Tuesday, 17 January 2017

Landlord hits out at HCA after downgrade

A housing association has accused the regulator of deterring smaller landlords from developing after its downgrade last week.

Christian Action Housing had its viability rating downgraded from a ‘V1’ to a ‘V2’ last week, which means the 1,500-home association is compliant with regulatory standards, but needs to make improvements.

In its judgement, the English social housing regulator the Homes and Communities Agency (HCA) said the association met viability standards, but its financial profile was “relatively weak”.

“Christian Action anticipates declining headroom in the business plan in relation to funders’ covenants, as a result of forecasting diminishing surpluses over the next few years and deficits in the long-term,” the agency said.

However, Mark Hayes, chief executive of Christian Action, criticised the move and said the downgrade had been due to the landlord’s decision to continue to develop, despite the expected loss of income due to the government’s 1% rent cut.

Mr Hayes said: “There is a frustration… that the message the regulator puts out to boards by doing this [issuing downgrades] is that perhaps you shouldn’t develop… I think there is a problem with this way of doing viability assessments that the regulator is effectively saying to us you would be stronger if you didn’t develop.”

He said he rejected the suggestion that the landlord is financially weak, and said it would be “quids in” if it stopped developing. The association plans to acquire 40 properties and develop 60 new homes over the next three years.

He added: “It’s directly in conflict with what the government is saying, which is we want you to develop.”

But Jonathan Walters, deputy director of strategy and performance at the HCA, insisted that the body was “not prescriptive”. “It is the responsibility of boards to manage their development programmes, while having a firm grip on risks they face and strategies in place to manage them,” he said.

Magna Housing Group also last week had its governance rating downgraded to a compliant ‘G2’. It said it would work with the regulator to regain a ‘G1’.

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