Social housing governance faces radical change

Governance – traditionally a backroom issue in social housing – will move centre stage from April when the performance of boards becomes paramount. The sector's regulator, the Tenants Services Authority (TSA), is consulting on six new standards due to come into force on 1 April, with one to cover governance and financial viability. The TSA's aims are clear: the onus is on boards to set and stick to their own standards. "We expect boards to be very much in control of their organisations but much more so going forward, as we will be much less prescriptive about codes of practice," says Louise Hyde, TSA governance policy manager. This means an association will be free to select its own code of governance, covering such areas as recruitment and appraisal, but must justify any diversions from existing guidance and good practice to the regulator. The consultation document, A New Regulatory Framework For Social Housing in England, was published in November; the deadline for feedback is next week. Boards will be forced to up their game, says Stephen Bull, head of governance and company secretary of the National Housing Federation (NHF), because the regulator is "making it clear that the first port of call will be to the board," rather than to the executive, as was the case until the Housing Corporation was disbanded and its regulatory function inherited by the TSA. This means boards will shoulder more responsibility when things go wrong. There are good reasons for boards to feel under scrutiny. The sector was shell-shocked when, in 2007, Ujima became the first housing association to collapse, amid financial mismanagement. Since then, the turbulent economic climate has thrust the focus on good regulation, making risk management and board accountability paramount. "Ujima has taught us that governance boards can't get complacent," says Bull. "Governing boards and their executive have to work closely with each other and challenge each other constructively." Board members have their work cut out. Of the 75 TSA governance regulatory judgments published since January 2009, only one social landlord, Riverside, achieved the top grade of effective leadership and control. The majority – 69 – maintained satisfactory control while the TSA had concerns about the remaining five. Aside from new and robust codes of conduct, how else can an association better its board? Payment is often invoked as a means of improving performance and in the housing sector some 39% of associations pay board members, up 12% from 2008. This is according to Insight HR's 2009 report, A New Horizon, which surveyed 1,202 registered social landlords and arm's length management organisations (Almos) across England. For example, Housing Plus, a Midlands landlord with over 5,300 properties, started remunerating board members in 2007 after a four-week consultation with stakeholders. Its chair receives £9,000 while other board members earn £3,500. Rising expectations Director of corporate services Jan Goode says residents, banks, building societies, local authorities as well as staff and board members were consulted on how they viewed board work and board recognition payment. They did not include managers, "because they work more closely with the board members," says Goode, who, like Bull, believes boards have a challenge ahead. "The TSA expects board members to truly lead the organisation rather than be led." Expectations of boards will certainly rise, agrees Andrew Cowan, a housing specialist and partner at law firm Devonshires. "The time requirement for board members is going to increase and payment, whether it's right or wrong, establishes an enforceable commitment – you are being paid to do something." Another way to nurture top talent on boards is through training, such as the tailored, in-house courses run by the Chartered Institute of Housing (CIH) for board members. One example is a course entitled Meet The Challenge of the TSA New Regulatory Framework. Bringing in fresh blood is important and the standard maximum limit of tenure on a housing board is nine years. "After nine years, the general thinking is that you cease to be independent and become part and parcel of the organisation," says Bull. The size of a board can also vary but Bull suggests nine as ideal. Good recruitment strategies are vital, adds Liz Potter, a governance consultant and chair of Orbit Housing Group which recruits openly – rather than relying on bringing friends of friends onto the board. She advocates "the option of additional headhunting to ensure shortlists are diverse and cover the skills we want". Another tip, says Potter, is to encourage strategic thinking by convening board members the evening before a meeting to discuss a key issue. "While members don't take decisions, it has developed our capacity to lead rather than just accept executive recommendations." Boards must balance this flipping of power while being thrust into the spotlight. CIH NHF TSA