Regulator issues six governance upgrades to housing associations

South Norfolk Council’s stock transfer association Saffron Housing Trust was upgraded for governance from G3 to G2.

Saffron was originally declared non-compliant in October 2016, when chief executive Adam Ronaldson and director of housing and finance Stephen Flowitt-Hill both resigned over failing to appoint board members properly.

At the time, the regulator criticised 6,000-home Saffron for keeping its problems quiet since 2011, only informing the regulator in June 2016.

In January this year, Saffron’s board was criticised by the regulator for failing to demonstrate “an effective approach to reporting, quantification and management of key risks” and had its rating kept at G3.

Today, however, the regulator praised the current board, saying it has “set out a clear vision and purpose for the organisation”.

The regulator also upgraded Broadacres to G2, which was judged non-compliant in February 2017 due to a “serious failure of governance at the most basic level”.

According to the judgement issued then, it had failed to manage “foreseeable risks” in its building company, Mulberry Homes Yorkshire, and was exposed to “material losses, impairment and write-offs”.

Today’s judgement said that 6,300-home Broadacres had worked to reduce its exposure to risks through its subsidiary, which is now wholly owned by the housing association.

Broadacres’ board, the regulator said, now has greater oversight of Mulberry Homes Yorkshire’s activities.

Colin Wilkie, chair at Broadacres, said: “We have been liaising closely on an action plan with the regulator since early 2017 and this positive experience has resulted in improvements which have created a new, stronger organisation that is fit for the future.

“This includes the recent launch of our new corporate strategy which sets out Broadacres’ commitment to building 1,250 new homes over the next five years, 90% of which will be affordable, in addition to significant investment in our existing homes and with a particular emphasis on environmental performance to tackle fuel poverty in rural areas.”

THCH also saw its governance rating improve from G3 to G2 after it worked on various issues where it had previously been criticised by the regulator.

In 2016, the regulator judged that 3,000-home THCH was non-compliant with its governance standard as a result of issues around site acquisition, procurement and delivery of two significant development schemes.

It also criticised the association’s approach to health and safety at the time, noting that there were “a number of very high risk outstanding actions arising from fire risk assessments”.

In today’s judgement, however, the regulator said that THCH had hired new executives and board members, strengthening its team and has “delivered a cultural change and restructure programme aligned with its purpose and strategic objectives”.

Philip Sullivan, chief executive of THCH, said: “Returning to a compliant governance grading is a significant and positive milestone for THCH after a successful period of restructuring and culture change that has transformed THCH into a hugely different and improved organisation.”

Manningham also saw its rating move from G3 to G2, after it recovered from governance issues identified in February 2017, relating to weaknesses around gas safety.

In today’s judgement, the regulator praised the changes 1,400-home Mannningham has made to its board and executive team.

It said: “An appropriate governance framework is now in place, underpinned by additional leadership and governance resources, and there is evidence of it operating in practice.”

Manningham, which is based in Bradford, also had its rating for financial viability moved up from V2 to V1 thanks to its higher level of fixed debt and ability to deal with interest costs.

Lee Bloomfield, chief executive of Manningham, said: “Registered providers must have the confidence of the regulator and our funders. Being downgraded to non-compliant puts a cloud over this. I am delighted that the brave and ambitious changes we have made over the last two years have been acknowledged.”

These four housing associations, according to the regulator, still have to let their planned changes take effect and progress along their strategies in order to return to G1 ratings.

Severn Vale Housing Society which is in the middle of a merger with Bromford, has moved up to a G1 rating.

Tim Knight, chief executive of Severn Vale, said: “We are absolutely delighted that the regulator has recognised the improved governance capability within Severn Vale, a key part of which was to appoint a Board based on skillsets we required to run our business as opposed to outdated criteria that required applicants to be representative of specific categories of stakeholders.”

So too has ISHA, which improved areas around health and safety compliance in order to return to the top rating for governance.

ISHA was, however, downgraded over financial viability, moving from V1 to V2. The regulator does not require ISHA to improve its viability, though.

According to the regulator, this downgrade was the result of ISHA increasing its spending on major repairs. This has made it harder for the association to afford interest payments on its debt.

Stephen Stringer, chair of ISHA’s board, said: “We are really pleased that we have been regraded to G1, which reflects all the hard work of the Board and staff at ISHA. We are reassured that the regrade to V2 is a compliant grade and the Regulator is supportive of the investment we have planned for our existing homes.”

Update: at 10.55 on 19.12.18 This story was updated to include a comment from Mr Bloomfield.

Update: at 11.30 on 19.12.18 This story was updated to include a comment from Mr Knight.

Update: at 11.44 on 19.12.18 This story was updated to clarify that Severn Vale now has a G1 rating.

Update: at 12.35 on 19.12.18 This story was updated to include a comment from Mr Stringer.

Update: at 09.30 on 20.12.18 The table below this story was updated to confirm that Broadacres Housing Association was given a viability upgrade