Regulator raps 5,000-home landlord over poor financial planning

Octavia Housing has breached a regulatory standard as a result of issues with its financial planning, the Regulator of Social Housing (RSH) has said.

The 5,000-home association today had its viability and governance ratings downgraded to ‘G3’ and ‘V3’ respectively, meaning it no longer complies with the standard and must take steps to improve.

balance sheet finances

In its regulatory judgement, RSH said the London-based provider had “significantly underperformed against its budget in 2022/23’ and has had to implement savings as a result, in addition to negotiating covenant wavers with lenders.

RSH said Octavia “had not adequately considered the financial implications when taking on new liabilities or ensured appropriate monitoring of the risk”.

It said: “The regulator lacks assurance that Octavia’s finance systems and resources are adequate to ensure its plans are monitored and accurately reported.

“Despite attempts to address this over a period of time, Octavia has been unable to make and sustain the changes required. This has led to poor quality and untimely financial data being produced, unrealistic budgets being set and has adversely affected the quality of returns submitted to the regulator.”

The regulator said Octavia’s financial position is “weak”. It said the association’s business plans since 2020 have been built on an assumption of savings between 2020 and 2025, but progress on achieving these has been slow.

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RSH said that Octavia has had to adapt its business planning to maintain its viability although it stressed “there is no immediate solvency issue.”

It said Octavia is drafting a plan to improve its governance. RSH said: “Octavia is working with the regulator to ensure it has the capacity and capability, and in conjunction with external advisers, the support to make the changes required to ensure its long-term viability and to address the governance and financial viability issues identified in this regulatory judgement.”

Harold Brown, senior assistant director for investigations and enforcement at RSH, said: “We found significant issues with Octavia’s financial planning, as well as a failure by its board to have appropriate oversight of the organisation.

“We expect Octavia to address these issues promptly and return to compliance with our standards.”

An Octavia spokesperson said: ”We accept the outcome of the review and have welcomed the opportunity to work closely with the regulator throughout the process to address the concerns raised.

 “Our board and leadership team have already taken a number of steps to enhance our governance and improve the way our organisation is run; however, we remain fully committed to taking further steps to return the organisation to a stronger financial position. This will enable us to deliver on our strategic goals while ensuring that we continue to provide high quality services to the residents and communities we serve.”