What social housing can teach the rest of the public sector

The community and provident roots of the registered social landlord sector are appealing to public-interest company protagonists, who argue that they provide a real example of successful public-interest companies even though they pre-date the idea by a century or more – and real examples of success are needed to topple the private company and public monopoly models of public service provision from their current supremacy.

The RSL experience has four key lessons for government and public services generally as they struggle to find organisational forms that both work and are politically acceptable.

Firstly, that the primary issue for public service organisations should be the management of service risk rather than the source of their capital funding.

Funders rely on legislation to give them the initial comfort to lend money to the specific public service sector and are thus effectively assured by government that their investment is safe so they bear minimal risks. This means they are not best-placed to take part in the governance of the public service organisation and are generally happy to limit their role to some form of step-in rights to protect their investment should the organisation fail.

Secondly, RSLs show us that improving the clarity and accountability of service management are key to raising service quality, quickening customer responsiveness and improving end-user opinion.

In the social housing sector, clarity and accountability appear to be inversely related to size; the most successful organisations seem to be those larger RSLs that have kept the knack of "managing small" by hard-wiring residents into the heart of their organisations as a deliberate strategy.

Thirdly, the pace of public service sectoral change depends upon the regulatory regime. In England, the Housing Corporation was a "soft-touch" funder of RSL deficits for many years and has only recently been focused on directed change focused on quality. One of the benefits of directed change has been a greater diversity of providers, demonstrating that regulation can enable diversity.

The recent departure into considering RSL quality is not straightforward because, in end-user terms and with local authorities still directly responsible for the majority of social housing in the country, there is no single quality regime spanning both sectors. The Scottish Executive has recognised this as an issue and recently added local authority housing regulation to the responsibilities of Communities Scotland, along with RSL regulation and funding and the overarching responsibility for community regeneration.

RSLs are a real example of successful public-interest companies, even though they pre-date the idea by a century or more

The fourth lesson is that organisations confuse governance and accountability at their peril. Organisational governance is principally about managing day-to-day service quality and revenue streams (capital investment being an occasional, long-term and largely bolt-on activity) and skilled people are needed to deliver effectively.

Accountability, however, is about delivering what the end-user wants. The most successful organisations in the public and private sector are the most customer-centric: First Direct and the Notting Hill Housing Trust are good examples.

The idea that you can mix accountability and governance by having some form of end-user representation in the organisational governance of a mass public service is attractive, but it is not easy to do and may not be the best way of making services more responsive. For example, identifying and then retaining representative and quality people has proved very difficult for RSLs, leading the sector to consider paying board members. This position is likely to be compounded if other parts of the public sector adopt a similar model.

Whatever form of public service organisation is most suitable for delivering a particular public service or public service sector, there are further issues that should not be overlooked in the wider debate on public-interest companies.

Good governance is more about long-term strategy than about day-to-day service delivery. If public-interest companies are sold as giving people a voice over service management but, in reality, are just there to provide a limited, shareholder-like, involvement on issues such as finance, public confidence in them will eventually fall away.

Also, monopolies not only provide poor value for money, poor innovation, poor customer responsiveness and poor service quality, they also obstruct the development of openness, transparency and markets in their service area.

Designing a proper social housing market that will break up monopolies once and for all, particularly if it can be built on real customer choice and portable social housing entitlement whilst improving the quality of services received, is a future challenge for RSLs, local authorities and government alike.