1. Successful places with homes and jobs A NATIONAL AGENCY WORKING LOCALLY Regulation and Development – Impact of the new framework

2. The Regulator’s view  Social housing is a long-term business  Our principal focus is on protecting the social housing assets because: –It protects taxpayer investment –It protect tenants (and future tenants) –It is a pre-condition for private finance at competitive rates  We do not want: –Lenders enforcing security –Assets being sold off to offset avoidable losses  Regulator is aligning its business to this objective – Framework, skills, operational doctrine etc.  Risk profile of activities varies considerably, e.g: –High turnover, low margin, limited liabilities –long-term liabilities that rely on non-social housing revenues –Exposure on sales receipts  Our interest lies in the potential recourse to social housing assets

3. Context  Changing economic and operating environment  Diversification and entry of profit making providers  Result = greater risks for registered providers  Regulator: fundamental objectives to deliver protection  PRPs: responsible for risk management to ensure protection

4. Regulation and Development  Always look to our statutory objectives  We have to ensure an appropriate supply of affordable housing  The country needs more homes of all types  We do not want to stop development nor insist it is right for every organisation or circumstance  With development comes risk…  And with risk comes responsibility

5. What is changing? Only changing what is necessary to ensure the regulatory framework stays effective in growing risk environment. Changes to:  Governance and Financial Viability Standard –Introduction of Code of Practice  Disposals regime  Rent Standard  Registration criteria

6. Governance and Financial Viability Standard Specific expectations:  Activities don’t put assets or viability at undue risk  Skills and capabilities of boards match activities  Active risk management and stress testing  Maintain records of assets and liabilities  Third party arrangements must benefit the PRP  Boards to certify compliance with the Standard

7. Code of Practice  Regulator committed to co-regulation  Not a return to guidance notes and circulars  Expands on G&FV Standard content  Aid to how compliance can be achieved  Regulator will have regard to the Code but enforce against the Standard  Boards will not have to certify compliance with the Code

8. Understand the business  Your business  As a whole  What are the general exposures  What are the specific exposures resulting from your strategy and organisation  Be sufficiently skilled to manage them

9. Manage risk  Skills and capabilities of boards and independence  Access to advisors  Take appropriate advice  Considered mitigation strategies  Cumulative risk not a series of one-offs

10. Test  Long term business, test against severe downturns  Assess the whole business – where are the points of vulnerability?  Not just one off sensitivity testing – multi-variate

11. What does this mean for development?  The regulator will want evidence that boards manage: –the development risk –the risk of holding (or not) land banks –the risks in financing the new development –the demand risk for finished development  We will want assurance that businesses and are both resilient and agile  How will you ensure that development will not be your Achilles heel in the next downturn?