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Regulator flags governance concerns at supported housing association
A housing association that provides homes and support to people with learning disabilities and mental health conditions has been downgraded by the regulator over governance concerns.
Advance Housing and Support has had its governance rating downgraded to G2.
The regulator said improvements need to be made to the 2,216-home association’s “strategic oversight” of the business.
Its financial reporting “lacks sufficient transparency to enable the board to manage its affairs with an appropriate degree of diligence and foresight in delivering its strategy”.
There is a “lack of granularity and an over-reliance on exception reporting” which “potentially masks performance issues at an operational level”.
The regulator also “lacks assurance” that the board has scrutinised its reported cost data, including the reallocation of social housing costs to non-social housing in the 2016/17 financial statements.
The report added that whilst the association’s board tracks performance against loan covenants on a quarterly basis, it needs to improve the monitoring of loan covenant compliance against the stress testing scenarios. The association’s mitigation strategies are “under-developed and related triggers are not yet in place”.
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A spokesperson for Advance Housing and Support said: “We are pleased to have maintained our top rating for financial viability and that the regulator is assured that our financial plans are consistent with, and support, our financial strategy.
“We are of course disappointed that our governance rating was reduced and are currently developing an action plan to achieve the required improvements. We have already commissioned an independent review of governance and board effectiveness and will work closely with the regulator to improve our governance. We are grateful to the regulator for their thorough review.”
South Yorkshire Housing Association (SYHA) also had its viability downgraded to V2. The regulator found that the 5,700-home associations’ entry into market rent, providing supported housing and its reduced covenant headroom “reduce SYHA’s capacity and flexibility to cope with downside risk”.
The report stated: “It has the financial capacity to deal with a reasonable range of adverse scenarios. In optimising the delivery of its objectives, SYHA is undertaking a material level of low margin supported housing activity, and venturing into market rent financed through a model which introduces fixed, long-term repayment liabilities set against less predictable assumptions on income and costs.”
Both Wrekin Housing Group and Arches Housing had their governance upgraded to G1. Wrekin, which has over 12,000 homes, was previously found to have weaknesses in its risk management. But the regulator has now found the association has simplified its group structure, has recruited a new board and “risks are now clearly prioritised and assessed at an appropriate level”.
The 1,200-home Arches Housing previously had been unable to provide “sufficiently robust assurance” to its board or the regulator that it was complaint with tenant health and safety requirements.
The report said that since then the board has been renewed and this has been extended to include renewal of the executive team. The association has also strengthened its operational control arrangements and has an established framework to ensure it meets health and safety legislation and regulatory requirements, the regulator found.
Regulatory judgements published on 27 June
| Provider | Governance | Viability | Change |
|---|---|---|---|
| Advance Housing and Support | G2 | V1 | Governance downgrade |
| Arches Housing | G1 | V1 | Governance upgrade |
| English Rural Housing Association | G1 | V1 | No change |
| South Yorkshire Housing Association | G1 | V2 | Viability downgrade |
| Wrekin Housing Group | G1 | V2 | Governance upgrade |
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.
