Regulator downgrades ​14 more housing associations on viability

The Regulator of Social Housing (RSH) has lowered the financial viability grading for 14 more housing associations, bringing the number downgraded in recent weeks to 48.

In its latest batch of 64 judgements today, RSH downgraded 14 providers from the top ‘V1’ grade to ‘V2’. V2 means an organisation still complies with the regulatory standard but “needs to manage material risks to ensure continued compliance.”

Among the latest downgrades is 31,800-home Norwich-based provider Flagship Group, 16,000-home north west association Great Places and 18,000-home Liverpool-based Plus Dane (see box below).

RSH said Flagship “has material risks and exposures that it needs to manage. It is increasing investment in its existing homes while at the same time undertaking a development and sales programme.” 

It said Great Places “forecasts to significantly increase its drawn debt to fund its development programme. It continues to develop new homes for sale and consequently has a material financial exposure to the housing market.”. It said Plus Dane’s delivery of its stock investment programme reduces its capacity to respond to adverse events.

The latest judgements from RSH come off the back of viability downgrades for 19 large providers on 15 November including big developers Clarion, L&Q, Home Group, Places for People and Sovereign . RSH said inflation and a weakening housing market are putting pressure on the headroom of providers, “as they continue to invest in new homes and carry out safety, decarbonisation and repair works.” A further 15 were downgraded on 30 November.

>> Can housing associations keep development going as the rest of the market slows?

>> Clarion reports drop in completions and turnover

The RSH warned last month that housing associations’ ability to manage risk will ‘inevitably’ reduce due to rising costs and a falling market.

Its most recent quarterly survey said housing associations’ levels of interest cover have “deteriorated” and will fall further over the next year.

The average level of registered providers’ interest cover – which compares earnings to interest payments and is used as a measure of financial capacity and liquidity – was 111% for the year to September 2022, the lowest figure ever reported by RSH.