London landlord drops from top governance grade to non-compliant

The RSH found that East End Homes has failed to demonstrate that it is appropriately identifying and managing its risks.

The regulator said it has “insufficient assurance” that the board of East End Homes has been managing its affairs and overseeing the business with an “appropriate degree of skill, diligence, independence, prudence and foresight, commensurate to the provider’s size, scale and risk profile”. 

The judgement said: “The provider has identified that it needs to strengthen its board to address skills gaps and take steps to manage potential conflicts of interest on the board. The regulator’s investigation found that management information has been, on occasion, insufficient to assist the board in making fully informed decisions on material issues and risks facing the provider. 

“The regulator also found instances where the board was not provided with adequate opportunity to make decisions. East End Homes has been unable to demonstrate that the risks it faces are being appropriately identified, managed and mitigated.”

The regulator concluded that risk management, stress-testing and mitigation strategies are “undeveloped” and not yet embedded at the landlord. 

“Weaknesses in financial planning and governance became evident as part of its recent securitisation exercise. The regulator also found that current and historical data integrity issues and poor-quality data had resulted in an insufficient understanding of the provider’s asset base. As such, East End Homes is unable to provide assurance that it meets the DHS,” the judgement said.

While East End Homes has recently carried out a condition survey on half its stock and commissioned one for the rest, the regulator said this will need to be “fully costed into the provider’s future financial plans”. 

Although the landlord retained its V2 grade, the RSH said there “remains low headroom against key covenants, and it is forecasting weak financial performance”.

“While it has the financial capacity to deal with a reasonable range of adverse scenarios, it has material risks and needs to manage these to ensure continued compliance,” the judgement said.

The regulator said that during the investigation, East End Homes was “transparent and responsive” and has accepted its concerns. 

As a result of the regulator’s investigation, East End Homes has commissioned external consultants to develop an improvement plan and an asset management strategy. 

Harold Brown, senior assistant director for investigations and enforcement at the RSH, said: “Our investigation found issues in the way that East End Homes is run, including weaknesses in its board, an inadequate approach to risk management and poor-quality data on its tenants’ homes.

“East End Homes is working to improve the way it is governed, and we will continue to monitor the provider as it works to return to compliance.”

Kevin Moore, chair of East End Homes, said: “While we are very pleased to retain our V2 rating, we are obviously disappointed our governance rating is now a G3. 

“Through the regulatory process our board and executive have been fully transparent, engaged with the regulator’s concerns and have prioritised actions to ensure East End Homes move back to a G1 rating as swiftly as possible.

“Prior to the IDA, we had commissioned a comprehensive external governance review. This was completed earlier this year, many of the recommendations have already been actioned, and we expect all improvements to be in place this year.

“A good example is that we have already strengthened the quality of our data, having completed a survey of 50% of our stock, with the remaining 50% to be captured in the next 12 months. This, coupled with our extensive proxy measures including our strong local presence on estates, has helped to further validate our fully costed and sustainable asset management strategy.

“The regulator’s confirmation of our V2 rating signals that our agreed financial plan supports our strategy which has prioritised building safety, stock decency and energy efficiency.

“The board carefully monitors our financial performance to ensure that we remain in a good place to achieve our strategic objectives and to provide a local housing service which meets the needs, priorities and aspirations of all our residents.”