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Landlord breaches economic standards after findings reveal it is unable to meet day-to-day costs
Tower Hamlets Community Housing (THCH) has been downgraded after the Regulator of Social Housing (RSH) found it was unable to meet the costs of its day-to-day operating activities and repair liabilities.
In a regulatory judgement published today, the English regulator found THCH in breach of the economic standards and has downgraded the landlord as a result to V3 for viability and G3 for governance.
Previously its ratings were V2 and G1.
The RSH first revealed that the landlord, which manages and maintains around 3,000 homes, was on its ‘gradings under review’ list in December.
Following an investigation, the regulator identified weaknesses in THCH’s governance and financial position and how its board had failed to show that it is managing these risks appropriately, or that it has mitigations in place to ensure the provider’s long-term viability.
These weaknesses mean that it is unable to meet the costs of its day-to-day operating activities and repair liabilities.
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The RSH pointed out that the landlord is faced with a substantial programme of fire remediation work up to the end of 2025-26.
As a result, THCH is finalising documentation for a covenant waiver from its funder as it failed to identify the full accounting implications of the Building Safety Act 2022 earlier in the financial year and made a poor decision surrounding budgeting for the recovery of costs.
Waivers are also being sought for the subsequent financial years 2023 to 2026. But the RSH said that irrespective of securing the necessary covenant waivers, THCH’s business plan demonstrates that it is unable to meet the costs of its day-to-day operating activities and repairs liabilities from its rental income stream.
THCH has no capacity for any future development, and its stock condition data, upon which forecast stock reinvestment provisions in the business plan are based, is outdated and overly reliant on cloning.
Although this is now being addressed, the RSH said it is still not sure that the business plan’s cost provisions are based on prudent assumptions.
In agreement with the English regulator, THCH has put a plan in place to improve its governance and address its long-term viability.
Harold Brown, senior assistant director for investigations and enforcement, said: “Our investigation found significant issues in the way Tower Hamlets Community Housing is run, including a failure to manage financial risks and reliance on poor-quality data, leaving it with financial weaknesses.
“It needs to tackle these issues promptly and return to compliance with our standards.”
Mark Thrasher, chair of THCH, said the landlord recognises that its historic strategic financial decisions have not been robust enough.
He added: “Significant building safety investment, inflation, a rent cap, the cost of living crisis and a shortage of affordable homes is having a considerable impact on the long-term survival of housing providers our size. While a downgrade is disappointing, against this backdrop, it was anticipated and accurately reflects our challenges. We haven’t been naive to this and have been open about actively seeking opportunities to ensure a sustainable future.”
“We take the regulator’s judgement seriously and are committed to addressing its concerns to improve our resilience. It’s positive that the regulator is confident we have the capacity, capability and resources to do just that. We remain focused on providing good, safe homes and services to our residents in Tower Hamlets.”
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