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Regulatory judgements: London housing association handed governance downgrade following safety failings
A London housing association has been downgraded by the English regulator on governance grounds after breaching safety standards amid the latest round of regulatory judgements.
Shepherds Bush Housing Group (SBHG), which owns around 4,700 homes in west London, has today been issued a G2 grading for governance by the Regulator of Social Housing (RSH) – indicating it still meets requirements but must “improve some aspects of its governance arrangements”.
Meanwhile, 15,000-home landlord Beyond Housing has been handed the top G1 governance rating after undergoing its first in-depth assessment (IDA) by the RSH since being formed through a merger in 2018.
Great Places Housing Group – which completed a merger with Equity Housing Group earlier this month – has been downgraded to V2 on financial viability grounds on an interim basis.
The RSH has also changed the basis for Hyde and Believe Housing’s V2 grades following IDAs.
A V2 rating indicates that the provider “has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance”.
Suffolk Housing’s non-compliant ‘G3/V2’ grading has been withdrawn after it was acquired by 31,000-home Flagship Homes in late January.
The judgements were carried out before the COVID-19 pandemic and do not take account of the impacts of the crisis.
In March SBHG was declared to have breached the RSH’s Home Standard after self-reporting failures over electrical and asbestos safety checks.
In today’s judgement, the regulator said the association “needs to continue work already in progress to strengthen its governance and compliance framework to ensure that controls are robust and are operating in line with its policies and procedures, and that there is effective board oversight of the management of key risks”.
The landlord’s V2 grading for financial viability – based on its large development programme and stretching cost savings targets – is unchanged.
Matt Campion, chief executive of SBHG, said: “We have worked closely with the regulator who has acknowledged work already in progress to increase the strength of our governance and compliance framework.
“We will continue with this to ensure that controls are robust, and we are operating in line with our policies and procedures, and that there is effective board oversight of the management of key risks.”
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Beyond Housing manages around 15,000 homes in the North East, it was formed through a merger between Coast & Country Housing and Yorkshire Coast Homes (YCH).
In November 2018, the association was issued an interim G2/V1 grading after it emerged that YCH did not have up-to-date fire risk assessments in place for a large number of buildings.
“The provider has strengthened systems and processes around statutory compliance and improved performance monitoring and reporting,” today’s regulatory judgement of Beyond concluded.
Rosemary Du Rose, chief executive of Beyond Housing, said: “This judgement reflects the hard work and commitment of colleagues across our organisation.
“It is incredibly rewarding to have that recognised by the regulator and gives our customers and stakeholders the reassurance that Beyond Housing is a well-run, financially viable business.”
In a strapline judgement, the RSH said its decision to downgrade Great Places to V2 is based on its “previous assessments of the providers which have now merged”.
Great Places was issued a G1/V1 grading in December, but Equity Housing Group was rated G2/V2.
Phil Elvy, executive director of finance at Great Places, said: “The regrade has no impact on our ambitious growth targets and we look forward to working with our various stakeholders and partners to deliver the new homes so desperately needed in the North of England.”
Hyde, which manages around 49,000 homes, has had a G1/V2 grading since November 2017 because of its “large and diverse” development programme.
The RSH’s latest judgement points to Hyde’s “new and innovative strategic partnerships and vehicles”, “a large sales programme” and its ongoing “large interest rate restructuring” exercise as potential financial risks.
Peter Denton, chief executive of Hyde said: “The G1 rating demonstrates our robust governance and our V2 rating shows our strong financial position, combined with our commitment to investing in our homes, so they continue to meet high building safety and energy efficiency standards, and our commitment to deliver more affordable homes in the future.”
Believe Housing, which owns around 18,000 homes, is the country’s youngest housing association, having taken a transfer of Durham Council’s housing stock in 2015.
It was issued a G1/V2 grading by the RSH on an interim basis in October after amalgamating four landlords under the Believe banner.
Today’s regulatory judgement said that while Believe “has recently completed delivery of its transfer promises, it continues to forecast high levels of investment in its existing stock”.
“This contributes to weak interest cover and coupled with relatively low covenant headroom, means there is limited capacity in Believe’s business plan to manage the crystallisation of downside risks,” it added.
Judith Common, chair of Believe, said: “I am delighted with this result. It’s a testament to all the hard work that everyone has put in to ensuring that believe housing is a great success.”
The RSH’s IDA programme is currently suspended because of the pandemic, with the publication of regulatory judgements set to continue until June.
Update: at 13.28pm 29/04/20 a comment from Hyde was added to the story.
Update: at 9.38am 30/04/20 a comment from Believe was added to the story.
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’.
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