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London landlord upgraded for financial viability
A housing association in east London has had its financial viability status upgraded to the top score of V1.
The Regulator of Social Housing (RSH) awarded Stratford-based Local Space, which owns 2,700 homes in the capital and Essex, a G1/V1 rating in its latest batch of regulatory judgements.
Local Space was downgraded in 2022, along with 18 other landlords, amid “significant economic challenges”.
A V2 grade means that the provider has the financial capacity to deal with a reasonable range of risks, but these need to be managed to ensure continued financial stability
However, the English regulator has now upgraded Local Space after it secured critical finance.
The RSH said: “Our previous judgement noted that Local Space was exposed to interest cost risk and had forecast increasing investment in its existing homes which weakened its financial performance.
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“Coupled with wider inflation and interest rate risks, this reduced its capacity to deal with downside risk.
“Local Space continues to invest in its homes but has now secured new finance that provides greater certainty regarding its interest costs and has increased its capacity.
“It has an adequately funded business plan with sufficient security to support its borrowing requirements and is forecast to continue to meet its financial covenants.”
Local Space had a turnover of just under £40m in the year to the end of March 2023. The provider intends to deliver 473 new rented homes over the next five years.
Josie Parsons, chief executive of Local Space, said: “We were always confident that we would return to a V1 grading rapidly and that it was a short-term issue, due to the wider challenging economic climate.
“We have a solid business plan in place and can continue our vital work in helping homeless people in east London, and work with our partner organisations to deliver solutions to bring forward much-needed long-term settled accommodation.”
Meanwhile, the regulator confirmed G2/V2 ratings for Honeycomb Group.
The Staffordshire social landlord “has an adequately funded business plan, sufficient security and is forecast to continue to meet its financial covenants”.
However, investment in existing homes in the current economic climate “impacts on Honeycomb’s capacity to respond to adverse events”, the RSH said.
A spokesperson for the landlord said: “Honeycomb Group can confirm its G2/V2 rating has been retained as of 31 January 2024.
“The regulator’s statement confirms assurance that the group complies with the financial viability elements of the Governance and Finance Viability Standard, has financial plans consistent with, and that support, its financial strategy, has an adequately funded business plan and sufficient security, and is forecast to continue to meet its financial covenant.
“The group continues to invest in existing homes, compliance and strengthening risk-management, with ongoing communication and commitment to the regulator.”
Local Space’s upgrade comes after the regulator warned that V2 is the “new normal” for landlords.
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