This chapter introduces our case-study public services sector: housing associations. Here we discuss the changing nature, scale and scope of the housing association sector and focus on diversification and the medium-term environment. This policy analysis will be used as a backdrop to give context to the debate about the innovative capacity of housing associations and to explore the pressures and external forces that may be driving innovation. The chapter closes with a discussion of the relationship between innovation and regulation. This is a particularly pertinent area of public services policy given the exhortation by governments to innovate within a field where there has been a concomitant increase in the regulation of public services. This has increased, not abated, under the Labour administration. The Best Value programme illustrates this tension with its requirements for innovation or continuous improvement within a highly regulated framework that adopts the regulatory tool of inspection together with sanctions and intervention. The housing association regulatory regime is currently being expanded to adopt aspects of the Best Value approach to local government management.

The nature, scale and scope of English housing associations

Nature

The promotion of housing associations as the providers of new social housing has altered their nature, as often specialist but complementary providers to local authorities, to give them a specific general needs remit. These changes were part of a wider social policy process which led to the introduction of market mechanisms (Le Grand and Bartlett, 1993), organisational decentralisation (Pollitt et al, 1998) and increased regulation (Hood et al, 1999) in education, health, community care and housing. The social housing ‘quasi-market’ was initially production-focused: introducing greater competition between associations for fixed government subsidy together with private finance in the development process, thereby transferring risk from government to associations (see Cope, 1998, for a more detailed discussion of the pre- and post-1988 Housing Act financial regime). Though not representing the full extent of a free market, the social housing quasi-market was seen to develop rapidly during the 1990s (Bramley, 1993) and more comprehensively than other sectors (Le Grand and Bartlett, 1993). Its development has continued apace as council housing is transferred into the association sector (Walker, 2000), and as more associations compete for scarce resources. This process is set to continue.