Building for the Future

A Voluntary Regulation Code for Approved Housing Bodies in Ireland

Draft consultation document

8 August 2012

Contents

page

Minister’s Foreword 3

  1. Background to the Consultation 4 - 5
  1. Key features of the Code 6 - 12
  1. How to have your say 13

Supporting Documentation14 - 18

(Report & Accounts, The Board, Audit Committee, sample

Tenant Services commitment checklist)

Housing Policy Statement20 - 25

Foreword

As Minister for Housing, I am very conscious of the fine work done by approved housing bodies and of the key role that they will have in terms of social housing delivery in the years ahead. In excess of €2 billion has been invested by the State in the sector since the 1980s and it is imperative that we protect that investment while creating the conditions within which the sector can grow in the years ahead.

While the sector itself has taken steps to improve governance and embed sound management principles, I am aware that we must have in place a robust and transparent regulatory regime that will provide independent validation of the sector’s performance to internal and external stakeholders.

In the short term, as we work towards a statutory regulatory environment, I expect that this Voluntary Code will enable my Department, in conjunction with the sector and with other stakeholders, to put in place a system that best meets the needs of tenants, Boards, investors and of the wider public interest. This Code will be a shared learning opportunity and I expect that most housing associations will sign up to it.

In the longer-term, the credibility of the statutory regulatory system will be measured by how it identifies and deals with risk, what “step-in” powers are there and how stakeholders, such as tenants and potential investors, regard the efficacy of the system. A good regulatory framework will encourage long-term strategic thinking and facilitate collaboration, alliances and mergers within the sector as well as focusing on good performance and excellent outcomes for tenants. This Code is the critical first step on this journey.

I look forward to continued engagement with the sector on this process and I urge your active participation with the Code and feedback to my Department on key issues arising.

Jan O’Sullivan T.D.,

Minister for Housing and Planning.

August 2012.

1. Background to the consultation document

Purpose of this document

Approved Housing Bodies (AHBs) have a strong track record in the provision of social housing with over 25,000 units provided to date. The national Housing Policy[1], published in June 2011, placesAHBs at the heart of the Government’s vision for housing provision. Better regulation of the sector is a key element of this new role, necessary to access non-Exchequer funding and also to ensure that AHBs are providing the best service possible to those they serve.

The Department has been considering possible approaches to regulating the sector and has decided that a voluntary regulatory code is the best way forward at this time, as a stepping stone to a legally binding statutory regulatory framework. The parameters of this voluntary code for AHBs have been drafted and are set out in this document for consultation with stakeholders.

Once this consultation period has been concluded, at the end of September 2012, the voluntary code will be formally launched the Department will work with the sector to maximise sign-up. It is proposed that those AHBs who sign up to the voluntary code will do so by submitting a signed Charter of Commitment (page 9) to the Department. Those AHBs signing up to the code will be listed on the Department’s website.

Appended to the code, for information purposes only, is a range of supporting material that may be of assistance to AHBs in considering how best to structure their organisations.

Why regulate AHBs?

Regulation, if done well, is a positive thing for AHBs, their tenants, potential investors and other stakeholders. It is intended that the framework will:

  • Provide assurance to tenants, Boards, Government and potential investors that the AHB sector is stable and well-regulated
  • Safeguard public investment in the sector
  • Encourage private investment in the sector
  • Encourage long-term strategic thinking and facilitate collaboration, alliances and mergers within the sector
  • Help AHBs to manage risk and to focus on achieving best outcomes for tenants

Experience elsewhere has shown that well-designed regulation can foster stakeholders’ confidence in the sector and create an environment that encourages growth and innovation. At a practical level, good regulation can lead to lower lending costs for the sector when lenders are reassured as to the long-term stability and growth potential of the sector.

Why a voluntary code at this stage?

It has been decided to introduce a voluntary code for AHBs at this stage to help inform the development and implementation of the statutory regulations which are to follow. Having reviewed approaches to regulation of AHBs in other countries, it has been concluded that the Irish sector is significantly different from that of other countries and, given the importance of getting regulation right, a collaborative and evolving approach would be best in the long run.

The voluntary code is, therefore, a learning opportunity. The voluntary code will set out a range of key regulatory principles that we believe will form the basis for much of the longer-term legal framework. We want to work in collaboration with the AHB sector and others to develop a regulatory model that’s tailor-made for the Irish market and best assists it to develop. Individual AHBs are encouraged to engage with this document and to provide the Department with as much feedback as possible before 21 September 2012. To assist in this regard, a series of consultation questions is listed throughout this document.

How has the draft voluntary code been developed?

