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The Regulator of Social Housing has released the final text of the new Value for Money (VfM) Standard ahead of its launch on 1 April 2018 – but what has changed following the consultation period, and what are the implications of the new regulatory standard for housing providers?
The revised VfM standard places emphasis on quantifiable outcomes and puts VfM right at the heart of RPs’ business. It is expected that RPs’ approach to VfM will be closely linked to meeting their strategic objectives. And crucially it is no longer about self-assessment, but focused on reporting metrics to measure performance and ensuring that RPs obtain the best possible benefit from their assets and resources.
Non-social housing activity - There has been some change in the wording around non-social housing activity, however, the end result is that the Standard confirms that RPs must demonstrate that they consider VfM across the whole business, and where they invest in non-social housing activity, that they have considered the risk against the likely returns.
Maximising returns – The reference in the Standard has changed from ‘maximising’ to ‘optimising’ financial returns. This is in conjunction with the caveat that RPs may choose not to maximise a return in favour of furthering their social objectives. This is to be welcomed, as there may be times when maximising a return is not necessarily the best option when looking at the overall objectives of the RP, and further ensures that the RP is not under an obligation to maximise returns where to do so may have a detrimental effect elsewhere and also be in contravention of the code.
Reporting requirements – The wording has changed to ‘reporting on’ performance, from ‘considering’ performance. In addition, the requirement to report on future forecasts is now no longer limited to five years. It is also now the case that RPs can report at times outside of the parameters in the Code, if they believe it will increase transparency with stakeholders. This may be helpful for RPs when considering matters which they are unsure about, which they believe may be something an IDA would highlight, or in light of the abolition of the consents regime.
The strengthened VfM Standard is largely welcome, as guidance on VfM in the past has been slight. With a Standard and a Code of Practice, it will be much clearer to RPs what the regulator expects of them.
However, despite the regulator asserting that the administrative burden will not be too great, RPs will now have to ensure that the standards are met and where they are not, have a justification as to why, especially given that the regulator will use the Code which accompanies the Standard to assess compliance, as well as ensure that they have targets against which the achievement of VfM can be measured.
A key question is whether a target-based approach will help to deliver VfM. Whilst this approach provides RPs with some guidance as to the expectations of the regulator, it will not address any unforeseen blows to RPs from external influences, such as that seen by the rent cut, or the impact of Universal Credit.
Having stronger guidance is welcome - if nothing else it will go some way towards a consistent approach in evaluating whether the VfM Standard has been met by RPs, which was a problem with the self-assessment approach. The short conclusion is that RPs will be expected to enshrine VfM in their decision making processes, and justify any deviation.
If you want to understand more about the impact of the new VfM Standard we are holding a free legal seminar to look at the issues in more depth.
Thursday 26 April – Friends Meeting House, Manchester – 9.30-11am
The seminar, run in partnership with housing consultancy David Tolson Partnership, will help housing providers get to grips with the requirements of the new Standard and associated Code of Practice, and understand the implications and obligations for your organisation so you can plan ahead with confidence to ensure compliance.
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