You are viewing 1 of your 1 free articles
Regulator declares lease-based provider non-compliant with warning over rents
A lease-based provider of supported housing has been found non-compliant by the Regulator of Social Housing (RSH) over issues including its high rents.
Auckland Home Solutions CIC, which owns and manages 817 units of social housing, according to the English regulator’s Statistical Data Return (SDR), was declared in breach of the Governance and Financial Viability Standard.
In 2019, it became the first housing association to join The Social Housing Family CIC, a not-for-profit firm set up by listed real estate investment trust (REIT) Civitas Social Housing.
Auckland is one of several housing associations operating a model that involves leasing supported housing properties from funds like Civitas on long-term, inflation-linked agreements.
Until recently, it was Civitas’ largest partner accounting for 23.7% of its £50.8m rent roll in 2020/21, but that figure has since fallen to 16.9%. The fund said it remains fully up to date with payments.
The regulatory notice published today comes after Auckland was put on the RSH’s gradings under review list in March this year. In it, the regulator outlined a series of failings by Auckland on governance and financial planning.
It said Auckland’s business plan is predicated on its rents being “excepted” from the Rent Standard by meeting the criteria for specialist supported housing (SSH) or temporary social housing (TSH).
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 SSH and TSH than other forms of social housing because of the cost of providing care and support to residents.
But the regulator said: “Auckland has reported a significant majority of its stock is SSH or TSH and therefore is excepted from the standard, but we lack assurance on how the board has satisfied itself that it is meeting this exception criteria.”
READ MORE
The notice also said Auckland “has failed to ensure that any arrangements it enters into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes”.
Some leases “have involved companies linked to directors of Auckland and its shareholder”, while “on more than one occasion, Auckland sought and received shareholder approval to authorise the reported conflict of interests and disapply the provisions in its articles relating to them”.
It warned that Auckland has “entered into a series of long-term lease agreements with no break clauses” and “has a concentration risk that comes from having long-term, low-margin, inflation-linked leases as a single source of finance”.
Due diligence information handed over by Auckland “demonstrates an inherent lack of financial capacity in Auckland’s operational model to manage downside risk such as repairs, voids or delays in agreeing rent and housing benefit levels with local authorities”, it added.
The notice also said the RSH lacks “compelling evidence that Auckland’s board is adequately assured that the governance arrangements in place with its parent would effectively manage and mitigate the financial implications of risks crystallising”.
The regulator is considering whether to exercise its enforcement powers, while Auckland has committed to working with it to address the issues.
In a statement to the stock market, Civitas said: “Auckland now represents 16.9% of Civitas’ annualised rent roll, down from 23.7% as announced in the company’s recent annual results to 31 March 2021.
“The reduction reflects the company’s continuing policy of driving efficiencies within the portfolio and where appropriate, seeking diversification.
“In so doing it enables Civitas to extend further its stated aim to work with a wider range of counter-parties including established charities and community benefit societies.
“Auckland remains fully up to date with all lease payments due to Civitas and this is expected to continue to be the case.
“Auckland has committed to continue to engage with the RSH and in turn Civitas will continue its supportive relationship with Auckland and all other counter-parties with the shared objective of further enhancing standards across the sector.”
Nine of Civitas’ 16 housing provider partners have now been declared non-compliant by the RSH.
According to Civitas’ website, The Social Housing Family CIC is “operationally independent” with a stated aim “to enable housing associations holding Civitas leases to increase skills and experience and to provide funding if required to promote enhanced performance”.
SSH is defined by the Ministry of Housing, Communities and Local Government as supported housing which has been designed or altered for “residents who require specialised services or support in order to enable them to live, or to adjust to living, independently within the community”.
It must involve “a high level of support, which approximates to the services or support which would be provided in a care home”.
The regulator does not publish regulatory gradings for providers with fewer than 1,000 homes, according to the SDR.
Auckland was registered in January 2012, with its ownership since changing twice.
In a statement, Auckland said: “Auckland Home Solutions CIC (Auckland) has been providing specialist housing services to vulnerable people for over ten years and is a registered provider regulated by the Regulator of Social Housing (RSH).
“The board and senior management team has been engaging with the RSH over the last three years as part of the engagement all specialist housing providers have had with the RSH.
“The Auckland board notes the contents of the regulatory notice issued by the RSH and is committed to continuing to work with the RSH in order to provide the RSH with the assurances it requires.
“As a registered provider Auckland is committed to the highest standards and places the interests of the vulnerable individuals it houses at the forefront at all times.”
Update: at 11.29am 16/08/21
A statement from Auckland was added to the story
Sign up for our legal and regulation newsletter
Already have an account? Click here to manage your newsletters
