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Eleventh lease-based provider declared non-compliant by RSH
A lease-based supported housing provider in the West Midlands has become the latest to be declared non-compliant by the Regulator of Social Housing (RSH).
Prospect Housing, which has 1,860 supported housing units according to the RSH’s 2019 Statistical Data Return, has today been handed a G3/V3 grading.
The assessment indicates “issues of serious regulatory concern” on both governance and financial viability grounds.
Prospect’s business model sees it enter into short-term lease agreements with third parties to secure properties while retaining landlord responsibility for its tenants.
Some of its lease partners “have themselves leased the properties from a range of head landlords”, the RSH said.
Today’s regulatory judgement means 11 housing associations operating some form of lease-based model have now been deemed non-compliant with RSH standards.
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The English regulator said that investigations into Prospect found “significant weaknesses” in its business planning framework, “inadequate risk management”, and that “the board has failed to manage its affairs with an appropriate degree of skill, diligence, effectiveness, prudence and foresight”.
There are “significant gaps and inconsistencies” between figures in its financial plan and key support information, according to the regulatory judgement, meaning the association “is unable to demonstrate that its rent assumptions are compliant with the Rent Standard”.
The RSH added: “The regulator does not have assurance that Prospect has effective systems in place to give it sufficient oversight of the arrangements it has entered into with multiple third parties, who deliver landlord services on its behalf and to whom on-going payments are made.”
The issues point to “a fundamental failure of governance and operational control”, the RSH said, but Prospect has agreed to work with the regulator to resolve the problems.
It is now implementing an improvement action plan having sought to address “conflicts of interest” identified by the RSH, the judgement said.
A spokesperson for Prospect said: “We have already significantly strengthened our governance practices and improved our regulatory compliance, but fully accept that there is further work to be done.
“We have strong cash reserves that mean we are financially resilient, but we will improve our financial risk planning to ensure that this remains the case.
“We have a comprehensive action plan in place that will ensure we achieve full compliance and that we continue to deliver the homes and support services that our residents and partners require.”
The RSH has also changed the basis for its G1/V2 rating of Cornwall-based Ocean Housing – indicating the top grade for governance and compliance with viability standards but a need to “manage material risks”.
A regulatory judgement said: “Ocean continues to have a significant exposure to the housing market, including open market sales.
“Given low rent levels and its underlying cost base, Ocean has limited capacity to manage adverse events alongside the delivery of its current development ambitions.”
The 4,700-home association, which intends to build 900 new homes by 2025, has had a G1/V2 grading since May 2016.
Nottingham Community Housing Association, which manages around 9,500 homes, has had its top G1/V1 grading confirmed.
The RSH’s in-depth assessment programme is currently suspended because of the coronavirus pandemic; the publication of regulatory judgements is set to continue until June.
Lease-based providers the regulator has found non-compliant
Regulatory gradings (for providers with more than 1,000 homes):
Prospect Housing (G3/V3 in May 2020)
New Roots (G3/V3 in February 2020)
Westmoreland (G4/V3 in September 2019)
Inclusion (G3/V3 in February 2019)
Sustain (UK) (G3/V2 in January 2019)
Trinity (G3/V3 in November 2018)
Regulatory notices (for providers with fewer than 1,000 homes):
Larch (November 2019)
Expectations (UK) (September 2019)
Bespoke Supportive Tenancies (May 2019)
Encircle (April 2019)
First Priority (February 2018)
Regulatory judgements in England explained
The Regulator of Social Housing publishes regulatory judgements for all providers owning 1,000 or more social housing homes.
These judgements set out whether the provider is complying with the regulator’s governance and financial viability standards.
The regulator carries out an assessment either through a scheduled in-depth assessment, or reactive engagement (in which the regulator acts following information about a provider).
It then awards the provider a rating from one to four for financial viability (V) and a separate rating from one to four for governance (G).
Providers must score two or higher in both categories to be judged as complying with the standards.
As providers have increasingly taken on more risk to cross-subsidise social and affordable housing delivery through market-facing activity, the regulator has changed a number of associations’ viability ratings from V1 to V2.
The regulator often categorises this kind of regulatory action as ‘regrades’ rather than downgrades. Click here to read more.
Key to ratings:
V1/G1: Compliant
V2/G2: Compliant
V3/G3: Non-compliant and intensive regulatory engagement needed
V4/G4: Non-complaint, serious failures, leading to either intensive regulatory engagement or the use of enforcement powers
Rating straplines in full:
Governance ratings:
G1: The provider meets our governance requirements.
G2: The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.
G3: The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.
G4: The provider does not meet our governance requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.
Financial viability ratings:
V1: The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
V2: 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.
V3: The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.
V4: The provider does not meet our viability requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.
