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Regulatory judgements: One Housing financial woes compounded by governance downgrade

London landlord One Housing Group (OHG) has been handed a governance downgrade by the Regulator of Social Housing (RSH), citing poor decision making.

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One Housing was downgraded from G1 to G2 for governance by the regulator, a grading which means that the association meets the regulator’s governance requirements but needs to improve some aspects of its governance arrangements.

Explaining this reasoning, the regulator said its “decision-making has not been consistently supported by accurate data”. Its financial viability rating stayed at V2.

The RSH also said: “OHG needs to ensure that there is sufficient capacity for this work to happen at pace while maintaining its day-to-day operations. The board has undertaken some work to improve data quality.

“OHG’s board recognises there is further work to do to manage the risks within its current operations and is developing a corporate strategy that is fully aligned to its agreed risk appetite.”


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It comes as the association, which belongs to the G15 group of London’s largest social landlords, reported an £8.6m loss in the year to March 2020, with its chief executive warning of another difficult year in 2021/22.

Despite the poor results the regulator did not downgrade the housing association’s financial viability rating which would have left the group with a non-compliant rating.

It said: “The regulator’s assessment of the group’s compliance with the financial viability element of the governance and financial viability standard is unchanged. Based on evidence gained from the stability check, we are satisfied that OHG has access to adequate liquidity to support its business.”

According to the most recent financial accounts, the 17,000-home landlord had liquidity of £369.2m in March 2020.

But the regulator warned that OHG’s current operations require “careful management” including increased investment in existing stock. It also noted that OHG is seeking to refine the terms of funder covenants.

A key driver for One’s financial difficulty was its care and support business, which ran at an overall loss of £1.1m in 2019/20. The RSH stressed the need for the group to “manage the ongoing financial risks stemming from its care and support activity and from its complex funding arrangements”.

The housing association was forced to exit seven of its care and support contracts last year which it considered unviable and One’s chief executive Richard Hill did not rule out more contract terminations going forward, in a recent interview with Inside Housing.

The group holds a number of floating-rate loans which delivered a £6m loss in the year as a result of falling interest rates.

A spokesperson for One Housing said: “We are a strong and robust organisation with good underlying financial strength and so while we’re disappointed with the downgrade, we remain a compliant organisation.

"We are pleased that the regulator acknowledges the cost of our building safety programme. The programme ensures our customers’ safety is, and always will be, our top priority. We are confident that we can get back to a G1 by working collaboratively with the regulator, our stakeholders and customers.”

Two other small housing associations have received governance upgrades today.

Cornerstone Housing, which manages around 1,400 homes in Devon, has been returned to the top grading.

The judgement said Cornerstone had resolved the regulator’s concerns over inadequate stress testing that led to it being issued a G2/V1 grade in June 2019.

“The board is now clearly sighted on the impact of scenarios across a suite of key performance indicators, including funders’ covenants,” today’s judgement said.

Framework Housing Association has been handed a G1/V2 grading following a governance upgrade.

The East Midlands-based supported housing provider, which owns around 1,250 units, received a G2/V2 grading in September 2019 after its first In-Depth Assessment (IDA).

At the time, the regulator concluded that Framework needed to improve its board reporting on risk and performance and complete a stock condition survey to inform its business plan.

Today’s judgement said the landlord “has now demonstrated that the board has effective oversight of the risks associated with the delivery of its strategy, including key performance indicators” and completed the survey.

Framework’s financial viability grading remains unchanged, reflecting that its business model means it “operates within low margins on support activities and the lack of certainty around contracts for its services means that finances have to be carefully managed at all times”.

In other regulatory judgements published this morning, Hexagon Housing Association, which manages around 4,500 homes across south-east London, has been moved down from G1/V1 to G1/V2.

The RSH terms this a “regrade”, in recognition of the fact that the emergence of notable risks to financial viability is not always the result of a failing by the provider.

In its judgement, the regulator said Hexagon’s financial plans “are consistent with, and support, its financial strategy” and that it has “an adequately funded business plan”.

But it added that “headroom against funder covenants is limited”, compromising the landlord’s “ability to manage the financial risks associated with the delivery of its business plan”.

“These risks include exposure to the housing market through sales, delivery of its committed development programme and some uncertainty on the cost of future stock investment requirements,” it added.

Two-thirds of Hexagon’s ongoing development programme to build 331 homes by 2022 is made up of shared ownership and market sale, with the rest for London Affordable Rent.

Meanwhile, The Guinness Partnership, which owns around 64,000 homes across England, has been kept at G1/V2 but had the basis for its viability grading changed following an IDA.

High levels of planned stock investment are “putting pressure on interest cover ratios”, the judgement said, which “coupled with a steep increase in the scale of its development programme, gives rise to exposures which Guinness needs to manage, and which reduce the capacity it has to respond to adverse events”.

Guinness was initially handed a G1/V2 grading in November 2019 as a result of its development programme relying on sales surplus to meet interest costs.

The regulator has also published strapline judgements following routine stability checks, confirming its existing gradings of four housing associations.

Swan Housing Association has been kept at G2/V2, as has Brunelcare.

Watford Community Housing Trust and First Garden Cities Homes have both retained their G1/V1 grades.

The RSH has today removed four landlords from its list of registered providers following mergers and takeovers.

These are Colne Housing Society, now part of Eastlight Community Homes, Suffolk Housing Society, now part of Flagship Group, Howard Cottage Housing Association, now part of First Garden Cities Homes, and Equity Housing Group, now part of Great Places Housing Group.

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