ao link
Twitter
Facebook
Linked In
Twitter
Facebook
Linked In

You are viewing 1 of your 1 free articles

Regrades of viability judgements put extra focus on governance

The English social housing regulator has changed a number of associations’ viability ratings from V1 to V2. Steve Douglas explains why this is a good thing

Linked InTwitterFacebookeCard
Sharelines

Regrades of viability judgements put extra focus on governance #ukhousing

The English social housing regulator has published a number of regulatory judgements with a viability judgement of ‘V2’ (see full list below).

Far from this being necessarily a judgement on inadequate financial control, it is more a reflection of a maturity in approach from the regulator.

It is a recognition that the sector is operating in an uncertain, complex and risk-associated environment and that there are pressures on associations’ finances through a whole host of external factors, as well as the change of the housing association business model to be more market cyclical.

“It is a reflection of a maturity in approach from the regulator.”

A few years ago we passed the tipping point of the proportion of a housing association’s balance sheet that is financed through public subsidy.


READ MORE

Regulator downgrades nine associations over financial viabilityRegulator downgrades nine associations over financial viability
Regulator flags health and safety compliance as major sector riskRegulator flags health and safety compliance as major sector risk
Regulator publishes fees statement setting out prioritiesRegulator publishes fees statement setting out priorities
Regulator: value for money ‘more important than ever’, as consultation launchedRegulator: value for money ‘more important than ever’, as consultation launched

Each year that the sector develops more homes of all types, that proportion of private borrowing and self-generated finance will increase.

If you are an association that is increasing your development programme, or a transfer association just hitting peak debt and refreshing your business plan, or you are sticking with essential care or supported housing services – that bring social return, but marginal profitability – then you are putting your balance sheet to work.

“Each year that the sector develops more homes of all types, the proportion of self-generated finance will increase.”

Sweating your assets was a phrase that was used a few years ago. And that’s a good thing in my view.

A V2 judgement is a compliant judgement. The tagline makes it clear: “The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.”

The grading to watch is the combination of the governance ‘G’ grade, alongside the viability ‘V’ grade.

A G1/V2 is an acknowledgement that an association has exposures but that its governance understands the risks and is able to demonstrate that it is managing them effectively.

“Financial institutions put a premium on the governance of an organisation.”

Financial institutions get it, and while their preference will always be that associations create and then sit on a cash pile of reserves to mitigate any risk, they increasingly understand the business of the sector and so put a premium on the governance of an organisation when pricing loans.

Any organisation that has raised bond finance will be acutely aware of the interest that is shown in the quality of the board and executive team.

The regulator likewise will continue to place a premium on the quality of the governance of associations.

I expect the in-depth assessment approach to be even more rigorous in testing an organisation’s consideration of adverse scenarios and its strategies for dealing with them, should they materialise.

As a mature sector, we should be comfortable with G1/V2, where we know that the G1 grade is a reflection of a board’s ability to govern effectively and manage risks appropriately. That is the challenge for our governance.

Steve Douglas, co-chief executive, Altair

Latest HCA judgements in full

Provider Governance rating Viability rating Details
Accent Group G1 V1 No change
Acis Group G1 V2 Viability regrade – V1 to V2
Aldwyck Housing Group G1 V2 No change
Brunelcare G1 V1 No change
Calico Homes G1 V1 No change
Catalyst Housing G1 V1 No change
Christian Action (Enfield) Housing Association G1 V2 Viability regrade – V1 to V2
Coast and Country Housing G1 V1 No change
County Durham Housing Group G1 V2 Governance upgrade
Cross Keys Homes G1 V1 No change
East End Homes G1 V2 Viability regrade – V1 to V2
Eden Housing Association G1 V2 Viability regrade – V1 to V2
Equity Housing Group G1 V1 No change
Estuary Housing Association G1 V2 No change
Gateway Housing Association G1 V1 No change
Gloucester City Homes G1 V2 No change
GreenSquare Group G1 V2 Viability regrade – V1 to V2
Halton Housing Trust G1 V1 No change
Hanover Housing Association G1 V1 No change
Havebury Housing Partnership G1 V1 No change
Home Group G1 V1 No change
Housing & Care 21 G1 V1 No change
Hundred Houses Society G2 V2 No change
Hyde Housing Association G1 V2 Viability regrade – V1 to V2
Leeds and Yorkshire Housing Association G1 V1 No change
Leeds Federated Housing Association G1 V1 No change
Manningham Housing Association G3 V2 Viability regrade – V1 to V2
Merlin Housing Society G1 V1 No change
Moat Homes G1 V1 No change
Mosscare St. Vincent Housing Group G1 V1 Merger
Mount Green Housing Association G1 V2 No change
Newlon Housing Trust G1 V1 No change
Peabody Trust G1 V2 Viability regrade – V1 to V2
Progress Housing Group G1 V1 No change
Railway Housing Association and Benefit Fund G1 V1 No change
Salix Homes G1 V2 No change
Saxon Weald Homes G1 V1 No change
South Lakes Housing G1 V1 No change
Southern Housing Group G1 V1 No change
Trent and Dove Housing G1 V1 No change
Watford Community Housing G1 V1 No change
Weaver Vale Housing Trust G1 V1 No change
West Kent Housing Association G1 V1 No change
Together Housing Group G1 V1 Governance upgrade
Wrekin Housing Group G2 V2 Viability regrade – V1 to V2
Golden Lane Housing G1 V1 No change
Linked InTwitterFacebookeCard
Add New Comment
You must be logged in to comment.