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Regulator finds ‘fundamental failure of governance’ at housing association
A housing association that provides homes mainly for adults with learning disabilities or mental health problems has a “fundamental failure of governance”, the Regulator of Social Housing has concluded.
The Regulator of Social Housing put First Priority Housing Association (FPHA) under review in January and has now published a report (see attached below) which states that the association does not meet the requirements for both the governance and viability standards.
FPHA leases properties with 26 landlords and the regulator said the association is dependent on the goodwill of these landlords in relation to rent payments which indicates a “fundamental failure of governance”.
The regulator has appointed new board members for the association.
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FPHA does not have “sufficient working capital” or the capacity to meet its debts when they fall due, the regulator found. The association has failed to get access to secure liquidity “because it continues to trade on the goodwill of its creditors”, the regulator said.
The association is working with its creditors and lender to find a solution to its financial problems.
The regulator also has concerns about FPHA’s governance “particularly the adequacy of resources and the skills and capability of the board to maintain effective control of the organisation.”
FPHA manages properties for Funding Affordable Homes, which recently became a real estate investment trust (REIT) and has borrowed money from Henley Investments, another REIT.
The association also leases around £40m worth of property from the REIT Civitas, to which it is obliged to pay £3m in annual rent, according to the REIT’s annual results.
Rent paid to FPHA accounts for 14% of Civitas’ total income, the second-most of any housing association to have done deals with Civitas.
Meanwhile, projects to which FPHA is the counterparty make up 4.4% of the total assets held by the investment trust GCP Infrastructure, meaning they are worth £39.9m in total.
FPHA and these creditors have been contacted for comment.
Update: at 12.15 on 13.2.18 This story was updated to include details of FPHA’s creditors.
