Regulatory judgements: 11,000-home landlord hit by governance downgrade

Earlier this week, the regulator reported in its annual value for money report that the reporting within housing associations this year was “mixed” and warned registered providers that reporting must meet requirements and year-on-year reporting weaknesses will be reflected in regulatory judgements.

Swan maintained its V2 rating for the regulator’s Financial Viability Standard, meaning the association is compliant with the regulator’s requirements and has the financial capacity to deal with adverse scenarios but needs to manage material risks to ensure continued compliance.

Swan’s income was generated from an increasing sales programme to maintain its financial strength, the regulator said. It added that this exposes the landlord to a range of market conditions and means that it is susceptible to the crystallisation of a series of housing market and economic risks which require ongoing management.

Swan plans to develop 1,684 new homes over the next six years, and is currently involved in a number major regeneration schemes including the regeneration of areas in Purfleet and Southend. Swan has been contacted for comment.

A statement from Swan said: "Our board and executive team are determined to learn from the feedback from the regulator to strengthen our business further.

"We have taken steps to embrace the regulator’s recommendations with immediate effect. Our board have already held a strategy day, with external advisors, as a start of a detailed and thorough review which will implement a range of detailed improvements to address the areas in which the regulator requires further assurance.
"We welcome the recognition of our continued financial viability and the work we have done to reduce our cost base and are committed to further demonstrating our compliance with the Value for Money Standard and our ability to provide best value whilst continuing to build more, much needed, new homes in Essex and East London in the short, medium and longer term."

In another judgement published today, Red Kite Community Housing was downgraded on governance after it was defrauded of nearly £1m in a cyber scam.

Elsewhere support care provider Brunelcare saw its financial viability downgraded from V1 to V2. The provider, which manages 1,100 homes in Bristol and North Somerset, maintained its G2 rating for governance.

The regulator said that while the association had an adequately funded business plan and sufficient security in place, it did have material exposures which it needed to manage to ensure continued compliance.

It added that Brunelcare’s financial plan had increased exposure to the housing market as more of its revenue was reliant on sales, while increased spending on improving housing stock would put operating margins under pressure and reduce headroom cover.

In response to the judgement, Brunelcare said: "The regrade reflects the organisation’s commitment to invest in its properties, following a full stock condition survey, and the resources required to do so.

"It also takes into account the potential of not achieving a limited number of property sales in the coming year, as Brunelcare invests in new shared ownership housing provision for the community.

"Brunelcare welcomes the regulator’s comment that the organisation ‘has an adequately funded business plan, sufficient security in place and is forecast to meet its financial covenants’.”

Meanwhile, Bournemouth Churches Housing Association (BCHA), which owns around 1,800 units across the South West of England, had its financial viability rating upgraded from V2 to V1.

In its previous assessment, the regulator found BCHA, which plans to develop 210 homes over the next four years, had a “material reliance on volatile contractual income and therefore reduced its ability to manage adverse events”.

However, it has now been upgraded following the delivery of its ongoing efficiency programme, which includes purchasing properties previously managed on behalf of others.

In another ratings upgrade, Essex-based Greenfields Community Housing had its governance rating upgraded from G2 to G1.

In May 2018, the regulator identified that Greenfields needed to improve aspects of its risk management and internal controls assurance after it failed to comply with its own policies and processes for property services and procurement.

Greenfields has since developed a five-year corporate strategy under a new chief executive and a review of its board skills has been undertaken to ensure the board’s skills are aligned with the corporate objectives.

Greenfields owns around 8,847 homes in Braintree District Council and plans to develop 1,787 homes by March 2025.

Responding to the judgement, Emma Palmer, chief executive of Greenfields Community Housing, said:

“This very welcome decision recognises the huge amount of work carried out by Greenfields’ staff, board and volunteer residents over the last two years.

“We are now in an even stronger position to work alongside our residents, communities and partners to provide superb homes and services in brilliant communities to those who need them.”

The regulator also confirmed today that both 23,000-home Longhurst Group and 3,000-home Colne Housing, which is currently in merger talks with Greenfields, maintained their G1/V1 rating.