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HCA fees: what we know, and what we need to know

9 February 2017 • Jo Loake

With the deadline for responses to consultation on the HCA’s proposed introduction of fees now passed the sector is waiting for further clarity on these new payments. Croftons’ Head of Governance, Jo Savage, recaps what we know so far, and poses some key questions the regulator needs to answer before the proposals are implemented.

The HCA proposed the introduction of fees to ensure that it has sufficient resources available to continue to be an effective regulator as the sector becomes more complex and diverse. It is proposed that the fees for RPs with less than 1000 units would be fixed at £300 per annum. RPs with over 1000 units would be charged a fee of £5 per social housing unit. It is further proposed that a fee of £2500 would be charged for new registrations.

Under 1000 units

RPs with under 1000 units would be charged £300 per annum. Concerns were raised in response to the initial discussion paper regarding possible exemptions for the smallest of providers, such as almshouses. However, it is proposed that providers are to pay the fee, regardless of size if they wish to receive the benefits of being part of the regulated sector. There will be no exemptions.

The fee is intended to reflect the costs of maintaining the register of RPs, the health checks that the HCA performs on financial statements and all other relevant costs and associated overheads.The fee level would be subject to periodic reviews and any material changes would be consulted upon.

New registrations

A fee of £2500 is proposed and it would only be payable when an applicant has successfully completed the two stage process and is registered. This represents 25% of the average cost of registration to the HCA and it was felt that to charge a higher fee than that proposed would be a barrier to entry. The remaining £7500 cost to the HCA of registration will be met from the grant-in-aid that it receives from the government. This fee would not apply to registrations resulting from amalgamations or transfers of engagement which involve existing RPs.

Over 1000 units

The fee of £5 per social housing property is to be per property owned as at March 2016. It is intended that for the remainder of the spending review period until April 2020 the regulation budget would be reviewed annually to ensure it is kept in step with the costs of providing the service up to a maximum of 1% annual increases, from a base of £12.5 million in 2017/18.

Unit definition

The proposal is that ‘units’ are defined as social housing where the RP is the owner, as defined in the Housing and Regeneration Act 2008, section 77 and which includes low cost homeownership and affordable rent and other housing types. This follows the SDR definition which RPs should be familiar with.

The consultation states that relevant aspects of the definition, including ‘ownership’ are contained in the SDR guidance notes glossary and includes units which are owned by an RP but are managed by others. It also includes units which are vacant and both non-self-contained and self-contained units.

Groups

The annual fee in relation to groups will be set at group level, where the parent is registered. Where the parent is not registered the fee would be collected from each individual RP within the group.

Overpayments

The HCA recognises in the consultation that there may be variations in costs from year to year (it cites staff vacancies as an example) and in the event that excess charges are collected, these will be refunded.

Transparency

It is intended that the HCA will publish an annual fee statement which will include an overview of its regulatory priorities, details of the regulatory budget (including a breakdown of budgeted costs and the amounts to be funded by grant-in-aid) and confirmation of the fee level for each RP.

Payment

The full cost of fee would be paid in the year in which an RP is registered, or de-registers. It is intended that an invoice for the annual fee will be sent to RPs in Spring 2017 and that the fee is paid in a single payment within 30 days of issue of an invoice. There may be some flexibility within the first year. For smaller providers, there is a proposal for an option to allow payments to be made quarterly. There will be consequences for non-payment, including a fine, enforcement notices, civil action for recovery and downgrades.

Food for thought?

While seemingly fairly straightforward, the proposed introduction of fees does pose some significant questions that the regulator will need to provide clarity on to satisfy registered providers. For example…

  • Is it intended that fees will be the based on the number of properties owned in March each year? If so, will there be any recalculation for sales, either by the RTB or similar, shared ownership or stock rationalisation?
  • The HCA can charge for giving advice, conducting research or providing other services, as well as for inspections, under the Housing and Regeneration Act 2008 however it does not propose to introduce such charges at present. If no new services are being introduced, what benefits will stakeholders see to paying for regulation, which is an additional cost to RPs without any new benefits? In particular when the HCA will be reducing its regulatory remit with the abolition of the consents regime.
  • The HCA states that in the current environment, and the need for the HCA to ensure that it can maintain the right skill base and capacity, it is important to move to a more sustainable model and that charging fees at this time is appropriate to ensure that the regulator is adequately resourced and to help increase accountability for efficiency. Does this mean that there will be a revised set of efficiency standards for the regulator?
  • How is it envisaged the RPs are to account for the fees as part of the VfM statement to tenants? It is of course possible that the VfM standards will be abolished, Julian Ashby, chair of the HCA Regulation Committee, has said: “We would like to shift our focus away from the analysis of RP's value for money self-assessments to seeking assurance that boards have a clear and demonstrable strategic grip on the value for money of their businesses and more solid reliance on useful metrics to assess their progress.”
  • Has there been any financial modelling carried out to ascertain whether the beneficial loan arrangements outweigh the cost of the fees?

Further information

  • It is anticipated that the HCA will publish the final fee scheme details by early 2017 with a view to charging RPs from 1st April 2017.
  • The HCA estimates that the cost to RPs is equivalent to adding 2.5 basis points (0.0.25%) to the interest rates on RPs’ long term debt.
  • The funding of the regulator will be split into grant-in-aid funding and the fees paid by RPs. It is proposed that the grant-in-aid be sued to cover non-routine regulation, including consumer regulation and a proportion of the registration costs. The split is indicated to be 83% of the regulator’s costs being met by the fees paid by RPs, with the remaining 17% being met by grant-in-aid.
  • The fees would apply equally to profit making RPs.

If you have any questions or concerns about any aspect of governance and regulation please contact Jo Savage.


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