Public & Private

After a turbulent month that saw some of the UK's biggest housing associations go into supervision, the sector is set to get a new code of conduct. It will be similar to that drawn up for the Department of Trade and Industry by former banker Derek Higgs.

The Housing Corporation now has 23 associations under supervision, and has made statutory appointments to 12 boards this year. When a regulator has to intervene this often, there has to be something wrong with the way boards work, despite the clarity of the corporation's regulatory guidelines and the National Housing Federation's code of governance. Amendments and extensions to both are inevitable, and Higgs is regarded as the obvious place to look for inspiration. But is it the right model for associations?

Although the Higgs report has some sensible ideas, it is arguably too prescriptive, too inflexible and too late. In reality, it is 80 pages of good intentions and token reforms, designed to give the impression that something is being done but that will, in practice, make little difference.

While they are waiting for new edicts, associations should revert to old-fashioned common sense. Large boards are not good for taking significant decisions: the importance of their finance function is diluted as spenders overwhelm good housekeepers.

Broader representation on boards may be a desirable social goal, but members should be appointed on the basis of what they can contribute, not who they are. The ideal non-executive is not only dedicated and supportive, but also asks difficult questions. Associations face hard decisions on strategy, investment, spending and services: these need to be reflected in proper debate at board level.

While they wait for new edicts, associations should revert to old-fashioned common sense. Large boards are not good for taking significant decisions

Meanwhile, it is not only associations that face corporate governance issues, but also the Housing Corporation itself. The corporation may have resolved successfully the potential conflict between being a regulator and the guardian of public money in the past, but is now under growing pressure from a highly interventionist government to help it achieve its housing targets.

These are becoming steadily more ambitious, yet the demands are not being backed by additional public funding. The sum of £3bn is clearly not going to be enough to provide 85,000 extra homes, without significant additional finance from lenders. However, this extra finance could threaten associations' financial viability.

The government is also requiring associations to be accountable to irreconcilably different stakeholders. The result could be a situation in which they are criticised whatever they do.