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Large London housing association holds on to V2 rating
Large London housing association Network Homes has maintained it V2 rating for financial viability, with the regulator stating that it has the financial capacity to deal with a range of exposures.
The regulatory judgement was published this morning for the 20,000-home association and said that the organisation’s financial plans support and were consistent with its financial strategy.
Network Homes secured a G1 rating for governance, the top rating that can be given. The V2 rating means that Network Homes is compliant but still has work to do to improve.
The regulator said that the association needs to manage the material risks arising from its growth and sales strategy to ensure continued compliance.
Network Homes currently has a development plan of 700 homes a year between 2018 and 2023, which includes homes for social rent, shared ownership and outright sale.
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The judgement said that Network Homes’ social housing lettings operations continue to generate low levels of social housing lettings cover but added that it has “effective and prudent” treasury management and an adequately funded business plan to meet financial covenants.
In July, large London landlord Notting Hill Genesis was also handed a G1 V2 rating by the regulator, with the association being given a V2 rating on the basis that while it has an adequately funded business plan it “faces a range of risks and exposure to sales”.
Helen Evans, chief executive of Network Homes said: "We’re delighted that we’ve maintained our G1 governance rating. As the highest possible rating, this confirms the quality of our governance as a whole and I’m really proud of our organisation.
“The continuation of our V2 financial viability grade reflects our ambition in delivering the affordable homes needed in London and the South East, while effectively managing the risks associated with having a pipeline of 3,000 new homes."
Network Homes’ judgement was one of three narrative judgements published by the regulator this morning.
Leeds & Yorkshire Housing association (LYHA) was handed a G1 rating for governance and V1 rating for financial viability.
This judgement upgraded the regulator’s assessment from last July, where the association was given a G2 rating for governance.
LYHA originally self-referred issues with electrical safety to the regulator.
The regulator then concluded that the 1,600-home landlord needed to improve the controls it had in place to monitor key risks and improve its performance in reporting on health and safety compliance issues.
In the latest judgement, the regulator said that the organisation had reviewed the weaknesses and its wider governance, and recommendations had now been implemented and health and safety reporting has been strengthened. The electrical safety issues have now been fully resolved.
LYHA has an adequately funded business plan, sufficient security and an ability to meet financial covenants under a wide range of scenarios, the regulator said.
Commenting on the rating, Mark Pearson, interim chief executive at LYHA, said: “Our top priority is customers’ safety in their homes.
"We have carried out a fundamental review of our approach to landlord health and safety, investing heavily in an extensive programme of works and improving our internal controls, to ensure that we are fully compliant in all aspects.
"We are delighted to receive this regrade which is testament to the hard work and commitment of our dedicated team of staff, board members and engaged customers."
Mike Gaskell, LYHA chair, said: “LYHA has worked swiftly and diligently to get back to this highest rating in just 14 months. This reflects the change in the culture of the organisation, led by a new and revitalised management team with a genuine desire to ensure that the safety, rights and best interests of our customers are always first and foremost in what we do.“
East Midlands-based housing association Framework secured a V2 and G2 rating, meaning it is compliant but is in need of improvement in both governance and financial viability.
The regulator said that it has received assurances from Framework, which provides supported housing, that the organisation has made efforts to strengthen its governance arrangements, particularly around risk reporting. The regulator added that the completion of a stock condition survey is also essential to assess future major repairs investment levels.
On financial viability, the regulator concluded that Framework’s business model meant that it operates with low margins for its support activities and the uncertainty in the sector means it has to carefully manage its finances at all times.
It said that these pressures would continue with the ongoing economic uncertainty but acknowledged that the organisation has consistently been able to maintain a surplus even when faced with similar challenges in the past.
Update at 16:08 27/09/2019 This article was updated to make it clear that the issues found with electrical safety were discovered last year and LYHA was given a G2 rating for governance by the regulator in July 2018. LYHA also wanted to stress that it originally self-referred the electrical safety issues to the regulator. These issues have now been fully resolved and contributed to the organisation achieving a G1 rating in its latest judgement. A statement from Mike Gaskell, LYHA chair, has been added.
Regulatory judgements published on 25 September 2019
| Provider | Governace | Viability | Explanation |
|---|---|---|---|
| Accord Housing Association | G1 | V1 | No change |
| Framework Housing Association | G2 | V2 | First judgement |
| Havebury Housing Partnership | G1 | V1 | No change |
| Leeds and Yorkshire Housing Association | G1 | V1 | Governance upgrade |
| Muir Group Housing Association | G1 | V1 | No change |
| Network Homes | G1 | V2 | Changed basis for existing viability rating |
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.
Jargon-busting: some regulatory terms and what they mean
- Co-regulation: this means boards are responsible for deciding how to meet the regulator’s standards – the regulator does not prescribe how to do this
- Gradings under review list: a public list of providers under investigation who are at risk of being judged non-compliant with regulatory standards
- In-depth assessment: a planned inspection, in which the regulator assesses a providers viability, governance and approach to value for money
- Narrative regulatory judgement: a detailed explanation of the reasons behind a regulatory judgement. Narrative judgements are published where a providers’ viability or governance ratings have changed, or where RSH has particular issues or concerns.
- Reactive engagement: refers to the regulator reacting to complaints or allegations about a provider and taking action
- Stability check: an annual assessment of all providers owning 1,000 social homes or more. RSH uses accounts and statistical return data to check for any changes in a providers’ risk profile.
- Strapline regulatory judgement: where a provider is meeting the standards, and its governance or viability ratings have not changed since its previous judgement, the regulator does not publish a full judgement explaining its reasons for the gradings. Instead it just publishes the gradings themselves, in a ‘strapline’.
