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Lease-based provider judged non-compliant by regulator
The Regulator of Social Housing (RSH) has judged a lease-based provider of specialist supported housing to be non-compliant with multiple regulatory standards.
In a regulatory notice published today, the RSH said it lacks assurance that Empower Housing Association, which is based in Lancashire, “is compliant with the governance elements of the Governance and Financial Viability Standard and with the Rent Standard”.
Empower is a lease-based provider within the specialist supported housing (SSH) sector, which means it predominantly enters into long-term lease arrangements with private landlords and charities to acquire homes that are used to provide supported housing to vulnerable tenants. Empower’s lease arrangements “are for periods of up to 20 years and are index-linked” and include “break clauses” so Empower or the landlord can end the lease within a given notice period.
According to the regulator, Empower owns a small number of properties.
The regulator has been critical of the lease-based model in the past and a number of SSH providers have been found non-compliant over the last couple of years.
In today’s regulatory notice, the regulator said Empower’s “governance arrangements are underdeveloped and inadequate for the size of the organisation”, adding that the board of directors “did not have sufficient routine meetings or receive adequate reporting on performance”.
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According to the notice, Empower “identified and informed the regulator of an issue relating to failures in financial and internal controls over a number of years”.
“As there were inadequate controls in place, some financial payments and commitments occurred without approval or oversight of the board,” the notice said.
While the regulator said there was evidence that Empower “had mitigated some of the risks of the business model which it operates”, it said the organisation “does not have a framework to record the risks identified or the controls in place”.
“Empower’s business planning is also limited and it has not carried out any stress testing of its business plan,” the notice added.
In addition to governance failures, the regulator said Empower has also been unable to provide it with evidence to demonstrate how it complies with the Rent Standard.
The Rent Standard imposes tight controls on how much social landlords can charge tenants.
Significantly higher rents – paid by housing benefit – may be charged for specialist supported housing than other forms of social housing because of the cost of providing care and support to residents.
The regulator said Empower has been unable to provide it with evidence that its properties meet the definition of specialist supported housing.
“It is a serious matter if an exception from rent requirements is inappropriately applied. As some of the cost of these rents has been met through Housing Benefit and Universal Credit, there may also be implications for the public purse,” the regulator said.
According to the regulator, Empower “has started to take steps to improve its governance and is committed to working with the regulator to address the issues outlined in this Regulatory Notice”.
As Empower has fewer than 1,000 properties, it has not been given a regulatory rating.
Les Paul, chair of Empower said, “The current board of Empower acknowledges the serious nature of the issues set out in the Regulatory Notice and has taken positive and proactive steps to agree a plan of action, with appropriate specialist support to address the areas of non-compliance. We are working co-operatively and collaboratively with the regulator and are committed to achieving full compliance with the Regulatory Standards whilst also maintaining the good standard of frontline and operational services delivered by the association.”
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