Corporate Governance in: Housing Associations
Sam Lawrence

Sam Lawrence

Consultant

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Corporate Governance in: Housing Associations

In another instalment of our ongoing series Governance In, Tom Wicker caught up with Charlotte Ferris – Head of Governance at Sovereign Housing Association, Penny McKelvey – Head of Governance at Peabody Housing to discover more about the sector’s governance and a career in Housing Associations. You can find the rest of our series here.

Housing associations are private, not-for-profit organisations that provide social housing to people in need of a home. They support more than six million people. Independently run but state regulated, they are the UK’s biggest providers of new housing for rent, as well as running shared-ownership schemes.

Undoubtedly one of the biggest events in the recent history of the UK housing sector was the tragedy of the Grenfell Tower fire in 2017. Following on from this, from the social housing Green Paper (2018) to the Together with Tenants Charter (2019), new legislation and proposals have been introduced to empower tenants.

These developments, in turn, followed the 2015 introduction of a new regulatory framework by the sector’s then-regulator, the Housing and Communities Agency (now the Regulator of Social Housing). In addition to placing a greater emphasis on governance, this framework included In Depth Assessments (IDAs) of providers of more than 1000 units every 2-4 years.

“A time of major change for those responsible for overseeing corporate governance”

It has, then, been a time of major change for those responsible for overseeing corporate governance – particularly in the housing association sector. “When the regulator comes in to do the IDA, you’re given a rating in terms of your governance and financial viability. The outcome of that can have quite a high impact if you’re found wanting,” explains Charlotte Ferris, Head of Governance at Sovereign Housing Association.

Penny McKelvey is Head of Governance at Peabody, one of the oldest housing associations in London and the south east. It manages more than 56,000 homes and has over 111,000 residents. It’s also spearheading the high-profile regeneration of Thamesmead. “Given the size we are, and the ambitions we have, it’s critical that we comply with all the legal and regulatory obligations. My role is to ensure that happens,” says McKelvey.

When she joined, McKelvey had to build a new governance team from scratch while overseeing due diligence of new service providers. Since 2015, she has also been involved in two mergers. She is consequently proud of the high governance and financial viability ratings awarded to Peabody by the RSH. “Without those gradings, we’re not in a position where we can get cost-effective funding,” she says. “They have to underpin lenders’ and stakeholders’ confidence in us.”

Visibility and Trust 

Since 2015, McKelvey has developed her team to become specialists in the diverse areas that directly impact Peabody’s operation. “We don’t just roll from one board meeting to the next,” she says. “We make sure that we manage all the expectations of all our stakeholders, including the regulators.” As a non-profit, this features the Charity Commission. Establishing a “robust governance framework” was her first priority.

After Grenfell, there has been “a big focus on how we engage with residents in terms of managing communal buildings and communal areas,” says Ferris. “We have to have a real grip on the building regulations and health and safety compliance.” Since 2010, housing associations have also been contending with the effects of government austerity measures. “We’ve had to reduce our rent over a number of years, which has had a big impact on everybody’s business plans,” she says.

 “It’s important that all tenants, residents and other interested parties, which might include investors, have trust in us.”

When this started, as the person responsible for coordinating and supporting board and committee meetings, as well as liaising with the executive team, Ferris knew “the board had to act very quickly,” she continues. “We had to make sure that we got everybody on the same page at the same time.”

McKelvey identifies one of the key priorities for the governance team of a housing provider as “getting other stakeholders to understand the purpose of good governance,” she says. “It’s important that all tenants, residents and other interested parties, which might include investors, have trust in us. We need to communicate more about how we are governed. We don’t do enough of that in the housing sector.”

This can also extend to misperceptions about what housing associations are. Ferris feels that, sometimes, when controversies about local council-owned properties make headlines, associations are “slightly misunderstood by the public, because it gets mixed up with local authorities,” she says. She points out that, “while we are part-publicly funded, we are private sector, so we also need to go out and find our own revenue streams.”

Building for the Future

The UK housing sector is now on the cusp of more changes, including the government’s recently unveiled ‘First Homes’ scheme. This looks to offer first-time buyers significantly discounted homes, funded by developer contributions. The industry is also in the early consultation stages of a new governance code that is expected to be introduced in a couple of years.

“We have a chance to try to influence that code in a way that makes it more useful,” believes McKelvey. “We’d like it to emphasise ‘value’, not only in terms of good governance, but also in terms of long-term sustainable success,” she continues. “Good governance has to achieve wider objectives, related to things like our social responsibilities and impact on the environment.”

Peabody already has several resident-involvement mechanisms in place, from its scrutiny panel to its resident-chaired strategy and policy group. It also has resident board members on its main board. For McKelvey, the new code is an opportunity to find new ways to turn strategy into practice and listen to tenants. “There are some interesting angles on how we focus on the customer when making decisions,” she says.

“We provide housing to people who need it and who wouldn’t otherwise be able to have their own home. The idea that we’re helping people is a big draw.”

And this is, she says, in line with The Together with Tenants Charter, which followed the social housing Green Paper, “in putting an emphasis on resident involvement, anyway.” And she expects that the anticipated social housing White Paper “will go further, in terms of emphasising accountability and trust.”

The relationship between a housing association and tenants goes to the heart of the appeal of a corporate governance role in such an organisation. “In a very broad sense, we are charities, at the end of the day,” says Ferris. “We provide housing to people who need it and who wouldn’t otherwise be able to have their own home. The idea that we’re helping people is a big draw.”

McKelvey echoes this. She highlights Peabody the housing association’s roots in nineteenth-century American financier and philanthropist George Peabody’s charitable donation to help London’s poor and needy. “If you think about what we’re doing now, we’re focusing not only tackling London’s housing crisis, for example, but supporting the most vulnerable around that.”

A Career in Housing Association Governance

What does someone need to do to be successful in corporate governance in the housing sector? “They need to look for an organisation like Peabody, if they’re really ambitious,” says McKelvey. “To a degree, they could study and learn their craft at one of the smaller associations, but they won’t get the same exposure.”

 “you have to be multi-skilled. You’ve got to be adaptable…You’ve got to embrace good practice.”

She also recommends finding a mentor: “someone like me, who will back you and support you,” she says. Some associations, like Peabody, may well finance your corporate governance training. However, as the regulation of the housing sector grows and intensifies, “you have to be multi-skilled. You’ve got to be adaptable. It’s not enough, now, to just know the regulation,” she cautions. “You’ve got to embrace good practice.”

 

 

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