RS3 requires a greater focus on diversity in regard to service delivery: ‘Delivers services which meet the diverse needs of tenants’. It also requires more transparency for tenants: ‘Makes landlord performance information available to tenants’;
• Tenant involvement – RS4 introduces further requirements to empower and support tenants to influence the design and delivery of services;
• Rents and service charges – RS5 introduces affordability requirements, ensuring that all applicable rules and statutory guidance is complied with;
• Value for money and strategic financial plans – RS6 and PS.6. RS6 introduces accountability to stakeholders, including tenants: ‘Can demonstrate to stakeholders, including tenants, that it achieves value for money in delivering its strategy and services’;
• Financial planning and management – RS7 and PS.8/PS.9. RS7 requires greater accountability to the board: ‘Sets financial plans which enable it to deliver its strategy and achieve its social purpose, and there is appropriate reporting to the board against these plans’. Again, a greater focus on stress testing and managing risks: ‘Identifies and effectively manages risks to the delivery of financial plans including appropriate stress testing, scenario planning and use of internal thresholds’;
• Management of assets and liabilities – RS8 and PS.10. RS8 has a greater emphasis on social purpose and fulfilling the objectives of the organisation: there is a requirement that the HA ‘[m]aximises the use of assets to achieve its social purpose and the objectives of the organisation; and
• High quality accommodation – RS9 and PS.2. RS9 requires the current Welsh Housing Quality Standard to be met (first published 10 April 2019, most recently updated 12 January 22).

For more information

For further information about the new Framework and accompanying guidance, please contact Catherine Simpson.

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