Why regulation matters: Thoughts from Ireland
Complying with government requirements can sometimes be seen as a burden, but it plays a crucial role in the health of the housing sector both in Canada and abroad. A few years ago, the Irish Government introduced a voluntary regulatory code requiring housing providers to meet governance, performance and financial viability standards to qualify for government funding. As of 2017, approximately 232 Approved Housing Bodies (AHBs) – aka housing providers – signed up for the voluntary regulation, representing over 93% of Ireland’s estimated housing stock.
The country’s Social Housing Strategy 2020 recognizes AHBs as the heart of social housing provision in the coming years. As the sector expands, they will take the lead in the delivery and supply of new social housing. 2018 will be the first year the regulatory code will become mandatory. How will a mandatory regulatory framework expand the capacity of AHBs and contribute to better access to private finance?
First we need to consider why Irish regulation matters.
Basically, regulation ensures that an organization is working well. It does this by focusing on strong governance structures and financial viability, ensuring that both AHBs and their tenants are protected now and in the future. This creates better organizations that are more attractive for financing. There is plentiful evidence that a standard regulatory framework is a pre-condition for sector growth. Ultimately, the sector as whole becomes more attractive and is able to build capacity to provide more homes for social housing.
What does Irish regulation look like?
Irish regulation focusses on three key factors: Good governance, financial viability and performance.
The key to good governance is having a clear mission and goals that will propel you forward. Reaching your goals is a result of well-planned decisions based on current priorities. The Board must always be clear on their function and be structured in a way that moves plans forward towards an organization’s goals, without losing sight of the overall mission.
Financial Viability depends a on an organization’s ability to pinpoint potential risks. Be ready to meet these challenges by maintaining good cash flow and liquidity. Also, maintaining strong lender covenants is important as it will help lenders build confidence in not just your organization, but in the sector as a whole.
Performance is something that can be easily measured and should be measured on a consistent basis. This has to do with how your organization is functioning, meeting its goals and serving tenants. Planning for and staying on top of repairs, maintenance and tenant policies will help keep performance consistently strong.
No ‘one size fits all’
Because housing providers are so diverse, the regulation code in Ireland follows a tier-based approach that takes into account stock (managed, leased and owned) levels and development plans. Each tier requires a different level of commitment based on the capacity of the housing organization. AHBs can move into the next ‘tier’ if they choose, or if they intend to expand their stock. In Ireland, the majority of AHBs (approximately 68%) fit into the tier where they have less than 50 units and no plans to undertake further development.
Housing regulation in Ontario
Ontario’s approach to regulation and compliance is different than the one in Ireland, although both have accomplished a lot over the past several years and are positioned to continue in this way. In Ontario, despite having “regulations” for some items such as how to calculate rent geared-to-income, there is not currently a common framework that service managers follow to ensure that housing providers are complying with their requirements. For example, some service managers conduct regular housing provider operational reviews while others don’t. There are no common standards for housing provider financial viability or performance. This causes unintended consequences, particularly for housing providers operating in more than one service manager area and need to meet multiple and sometimes conflicting criteria.
The lesson to draw from the Irish experience is that a common set of housing standards and a code for operating can be valuable for housing providers as well as government. The regulatory framework can help embed risk assessment and management, improve governance standards and provide balance to landlord and tenant relations.
“Regulation is important in protecting the interests of tenants and ensuring that social landlords are providing good quality services. It also safeguards public investments in AHBs and facilitates access to long-term private finance at good rates by providing assurance for lenders and investors.”
– Regulation Office’s Annual Report, One Year On: The Regulation of Approved Housing Bodies in Ireland
