Becoming a Registered Provider of Social Housing

What does it mean to be a Registered Provider (RP)?

A registered provider of social housing is an organisation officially listed and regulated to offer low-cost housing to people in need. Any provider of social housing can apply to the Social Housing Regulator (RSH) to become a registered provider. The advantages of becoming a RP are:

• RPs can apply for capital funding from Homes England
• Banks view RPs more favourably for loans
• RPs can evidence that there are good standards in place - which helps when commissioning for new services
• RPs can demonstrate that there are good standards in place for any potential grant funders and Housing Benefit Departments.

The full guidance on becoming a RP can be accessed here.

Principles of Regulation

All applicants – whatever their size, status or type of business – are required to meet the same registration criteria; but the Regulator subjects organisations with less than 1,000 units in management to less scrutiny. However, the registration process is still extremely onerous and needs careful thought before commencing.

Standards include:

• Economic Standards: Governance and Financial viability, Value for Money, Rents
• Consumer Standards: Tenant Involvement and Empowerment, Home Standards, Tenancy Standard, Neighbourhood
• Community standards

More information about the Social Housing (England) Regulations can be found here.

What are the disadvantages of Regulation?

It’s a very lengthy process and a high percentage of smaller organisations do not have the resources to undertake the full application process. Many do not have the governance administrative processes in place to evidence lower than market rents at the first stage.

Stage 1: The Preliminary Application

The purpose of the preliminary stage is to ensure the applicant will meet the basic requirements for becoming an RP. The three basic requirements are:

Requirement 1: That you are (or will become) the landlord of the low-cost rental accommodation.

This means the accommodation must either be owned or leased by the applicant and therefore the occupancy agreement is (or will be) between the applicant and the occupier.

The following would not therefore qualify as a basis for registration:

• Accommodation subject to a management agreement or service contract and let on behalf of another organisation, or
• Accommodation leased to another organisation who then becomes the landlord and can let the accommodation in their own name.

Low-cost means the rent will be lower than the private market for similar accommodation in the local area. It is important to make like-for-like comparison as far as possible, explaining the assumptions used for the comparison such as whether the rents include council tax, whether it is furnished, and which utilities are included.

Documentation needed:

• Title deeds or leases for low-cost rented accommodation
• The occupancy agreement (if the agreement is a licence, you must provide an explanation of why a licence is appropriate for the accommodation provided)
• Private market rental data for the local area and a comparison with the low-cost accommodation provided or to be provided. Include an explanation of how a like-for-like comparison has been made. It may be possible to make a case that some of the charges in your low-cost accommodation are for items that would not be provided in the private market, and therefore those items could be excluded from the overall amount payable when making the private market comparison.
• The Regulator will want to know the difference in £ and the percentage difference between the average market rent and the total payable in rent and relevant service charges for the low-cost accommodation.

Additional requirements where the applicant intends to become the landlord of low-cost accommodation:

• Details of planned land/property ownership, leasing or development
• The financial arrangements, including capital funding (Homes England, Greater London Authority or other funding bodies), the use of reserves, loan finance, etc.
• Contact with the local authority regarding the plans and any contractual relationships.

Requirement 2: The rents charged (or to be charged) in respect of low-cost rental accommodation will meet regulatory and legislative requirements

In practice this means the low-cost accommodation must qualify as social rented or affordable housing.

Social Rented accommodation

To qualify as social rented accommodation, the core rent (excluding service charges) must comply with the Regulator’s Rent Standard, i.e. it must be set at or below the formula rent level.

Formula rents take account of the property valuation as of January 1999 (relative to the average social rented valuation at that time), local earnings from the same period and a unit size multiplier. Download a formula rent calculator here.

A second method is available for large or specialised projects that requires unit size measurements and the plot of land area (including curtilage). The Homeless Link calculator can also be used for this method.

Service charges must be set to cover service costs that are needed and must distinguish between those that are eligible or ineligible for housing benefit. Charges for enhanced, additional or intensive management costs and out-of-hours cover and security services should be clearly set out and it is advisable to have supporting information available to explain what is included within each.

The Regulator may seek evidence that the service charges have been approved for housing benefit purposes where necessary.

Documentation needed:

• A valuation prepared by a qualified professional using based on the RICS red-book methodology
• The formula rent calculation (the Homeless Link calculator can provide this).
• A full schedule of service charges (both eligible and ineligible for housing benefit).
• It is also recommended that a full budget for the social rented accommodation should be made available to demonstrate that core property costs can be met from formula rent income. This includes loan or lease charges, routine, response and void maintenance, a provision for cyclical maintenance and long-term major repairs, property depreciation and basic property management.

A webinar recording on Housing Benefit and Supported Accommodation, alongside a budgeting template for supported accommodation providers can be accessed here.

Affordable housing

This can only be provided by a RP, so this category will normally apply to organisations intending to become a RP.

Affordable housing is provided under an agreement with Homes England or the Greater London Authority (GLA) which specifiers that accommodation may be let at an affordable rent. It is normally a condition tied to a capital grant.

The total amount payable, i.e. the rent and all services charges (both HB eligible and ineligible) must be no more than 80% of the private market rent.

Documentation needed:

In addition to the plans and financial arrangements under the requirements for those intending to provide low-cost rental accommodation, if the project is for affordable rented housing, you will also need:

• The basis for calculating the market rents
• Details of discussions with Homes England or the GLA, and
• The budget for services
• Financial projections for the proposed project.

Requirement 3: The accommodation will be made available to people whose needs are not adequately served by the commercial market.

This requires an explanation of referral arrangements and how people are made aware of the low-cost accommodation.

Documentation needed:

• The allocations and lettings policy and associated procedures.

Other information

The Regulator will need to see that the objectives of your organisation include the provision of social housing.

It is also recommended that you prepare an overview of all services provided with a focus on housing provision. If you also provide market-rate or other types of housing, explain why it would not qualify as social rented, and whether it might meet the criteria for social housing in future.

Stage 2: The Main Application

Once an applicant is successfully through the preliminary stage, they have six months to prepare for the main application. This can be a lengthy process (the application form has 60+ questions) and requires a considerable commitment from the Board and senior staff.

Applicants need to provide information that will enable the Regulator to determine whether they meet the registration criteria.

Applicants must have in place management arrangements that enable it to demonstrate it meets the Governance and Financial Viability Standard at the point of registration and demonstrate it can sustain its financial viability on an on-going basis. There must be management arrangements that enable it to demonstrate the capacity to meet the other regulatory standards (which include the Value for Money, Rent and Consumer Standards).

Policies you will need to have in place are (not exhaustive):

• Evidence of a Code of Governance in place or working towards completion e.g. NHF or Charity Code of Governance including how the organisation manages conflicts of interest
• Board Members Handbook - including Code of Conduct how the organisation assesses and ensures that it has the right skills to govern the organisation.
• Full set of housing management policies - including rent setting policy, nominations, eviction procedures, maintenance and repairs
• Complaints procedure in accordance with the Housing Ombudsman Complaints principles
• Risk register
• Financial forecasts for the following 5 years or longer, up to 35 years, to show long term viability, the ability to repay loans and meet long term maintenance and renewal costs
• Financial stress testing of the financial projections
• Financial policies and procedures
• Quality Assurance processes
• Tenant engagement strategy and action plan including reference to the Regulator’s Tenant Satisfaction Measures
• Neighbourhood and community policies e.g. ASB etc
• Evidence of how the Board assures itself of compliance with the above with evidence within agendas and minutes of meetings

It’s a slow and long process – even just getting through Stage 1. 80% fall at the first hurdle but if you have the resources (time and money) it will be worth it.