Aberystwyth 27/09/2008


In October 2007 the Deputy Minister for Housing established this Task and Finish Group to carry out a Review – in the context of the 'One Wales' agenda - to explore the barriers and opportunities presented by the Assembly Government's priority to deliver significantly more affordable homes in Wales by 2011. The Review has proven to be timely bearing in mind the significant changes planned in England and Scotland and the emergence of the 'credit crunch' during the period of the Group's work.  The issues arising from this downturn in the market underline the importance of housing in tackling poverty and its influence on health and well being, educational access and achievement, and employment activity. 


The challenge is not solely about delivering increased numbers but about people and their need for well designed, quality homes, of the right type, in the right place, integrated into wider community plans to ensure strong, balanced sustainable communities.  However, we believe that the mechanisms currently in place to support the development of such housing – collection and use of information, regulation, resources and ways of working – needs to be more effective, Immediate action is necessary to achieve this.


The current picture in Wales


The starting point for the Group's Review has been the current housing position in Wales, how this might be expected to change and the existing frameworks for the delivery of affordable housing.  Although the majority of the housing stock is in the private sector (83%), a significant proportion of households live in the social housing sector in homes provided by local authorities and housing associations.  Tenure change in Wales has shown an overall decline in the level of social housing and the growing importance of housing associations as providers of affordable housing (see reference 1). 


In looking at current and future housing requirements (and in particular the need for additional affordable housing), we have noted the evidence from a number of local and regional studies. However, we are concerned at the lack of a robust evidence base in relation to the extent of the need for additional affordable housing at a national level in Wales.  We believe this data deficit needs urgent attention.  Whilst the commitment to an additional 6,500 affordable homes between 2007-2011 is welcome, we think this is unlikely to be sufficient to fully address needs.


In terms of the long term improvement in the quality of Welsh housing stock  available evidence suggests that the quality of the social housing stock (particularly local authority stock and that which has been transferred to new housing associations) falls well short of the Welsh Housing Quality Standard (WHQS) and substantial investment is needed both to achieve WHQS by the target date of 2012 and to sustain it thereafter.  This poses significant challenges for social landlords (not least in terms of local authorities examining the options and, where appropriate, putting the transfer option to tenants), yet the scale of investment also presents opportunities for social housing organisations to be at the heart of local economic and community regeneration.


Political devolution and the refocusing of Welsh Assembly Government policies on service delivery and a stronger co-ordination of different strategies and policies have begun to shape policy development for housing in Wales.    We have concluded that more needs to be done to address supply side issues, to ensure environmental and community sustainability and to strengthen the strategic and enabling roles in housing at a local, regional and national levels, building on successful innovation.


In considering the current housing position in Wales we have considered the changing shape of the housing association sector, the drivers of change, and the ways the sector is organising to deliver on the provision and regeneration of affordable housing.  The roles which housing associations play in the local housing system are changing and that this has implications for organisations themselves, the sector as a whole, their partners (including local authorities) and the Welsh Assembly Government, in terms of its funding and regulatory functions.


Looking to the future


The ‘Making the Connections’ model at the heart of the Welsh Assembly Government's public service agenda, is both appropriate and applicable to taking forward a new approach to stimulating and developing affordable housing in Wales.  The Group believe that the principles underlying the model, clearly focused on an outcome based and collaboration led approach, match the nature of housing in Wales, both in character and necessary direction.  In applying the model, housing would be aligning itself with other policy changes in public service delivery taking place within Wales. This would see:


  • the Assembly Government taking a stronger strategic role,  moving away from detailed management of programmes to concentrating on achieving outcomes through enabling delivery, performance and accountability; 
  • local authorities acting as strategic housing enablers and community leaders, identifying local need and working closely with others to meet it; 
  • housing associations being given more freedom to release resources, develop and innovate but within a clearer, risk and performance based regulatory framework; 
  • the private sector recognised as having an essential role as funder, developer and landlord, encouraged to work in greater partnership with government; and
  • tenants being sure of a quality and responsive service  


The recommendations in the Group's Report will, if implemented, contribute to ensuring this challenging agenda can be met. Although not all are for the Welsh Assembly Government it is essential that they lead the change, moving quickly to put new arrangements in place. They must ensure that this Review is used to implement and embed the cultural environment of trust and transparency that allows a model of partnership, integration, planning and performance to thrive.     