This code was drafted following consultations with the sector, including participation at ICSH regional meetings and individual submissions. It builds on a range of existing guidance templates, including the Department’s own Memorandum VHU: 2/02 “Capital Funding Schemes for the Provision of Rental Accommodation by Approved Housing Bodies”[2], the ICSH’s “Working for Good Governance”, 2008[3], and the recently launched “The Governance Code: A Code of Practice for Good Governance of Community, Voluntary and Charitable Organisations in Ireland”, February, 2012[4].

While this document is not a governance code for approved housing bodies, we recognise that sound governance principles will assist individual AHBs to comply with the regulatory requirements set out in this code. In this regard, the principles and recommendations of the ICSH Guide “Working for Good Governance” are very helpful. Also helpful is The Governance Code referred to above, which outlines a code of practice for good governance in community, voluntary and charitable organisations in Ireland as a complementary approach to embedding good practice in organisations.

2. Key features of the Voluntary Code for AHBs

The voluntary code is underpinned by three guiding principles, viz:

  • Proportionality – a one size fits all approach to regulation is not suitable for the AHB sector as there is a wide diversity of organisations in terms of aims, scope, ambitions, stock, staffing and resources. It is proposed that depending on the size, scale and development plans of the individual AHB more regulation may apply. This is explained in more detail below.
  • Accountability–AHBs should be accountable for the services they provide, both to their tenants and to funders.
  • Transparency - the process of sign up to the voluntary code should be clear and consistent. For AHBs with good corporate governance already in place, the code should not require substantial additional work.

Consultation Questions
  1. Do you agree that these principles should underpin the regulatory framework?
  2. Should additional principles underpin the framework?

How will Proportionality work?

Those signing up to the voluntary code will be required to provide documentary evidence of their compliance with the code’s requirements. What is required to be compliant will depend on the size and activity of the organisation.

It is proposed that there will be 3 tiers, or organisational classifications, as outlined below:

Tier / Description
Tier 1Small AHBs – less than 50 units, few or no employees, no development plans / These AHBs have developed and completed projects, have units under management but generally do not have further development plans. Most AHBs in this category are entirely run by volunteers. Annual turnover may vary considerably between AHBs in this category and many organisations may receive grants from statutory bodies and/or trusts and foundations as well as doing their own fundraising.
Tier 2Mid-size AHBs – up to 300 units, or having employees, or scope to develop or expand in the future / Those AHBs have portfolios of less than 300 units and have plans to develop new housing as part of their strategy in future in addition to the existing housing they manage. These organisations may employ staff or may be run purely by volunteers. The most senior member of the organization may have a job title such as manager or director.
Tier 3Large AHBs – more than 300 units, fulltime staff, ongoing expansion or development plans / These AHBs have more than 300 units each and have plans to develop new housing using loan finance. Typically these AHBs have a fulltime staff and operate in a number of different areas. They will also have established Boards that focus on governance / oversight issues rather than the day to day management of the AHB.
Consultation Questions
  1. Do you agree with this classification?
  2. Are additional classifications required? For example, do AHBs with significant care elements in their housing provision or AHBs that have entered into collaborate approaches with other AHBs fit into this scheme?

What will be required from AHBs?

All AHBs that sign up to the voluntary code will be required to:

Submit a signed copy of the Charter of Commitments (page 9) to the Department

Submit an Annual Report & Accounts, and a copy of their filing to the CRO or to the Registrar of Friendly Societies, to the Department

Submit data on performance and service levels, as requested, to the Department[5]

Agree to be subject to an audit by the Department and / or its agents, if so requested

Attend an annual review meeting with the Department and the Housing Agency, if so requested.

While all AHBs signing up to the code will commit to the actions above, it is likely that the latter two items will apply mainly to Tier 3 bodies.

Charter of Commitments

Tier / Commitments
Tier 1 /
  • Have in place a properly functioning Board with
  • clear roles and responsibilities
  • at least 5 members, none serving more than 2 consecutive 5-year terms
  • holds a general meeting at least once per year
  • no employee acting as Chairperson
  • Comply with existing companies law, charities requirements, conditions of approved status
  • Have a tax clearance certificate and a sinking fund

Tier 2 /
  • All Tier 1 requirements
  • Establish an Audit committee, with at least two independent non-executive directors and one member should have financial experience
  • Include in the annual report details of fixed assets, liabilities, reserves, loans outstanding, capital repayments and evidence of a risk register.

Tier 3 /
  • All Tier 1 and 2 requirements
  • External audit process in place
  • Maintain an active strategic plan
  • 3-year financial plan in place
  • Have an agreed range of Tenant Services indicators in place
  • Have an agreed set of performance management indicators in place
  • Submit a completed annual return, as specified by the Department

Consultation Questions
  1. Do you think that these requirements are proportionate?
  2. Do you think they are the right requirements? If not, why not?
  3. Are there any additional requirements that you would like to suggest or think would be more appropriate?

