Firm linked to non-compliant landlords sets up charitable organisation to acquire ‘struggling providers’

When Westmoreland was given a non-compliant rating of G3 in 2018, the RSH criticised the landlord for for “inherent conflicts of interest” arising from the fact that the chair of Westmoreland at the time was “employed in a senior role by the same third party that is providing the cash support, management services and sourcing properties as part of Westmoreland’s growth strategy”.

The chair of Westmoreland at the time was John Russell, who has been chair of Fairhome since 2016. Mr Russell resigned from the board of Westmoreland in June 2019.

Steve Fensom, chief executive at Westmoreland, said the organisation has “reviewed and strengthened all aspects” of its governance since the regulatory judgement was issued and confirmed that “no conflicts of interest exist at board level – nor any other level – within Westmoreland”.

Fairhome was also listed as a “person with significant control” of Encircle on Companies House up until January 2018, a provider that was given a non-compliant rating in April 2019. Fairhome’s latest accounts also list Encircle as a “significant related party”, meaning they share directors with Fairhome or that Fairhome directors “exert significant influence”. Encircle said that no Fairhome directors currently hold positions at the association.

Encircle, Westmoreland and Hilldale are all specialist supported housing providers that rely on a business model that sees them lease homes on a long-term basis from private investment funds rather than own properties.

The business model has been heavily criticised by the RSH as housing associations are tied into making monthly inflation-linked payments to the building owners, creating risk if housing associations experience a dip in income.

In a 2019 report the regulator said it was “hard to see how a provider of [specialist supported housing] which is substantially financed by long-term leases and subsequent tight margins can meet the requirements of the Governance and Financial Viability Standard” .

In the year up until July 2019, Fairhome made a loss of £1.9m, compared with a profit of £15.1m in 2018.

This included a contribution of £17m to other companies in the sector in 2019.

In addition to the money it donated to Westmoreland and Change Housing, it also contributed £10.4m to its sister company Valorum Care Group, which provides care to people living in supported housing. The loans have no fixed repayment terms and no interest has been charged.

Valorum reported a loss of £6.7m in the year up until July 2019.

In reference to the loans it has given to related businesses, Fairhome said in its accounts: “Although it is believed by management that these businesses will ultimately become more profitable and be in a position to repay the borrowings, there is uncertainty over the amount of recovery and its timescale.”

Since Fairhome was established in 2014, it has delivered more than 6,000 units of accommodation for vulnerable adults.

A spokesperson for Fairhome said: “Established in 2014, Fairhome Group is a specialist developer delivering end-to-end supported housing from acquisition and development through to housing management and support, through its network of housing and care provider partners.

“Fairhome Group enables and facilitates collaborative partnerships, working to co-ordinate the provision of specialist housing with local authorities and housing associations.

"We take a ‘needs-led’ approach, ensuring supported housing provision is delivered where it is most needed, enabling local authorities to provide accommodation to manage local community needs and provide much-needed independent living for vulnerable adults. Since the group was established in 2014, it has created over 6,000 homes for vulnerable adults throughout the country.

“Change Housing, Westmoreland Supported Housing Association, Hilldale Housing Association and Encircle Housing Association all operate independently, under their own governance, with independently appointed boards. As such, Fairhome Group is unable to provide direct comment regarding these organisations.

“In late 2017, the directors of Fairhome established Valorum Care Group to deliver bespoke care and support services nationwide. In the year to July 2019, Fairhome Group invested £10.4m in the company as it became established.

“With extensive expertise in supporting people with a variety of complex needs, Valorum now provides specialist support to almost 1,000 people across England and Wales. Under the guidance of its strong leadership team, Valorum employs more than 2,000 frontline staff who deliver care in over 80 locations.

“This brings the total amount contributed by Fairhome in 2018 and 2019 in support of its partners in housing and care organisations to £21m, in addition to providing significant operational resources and support.

“Fairhome remains committed to ensuring that the high-quality properties it develops fulfils its long-term purpose in ensuring the best outcomes for the tenants that live in it.”

A spokesperson for Change Housing said: “It’s important to note that Change Housing is a not-for-profit community benefit society. It has a strong focus on business infrastructure that is supporting its subsidiaries in building robust governance and viability, within the regulatory code. It includes growth that will build strong sustainable liquidity.

“This is the purpose of Change Housing in enabling registered specialist supported housing organisations become exemplar businesses. We are bringing in senior expertise and deploying resources to deliver this purpose.”

A spokesperson for Hilldale echoed Change Housing’s response.