North West housing association gets viability upgrade in latest round of regulatory judgements

Also in today’s judgements, London landlords Hexagon Housing Association and Islington and Shoreditch Housing Association (ISHA) had the basis for their G1/V2 grades changed following IDAs.

A V2 grading indicates compliance with the RSH’s viability standard but a need “to manage material risks to ensure continued compliance”.

In a judgement for 2,300-home ISHA, the regulator said: “ISHA is undertaking building safety works requiring significant expenditure.

“As a result, interest cover is forecast to remain weak for at least the next five years. This increased investment in its stock reduces ISHA’s financial capacity and gives rise to material risks that the provider needs to continue to manage.”

Reacting to the latest regulatory judgement, Ruth Davison, chief executive of ISHA, said: “ISHA has been an ambitious builder for 20 years, developing 60% of its homes during that time.

“Unfortunately, it coincided with a race to the bottom in building standards and a failure of governments to ensure regulation prevented that and ensure residents’ homes were safe.

“Our viability rating reflects the work we are doing and need to do, to put that right. Safety is our highest priority and we moved quickly to intrusively survey all our high-risk buildings and put mitigations in place – at our cost – until we could complete works.

“Some developers have worked well and honourably with us and we thank them for that. Others have not.

“We call on the government during the passage of the Building Safety Bill to ensure that not only leaseholders are protected, but that social landlords are too and that we can continue to deliver much-needed social homes in the communities we exist to serve.”

Hexagon, which owns around 4,500 homes across south-east London, was downgraded from V1 to V2 in January, with the regulator citing limited headroom against its funder covenants, which affected its ability to manage financial risks.

At the time, the RSH said: “These risks include exposure to the housing market through sales, delivery of its committed development programme and some uncertainty on the cost of future stock investment requirements.”

In a judgement published today, it said Hexagon “continues to have limited headroom against funder covenants and its liquidity position is dependent on getting the refinancing in place”.

But it removed the wording around “uncertainty on the cost of future stock investment requirements” from the list of risks.

Also today, the RSH withdrew regulatory notices of non-compliance against Wandle Housing Association and Folkestone & Hythe District Council.

Wandle was hit with a regulatory notice in September 2020 for failing to implement in full the 1% social housing rent cut between 2016 and 2020.

Folkestone & Hythe was among four Kent councils issued with regulatory notices in September 2019 over safety failings by their former joint-owned ALMO, East Kent Housing.

Moat Homes and Coastline Housing had their G1/V1 gradings confirmed by the regulator following IDAs.