Housing regulation should encourage innovation – not stifle it

The Homes and Communities Agency (HCA) is currently consulting on its proposals to revamp its regulatory framework. As a regulator, it has a duty to broadly ensure accountability, transparency and responsibility, particularly where significant assets – in this case, housing stock – are involved. As a regulator, it also takes an unspoken role in defining the scope and nature of a given sector and market by virtue of what it encourages and oversees. But such a definition – the nature and purpose of registered providers – is often assumed rather than discussed.

What counts as core social housing activity is often debated, but requires the active engagement of national public bodies, such as the HCA, to open up such principles to wider discussion. Housing providers have been delivering local services to their tenants and communities – services and local innovations that reach beyond their role of managers of housing stock – for many decades. They are able to start up new services in response to local needs and forge new partnerships with other service providers, businesses and communities to radically improve their local areas.

Many have established social enterprises and provided the space, training and assets for others to set up and run their own social ventures. Others act as mediators for communities to encourage them to take up the opportunities in the Localism Act, such as the community right to buy and bid. Much of this activity, however, currently lies outside of what is defined by the regulator as 'social housing activity'. In its most recent proposals, the HCA recommended that non social housing activity be limited to a very small proportion of housing providers' turnover (between 2.5% and 5%), which could severely limit the level of additional services and local innovations that providers have pioneered. To put this into perspective, this figure stood at 49% in 2000.

Regulating the huge range of services and social activity is not necessary. The regulator – and regulators of all sectors – must seek to encourage diversity and local innovation. Other regulators, such as the newly established Financial Conduct Authority, are already beginning to do this, by exploring, for example, how it can begin to more effectively nudge good behaviour in the financial sector. The housing regulator must not only set out to establish and update a set of rules, but become in part responsible for creating an environment where housing providers are incentivised to play an even greater social role.

Housing providers could do much more but regulatory proposals prevent them from doing so. The HCA should carefully review, before proceeding, how it might greatly incentivise housing associations to actively respond to their localities, such as through transferring assets into the hands of communities and working with their communities and other partners to bid to run their local services or set up new social ventures. The HCA must promote innovation, not just regulation, as the goal for social housing.

Caroline Julian is head of research at ResPublica. ResPublica's conference, 'Raising the Roof: A new agenda for housing associations' takes place on Tuesday 16 July. Follow the debate on Twitter at @res_publica, @CarolineLJulian and #raisingtheroof

This content is brought to you by Guardian Professional. Join the housing network for more comment, analysis and job opportunities