Governance downgrades for two landlords in latest batch of regulatory judgements

However, like BDHT and YMCA SPG, the regulator changed the basis of Acis’ viability grade. It said the landlord was reliant on income generated from its sales programme and student housing business to maintain covenant compliance and its financial headroom remains “relatively low”. 

The RSH said that coupled with the current economic uncertainty, this was reducing Acis’ capacity to respond to adverse scenarios, as demonstrated in its own stress-testing.

Acis’ viability rating was changed to V2 in 2017 after interest cover and covenant headroom fell due to a “significant increase” in major repair costs.

YMCA SPG has held a G1 rating for governance since 2021, when it was upgraded from its initial G2 rating given to the association as part of its first regulatory judgement since its formation in 2018.

Explaining its reasons for lowering the rating back down to G2, the RSH said its assessment had identified gaps in the board’s oversight of stress-testing, risk management and delivery of the strategic plan outcomes.

It also said board reporting needs to be strengthened to facilitate adequate oversight and challenge of performance.

As for its financial viability, the regulator said while YMCA SPG has the financial capacity to deal with “some exposures”, the landlord has material risks and needs to manage these to support continued compliance.

In response to the judgment Richard James, CEO of YMCA St Paul’s Group said he was pleased the provider continued to meet the regulator’s governance and viability standards.

"The last few years have seen us navigate Covid, labour shortages, energy bills tripling alongside high interest and inflation, throughout this period we have continued to provide safe, secure and supportive places for our young and vulnerable residents.

"We welcome the feedback from the In Depth Assessment which recognised our strengths as well as identifying areas for improvement. We will now work with the regulator, the board, our staff and residents to ensure that these gaps are addressed”.

Meanwhile, the judgment for BDHT said the association’s rating was downgraded to G2 as it “needs to improve” aspects of its governance arrangements and strengthen its board to improve its capacity for providing strategic oversight and effective scrutiny of its increased financial risk profile.

The RSH said BDHT has “material risks and exposures” that it needs to manage and is reliant on sales surpluses to remain compliant with covenants. 

“Delivery of this investment reduces Bromsgrove’s covenant headroom. Coupled with economic uncertainty in relation to inflation and interest rates, this impacts its capacity to respond to adverse events,” the judgment said.

Mary Miller, chair of BDHT, said: “We recognise that in the challenging circumstances that the sector is facing, we need to improve the strength and depth of our governance arrangements. We have had a constructive and positive dialogue with the regulator and we are working with them to give them the assurance they require.”

Greg Bacon, chief executive of Acis, said: “Following a recent in depth assessment by the Regulator of Social Housing, Acis’ regulatory judgement remains unchanged at G1:V2. We continue to meet the exacting regulatory standards which recognises our commitment to good governance and the financial challenges facing the sector and the country as a whole.”