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Lease-based provider takes regulator to court over ‘irrational’ and ‘legally flawed’ judgement
An equity-linked housing association is taking the Regulator of Social Housing (RSH) to court after the social landlord was deemed non-compliant with its standards last year.
Inclusion Housing Community Interest Company said the regulatory judgement concluding that it had failed to meet governance and financial viability requirements was “legally flawed, unfair, irrational, inconsistent and in breach of the regulator’s duties”.
It has submitted a claim for judicial review against the RSH and the two are due to meet in the High Court next week.
The judgement in question, published in February 2019, gave Inclusion a non-compliant ‘G3/V3’ rating. The RSH said it lacked assurance that “steps within [Inclusion’s] control should risks crystallise would ensure its ongoing financial viability and that social housing and tenants’ homes are protected over economic and policy cycles”.
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Inclusion’s business model is based on leasing supported housing from investment funds such as real estate investment trusts (REITs) through inflation-linked deals.
Several housing associations funded this way have been found in breach of the RSH’s standards since one, First Priority, almost went insolvent in 2018.
An RSH report into the model published last April said it is “hard to see” how such housing associations can be compliant.
According to the RSH’s 2019 Statistical Data Return, Inclusion owns 2,084 homes across 104 local authority areas, and the vast majority are specialist supported housing. Its stock grew by more than 500 homes over 2018/19.
In a press statement issued this morning, Inclusion pointed to a line in an Inside Housing article describing the regulatory judgement as a “watershed moment” where the RSH “attacked the [lease-based] model itself, targeting a housing association seen by many as the best-run in this sub-sector”.
Inclusion said: “We agree with this assessment. Our comprehensive claim, supported by substantive evidence, is that the judgement is legally flawed, unfair, irrational, inconsistent and in breach of the regulator’s duties. We look forward to making our case in the High Court.”
It added: “Our 2018/19 annual report highlights our best-ever financial year in relation to our overall surplus, strong cash reserves and strengthening balance sheet.
“Inclusion has demonstrated a strong track record in how to operate the lease model successfully, viably and responsibly, and continues to function as a high-performing and robust business.”
The association achieved a £1.51m surplus in 2018/19, up from £1.27m the previous year.
A spokesperson for the RSH said: “The Regulator of Social Housing is contesting the judicial review brought by Inclusion and its position and evidence will be considered by the court at next week’s hearing.”
Update: at 11.56am 06/01/20 a comment from the RSH was added to the story.