Regulating housing associations – going forward


The current regulatory regime in Wales for housing associations was originally developed over 20 years ago and although it has served its purpose well, it no longer meets current or forthcoming challenges. We have set out a substantial agenda for change. Our view is that the current arrangements are failing in a number of different ways, albeit we fully recognise and acknowledge the considerable efforts made by staff in the Welsh Assembly Government and the Wales Audit Office (WAO) as well as housing associations themselves, to make the current regime work. Nevertheless having heard the evidence and considered this in significant detail, we take the view that reform is urgently needed.

In our view the task of change needs to be taken forward as soon as possible and certainly to begin this year. Having identified weaknesses in the current arrangements it would be foolhardy to leave these untouched now. With significant regulatory upgrading underway in England and Scotland it is important this is taken forward so that Wales is not disadvantaged.

The aim of the Review in part has been to see how we can help associations do more. Some may have viewed that as a mandate for a lighter regulatory regime or indeed no regulation at all. However, it has become obvious to us that in setting out an ambition to do more we do have to have a system in place which helps all associations achieve that. The requirement for more homes and better services is Wales-wide and the regulatory framework needs to ensure there are organisations fit for purpose across Wales delivering it.

Our aim has been to set up a regime which is far more transparent than the one operating at present, with clear performance requirements and compliance mechanisms in place so that it will deliver real benefits to associations and their key stakeholders including tenants and residents. It is quite evident that what we are suggesting has in broad terms been on the agenda for a long period of time and we have set out the necessary changes to deliver this agenda.

We have responded to the appetite for a regime built around a stronger role for self assessment but we have also recommended an upgrading related to finance and governance across the system.  We have set out new requirements for the Welsh Assembly Government, stressing the need for continuous improvement and proposed a Regulatory Board that can maintain a permanent watch over the system and the performance of the sector.

Our view is that we need a step change in the current arrangements. The system has lost credibility with associations and others, as is evidenced by late reporting and the variable quality of those reports. There must be a renewed commitment by all parties to take any new arrangements forward recognising that the need to secure an efficient and effective social housing sector for the benefit of the people of Wales.

We believe that what we propose will ensure that key organisations will be much better placed to respond to the One Wales and Delivering the Connections agendas.  First the system will give a stronger role to local authorities and to residents and tenants. Second, it will help associations make better use of their resources. Third it should help secure more resources because investors - both public and private - will have more confidence in the regime in place.

Securing finance for affordable housing


The Report explores a number of ways it might be possible to secure extra funding. None of them are dramatically new or unique to Wales, but the reality is that markets and finance rules are constantly changing with new windows of opportunity opening just as others are closing. We looked across the spectrum to see what might be achieved, covering a range of issues including the use of land, cross subsidy, cheaper finance and increased leverage, building a greater borrowing capacity as well as looking at some of the different models that might be applied. The Welsh Assembly Government has explored some of these options in the past and others are currently under consideration. The key point is we know they can be made to work and that subject to appropriate safeguards (and appropriate market conditions) lenders will normally be prepared to back an expansion of activity.


The Welsh Assembly Government has identified the need to increase the supply of affordable homes in Wales. Successive years of public funding have allowed the housing association sector to build up a considerable stock of assets of both homes and financial reserves. The current Community Housing Cymru (CHC) initiative to ensure that housing associations are able to maximise these assets is a welcome move by one key player in the market place and one we strongly support. Our view is that the sector does have the capacity to do more and we would urge all association boards to deliver on this. The Report recommends a series of major changes to the regulatory environment which we believe will also help associations to carry forward this agenda.


