L&Q governance rating downgraded one notch to still-compliant ‘G2’

L&Q has had its governance rating downgraded by the Regulator of Social Housing (RSH).

In a judgement today, RSH changed L&Q’s rating from the highest possible ‘G1’ grade to ‘G2’ which means it still complies with regulatory standards but must improve some aspects of its governance arrangements.

RSH said the depth and quality of board reporting on how L&Q delivers on the stock quality outcomes “was not fully aligned with its agreed risk appetite”. It concluded routine board reporting on customer facing performance areas such as repairs, damp and mould and decent homes required some improvement.

It said: “Improvement is needed so that L&Q’s board gains assurance on the annual effectiveness of governance arrangements including board and committee roles and responsibilities.” It said an external governance effectiveness review commissioned by L&Q in 2023 “had a narrow focus and did not lead to a formal improvement plan tracked by board.”

However RSH said L&Q’s governance arrangements are effective in delivering its strategic objectives, social purpose and value for money. It said the landlord “demonstrated strategic decision-making in line with its risk appetite and legal and regulatory obligations” and that it saw evidence of appropriate reporting on the overall delivery of L&Q’s strategy”.

RSH said L&Q has “already started to make necessary improvements to its reporting framework and our regulatory engagement with L&Q will continue while these are embedded.”

L&Q’s viability rating remains at a compliant ‘V2’ as there are “material risks within L&Q’s financial plan that it will need to manage.

It said: “As it pursues a strategy of rationalisation and de-risking its business, L&Q is aiming to generate substantial surpluses from the sale of homes and non-core business activities. L&Q is also increasing investment in its existing homes.” L&Q was also handed a ‘C2’ rating – the second highest possible – in its first judgement since the new consumer regulatory regime came into effect.

Liam Coleman, chair of L&Q, said he was pleased RSH recognised its work to deliver compliant services.

He added: ”The governance rating of G2 is disappointing, however we already have plans in place to address the areas for improvement, and we look forward to continued dialogue with the Regulator as we enact these plans and enhance our performance.”

In other judgements today Arun District Council was handed the lowest possible ‘C4’ rating for consumer regulation and Stonewater had its viability grading downgraded from V1 to V2.

A Stonewater spokesperson said: ”While Stonewater’s financial position remains strong, it reflects the challenges facing the wider sector, including higher interest rates and investment in repairs and maintenance, as well as our conscious decisions to prioritise investment in our existing properties

This judgement reflects Stonewater’s financial capacity to deal with a reasonable range of adverse scenarios. We are committed to ensuring that Stonewater remains financially strong and resilient, with the agility and resource to respond to opportunities as they arise.” 

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