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Regulator hits four landlords with financial viability downgrades
Four landlords have been downgraded for financial viability as the English regulator warns that increased spending on their existing homes is exposing them to risk in a tough economic climate.
Curo Group, Golding Homes, Phoenix Community Housing and Worthing Homes have all been moved to a V2 rating following annual stability checks by the Regulator of Social Housing (RSH).
A V2 rating is compliant, but means a landlord has “less capacity” to respond to adverse events, according to the RSH.
Twenty other landlords retained their current governance and financial viability grades today, in what is the English regulator’s first wave of announcements based on its annual stability checks.
During last year’s stability checks, a string of landlords were downgraded to V2 as challenging economic conditions started to bite.
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On Bath-based Curo, which operates around 13,000 homes, the RSH said its growing investment in existing homes was “weakening its interest cover and reducing headroom on funder covenants”.
The judgement also warned that Curo’s development programme, which includes outright-sale homes, was exposing it to risks in the housing market. In its last full year, Curo reported a slightly reduced surplus of £23.9m off turnover of £141.7m.
For Golding Homes, a Kent-based provider that operates around 8,500 homes, the English regulator said its financial performance had “weakened” due to investment in current stock and new homes.
For both 7,600-home Phoenix and 4,000-home Worthing, the RSH said their increasing investment in existing properties was “weakening” their interest cover and “reducing headroom on funder covenants”.
The regulator said all four landlords’ capacity to respond to “adverse events” had been affected by high interest rates and inflation.
All four retained their G1 status for governance.
Victor da Cunha, Curo’s chief executive, said: “While we’re naturally disappointed to be regraded, we recognise this as a reasonable assessment. This is a symptom of the difficult financial context housing associations are operating in.”
He said this was the “direction of travel for the sector” and expected more landlords to be downgraded.
“Curo remains financially sound and we will continue to stay alert to the uncertainty of the economy and to manage our budgets closely,” Mr da Cunha added.
Steph Goad, Golding Homes’ chief executive, said: “We understand this regulatory decision is down to the wider external environment and current economic pressures. We remain committed to investing in our existing homes, providing much-needed new affordable homes and improving services in line with our corporate plan ambitions.”
Denise Fowler, Phoenix Community Housing’s chief executive, said: “The V2 financial viability rating reflects the financial pressures facing the sector and Phoenix’s ongoing commitment to investing in our homes and services to meet our residents’ needs, as well as delivering high-quality new homes to help meet the housing crisis in London.”
Worthing Homes has been contacted for a response.
The RSH warned landlords earlier this week that one of the significant pressures facing the sector was a declining housing market that threatened to damp income from development sales.
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