We are looking to see expansion supported by increased use of European Investment Bank (EIB) funds, public land release and section 106 Agreements, all of which can bring extra resources to the table so that Wales is not solely reliant upon housing association asset alone. This may be complemented by European Structural Funds. Adopting a full suite of the range of options available including local housing companies, partial stock transfer and community land trusts, in conjunction with improved regulation, should reassure boards and association stakeholders such as lenders and local authorities that this can be done safely and without risk to the future of the associations themselves. The Assembly Government should use its strategic Capital Investment Board to secure additional funding for affordable housing as part of wider regeneration objectives.


As a matter of some urgency, we feel the Welsh Assembly Government must now review the housing association rent regime and its interaction with the cost guideline process. We are concerned that within the structure there are significant anomalies and there is a need for a regime with a stronger and clearer logic and one that is fair and consistent.


A review of the Housing Revenue Account (HRA) system is underway in England and this will impact upon Wales.  This clearly is very significant for Wales and the Welsh Assembly Government needs to work with the Welsh Local Government Association (WLGA) to influence its outcome. The timescales involved and need for legislative change suggest that there should not be an over reliance on this as a short term solution but it could play a role in the future.


Delivering on the ground


It is important to recognise that we are not operating on a blank canvas. There are already good examples of policies and approaches that are helping to increase the supply of quality affordable homes in Wales and elsewhere and there is an imperative to transfer and mainstream those initiative across Wales.  these could be mainstreamed. Where necessary they have been reflected in the Report's conclusions and recommendations. Many of these good examples rely on the type of collaboration and partnership working recommended by the Report. The basic message is that working together works.


Key recommendations


The Review Group has not been able within the short timescale to provide a complete blueprint for the future.  For the most part the suggested changes are broad in nature, but in some areas such as regulation for housing associations there is considerable detail to support immediate changes to the system should the Government decide to take those forward.


The Report has been prepared as an advisory document for Government with a large number of suggestions for change: this reflects the Terms of Reference which cover a wide and complex area.  There are some that are crucial to the delivery of the 'One Wales' commitments and need urgent or immediate implementation.  These include:


  • the need to urgently put in place a robust evidence base on housing need;
  • the immediate implementation of a planned programme of change, with the Welsh Assembly Government taking a strong lead role by providing a clear vision and setting out a partnership approach based on trust, transparency, mutual respect and clarity of roles;
  • strengthening of staffing with the right skill sets in Housing Division to enable them to implement this change agenda and take a new approach. This may require additional resources. Those activities that don't add significant value (eg detailed scheme appraisals) need to stop urgently in order to create capacity for staff to move the management of Social Housing Grant (SHG) swiftly onto a more strategic footing and pursue a role of overseeing the health and performance of HAs to ensure that quality, affordable housing is delivered;
  • implementing the new regulatory regime described in the Report as a matter of urgency, beginning this year;
  • a more focused regime must be complemented by a relaxation of current constraints on housing associations through early implementation of the 'quick wins' recommended previously by the Group; 
  • ensuring that the Assembly Government and its partners make best use of existing resources such as publicly owned land, housing associations’ assets and the planning system to support the delivery of new affordable housing; 
  • encouraging all local authorities (including those that have transferred stock) to take a stronger strategic enabling and community leadership role, identifying housing need and working with others across their areas to maximise opportunities to provide affordable housing;
  • aligning Social Housing Grant and the Welsh Housing Quality Standard (WHQS) with the Assembly Government's climate change agenda,  maximising energy efficiency and progressively moving up the levels of the Code for Sustainable Homes;
  • early partnership working, which is essential to taking forward the recommendations regarding the Regulatory Framework and implementing the new regime for SHG. 


Implementing these and the many other recommendations in the Report represent a significant challenge and will require sustained political, organisational and financial commitment from all the key bodies in Wales - particularly the Welsh Assembly Government, local authorities and housing associations. We have found an immense interest and enthusiasm for securing an expanded programme of affordable housing in Wales to meet the housing needs of people in Wales and we believe it is imperative that the Assembly Government, working in partnership with others, now leads a programme of change management to ensure delivery.














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