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English regulator downgrades London landlord for setting unrealistic budgets
A London-based landlord has been downgraded by the Regulator of Social Housing (RSH) for “producing poor-quality and untimely financial data, and setting unrealistic budgets”.
In its regulatory judgement, published earlier today, the RSH found that Octavia Housing had breached the economic standards and said it has been downgraded to V3 for viability and G3 for governance, from V2/G1.
The English regulator opened an investigation in March, citing concern over the 5,000-home landlord’s compliance with the governance standard.
Octavia, which is based in Kensington and Chelsea, manages homes for rent and shared ownership across central and west London.
The RSH said it lacked assurance that Octavia’s financial resources and systems were adequate.
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These issues led to the provider producing poor-quality and untimely financial data, and setting unrealistic budgets.
The RSH also lacked assurance that Octavia had a robust financial plan it was capable of delivering.
The judgement found that the association’s financial performance had been weaker than budgeted, and this affected its performance against its loan covenants.
Harold Brown, senior assistant director for investigations and enforcement at the regulator, said: “We found significant issues with Octavia’s financial planning, as well as a failure by its board to have appropriate oversight of the organisation. We expect Octavia to address these issues promptly and return to compliance with our standards.”
In its press release, the English regulator said Octavia was working to address the governance and financial viability issues identified by the RSH’s investigation, in order to ensure its long-term financial viability.
An Octavia spokesperson said: “We accept the outcome of the review and have welcomed the opportunity to work closely with the regulator throughout the process to address the concerns raised.
“Our board and leadership team have already taken a number of steps to enhance our governance and improve the way our organisation is run; however, we remain fully committed to taking further steps to return the organisation to a stronger financial position.
“This will enable us to deliver on our strategic goals whilst ensuring that we continue to provide high-quality services to the residents and communities we serve.”
In December, S&P, the credit rating agency, downgraded Octavia to BBB+. The agency said it believed Octavia had “limited capacity to mitigate the effects of cost overruns, high inflation, rising interest rates and the government-imposed rent cap”.
S&P also flagged that the association’s finance team had experienced a “high turnover over the past few years, reducing accountability and the ability to adequately execute plans”.
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