Charter of Commitment for Approved Housing Bodies

Name of Organisation______

Address ______

______

______

Type of Organisation (tick as appropriate):

Tier 1Small AHB – less than 50 units, few or no employees, and no development plans

Tier 2Mid-size AHB – up to 300 units or having employees, scope to develop or expand in the future

Tier 3Large AHB – more than 300 units, fulltime staff, ongoing expansion or development plans

We confirm that we will comply with the requirements set out in the Charter of Commitments, appropriate to our organisation type, and with the wide code.

We are committed to reviewing our organisational practice against the code on an annual basis.

______

Chairperson of BoardSecretary of the Board

Date:Date

Please return your signed Charter to
Housing Regulation & Statistics Section.
Department of the Environment, Community and Local Government,
Newtown Road, Wexford

How will the Voluntary Code be managed?

For AHBs that sign up to the Code it is proposed that the Department and the Housing Agency will pilot an active regulatory oversight system pending agreement on the best long-term regulatory structure. Initially, this voluntary regulatory effort will be focused on Tier 3 (Large) AHBs – although we would welcome any AHB that wishes to participate. As processes are refined, and resources defined, oversight can be extended to other AHBs on a case-by-case and risk-driven basis.

It is proposed that those AHBs signing up to the code will be listed on the Department’s website. On foot of being audited and / or interviewed by the Department and its agents a regulatory assessment report will be supplied by the Department to the AHB and, if requested by the AHB, to third parties such as financial institutions. It is expected that a positive assessment report will be of assistance to an AHB in its dealings with external stakeholders.

The role of Local Authorities in the eventual statutory regulatory framework remains to be defined. The authorities already have a sizable regulatory presence when one takes their roles as mortgage controller, housing lists manager and standards inspector into account. The lifetime of this code will allow us to define the long-term role of Local Authorities in the regulatory context. However, in the interim, structures could be developed to facilitate regular liaison between AHBs and Local Authorities (both elected representatives and officials) on a city, county or regional basis.

Consultation Questions
  1. Does the outlined approach to regulation under the code seem reasonable? If not, how should it be changed?
  2. To what extent should the outcomes of AHB assessments under the code be publicised?
  3. What role should Local Authorities have in the longer-term statutory regulatory framework?
  4. In the short term, how best can interaction between AHBs and the Local Authority system be structured?

Will there be a charge for registration?

It is not proposed that there will be a charge for those who sign up to the voluntary code. The operation of the voluntary code will give us a better idea of the potential cost of regulation, in terms of the staff and operational costs,and how best to fund a statutory model. Those signing up to the code will, of course, have a direct input to decision-making on such issues.

Once we have a better idea of the potential costs of regulation, we will consult with the sector, with the Department of Public Expenditure and Reform, the Local Authorities and other relevant stakeholders. A range of possible funding options are possible – from full Exchequer funding of the system to an entirely sector-funded model

Consultation Question
  1. While a decision of how the statutory funding scheme is yet to be decided, do you have any views at this stage regarding how the regulatory system should be funded? Please provide reasons for your answer.

What are the consequences of non-registration?

In the longer term, adherence to the regulatory framework will be mandatory and this will be set out in legislation. While engagement with this code is voluntaryfor existing AHBs any fresh applications for AHB status will only be considered in the context of signing up to the code.

Equally, as the Department considers future decisions regarding any available Exchequer support to the sector, priority will be given to those AHBs that have demonstrated a commitment to good governance and sound management. Engaging fully with this code will be a tangible demonstration of that commitment.

At a very practical level, signing up to this code will afford AHBs the opportunity to influence the final shape of a legal regulatory framework. Experiences gained in implementing the code will form the evidence base for the statutory framework, so this is a key opportunity for AHBs to get involved in a process that will have a profound effect on their future. It will also be a useful demonstration of an AHB’s bona fides to potential external partners.

Consultation Question
  1. Are there other measures that could boost engagement with this code?

What regulatory powers will there be under this code?

While the statutory regulatory framework will spell out specific interventionist regulatory powers the current code, being voluntary, is not as forceful. The key powers under the code will be

  • the awarding, or not, of a positive regulatory assessment report to an AHB, and
  • the subsequent listing or delisting of AHBs as being compliant with the code.

The Department will work with the sector to address any specific issues (whether operational, financial or governance) arising out of this voluntary regulation approach. Lessons learned from this approach will inform the eventual statutory regulatory framework.

Consultation Question
  1. Are there other regulatory measures that would be appropriate to this code?
  2. What key regulatory powers would you like see under a longer-term statutory framework?

Training and support requirements