Increased investment in existing homes is weakening providers’ financial capacity, RSH warns
The Regulator of Social Housing (RSH) has issued six registered providers with financial viability downgrades stating that increased investments in existing stock have weakened interest cover and reduced the housing associations’ capacity to respond to adverse events.
The RSH issued viability downgrades to Bournville Village Trust, Brighter Places, Fairhive Homes, Look Ahead, Pioneer Housing and Trent & Dove, along with a further 40 regulatory judgements. Look Ahead’s governance grade was also downgraded.
The judgements note that housing providers such as Bournville Village Trust, Brighter Places and Fairhive Homes are increasing their investment in existing homes, which is weakening their interest cover. It said this has weakened funder covenant headroom for Brighter Places and Fairhive Homes. Interest cover compares earnings to interest payments and is used as a measure of financial capacity
The associations were downgraded from ‘V1’ to ‘V2’ which means they are still comply with the governance and financial viability standard but need to manage material risks to ensure continued compliance.
The RSH noted that all six housing associations issued with viability downgrades have adequately funded business plans and sufficient security.
In addition to the downgrades on viability, Railway Housing Association governance grade was downgraded from G1 to G2 due to weaknesses in the board’s oversight. The RSH stated that these weaknesses leave RHA exposed to potential material risks.
The regulator upgraded GreenSquareAccord and Wandle Housing Association’s governance grade from G2 to G1.
In October 2021, the RSH issued a regulatory notice to GreenSquareAccord for failing to meet safety requirements for fire, electricity, and asbestos in legacy Accord homes.
The RSH has stated in today’s judgment that GSA has made significant progress in its fire risk assessments, asbestos and electrical safety testing, and stock condition surveys. As a result, GSA now has reliable and up-to-date data that it can use to support its compliance and reinvestment programs.
Thirty-four housing associations have had their existing grades confirmed by the RSH.
Sovereign Housing and Abri have received their first interim regulatory judgements since their respective mergers with Network Homes and Silva Homes took place at the beginning of October.
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Ursula Bennion, chief executive of Trent & Dove, said: “The regulatory decision to regrade our financial viability to V2 reflects the economic pressures we and other housing providers face across the sector. Trent & Dove remains committed to delivering on our five-year strategic plan focusing on people, purpose and performance.
“Trent & Dove continue to transform homes, lives & communities by delivering around 830 new homes by 2029, alongside regeneration of, and investment in, our current 6,500 homes. This is combined with significant spend on community support strategies.
“The regulator’s assurance that Trent & Dove continues to comply with its Governance and Financial Viability Standard, and that our financial plans are consistent with, and support, our strategic plan, provides our customers and funders with confidence in our delivery.”
In response to their governance and viability downgrades from G1 and V1, to G2 and V2, Look Ahead said: “Our V2 rating is reflective of the current economic challenges facing the sector including interest rate rises, inflation and workforce pressures. To ensure we continue to mitigate these challenges, we have updated and strengthened our business plan and put in place a revised, more robust business model.
”In terms of governance, we had forecast a potential breach of interest rate covenant. We successfully renegotiated with the one lender to agree terms of a new interest rate loan covenant that fitted our business model. This was put in place and the potential breach was avoided. We are also working constructively with the regulator to strengthen controls and work towards reattaining G1 status as quickly as possible.”
Pete Richmond, chief executive of Bournville Village Trust, said: “We have set out an ambitious corporate plan to invest tens of millions of pounds in our homes and communities. The tough current economic climate means that delivering our plan will be more challenging. However, we are committed to doing so and to creating and sustaining communities where people can thrive. We are pleased to remain compliant whilst still being able to deliver our planned investments and are committed to managing our financial position carefully in order to achieve our corporate plan.”
On their governance downgrade, chief executive of The Railway Housing Association, Matt Sugden said: “While we are understandably disappointed to have had our governance rating downgraded, it’s important to note that we identified and self-reported an internal governance issue to the RSH and that we still remain compliant with the requirements on governance as set out in the Governance and Financial Viability Standard.”
“We appointed an external advisor as soon as we identified the issue and have set out a path for improvement with our Board, which we are already delivering on in several areas.
“This includes undertaking a stock condition survey on every one of our homes which began in September 2023 and will be completed by April 2024.
“Railway Housing Association remains financially sound and by working collaboratively with the Regulator, our stakeholders and residents, we are confident of returning to G1.”
Brighter Places, Fairhive Homes and Pioneer Housing have been contacted for comment.
Latest RSH regulatory judgements
| Provider | Governance | Viability | Explanation |
|---|---|---|---|
| Abri Group | G1 | V1 | Merger |
| Advance Housing and Support | G1 | V1 | Confirmation of existing grades |
| Anchor Hanover Group | G1 | V1 | Confirmation of existing grades |
| Arawak Walton Housing Association | G1 | V1 | Confirmation of existing grades |
| B3 Living | G1 | V1 | Confirmation of existing grades |
| Bournemouth Churches Housing Association | G1 | V2 | Confirmation of existing grades |
| Bournville Village Trust | G1 | V2 | Viability downgrade - V1 to V2 |
| Brighter Places | G1 | V2 | Viability downgrade - V1 to V2 |
| Castles & Coasts Housing Association | G1 | V1 | Confirmation of existing grades |
| Cobalt Housing | G1 | V1 | Confirmation of existing grades |
| Cornerstone Housing | G1 | V1 | Confirmation of existing grades |
| East Midlands Housing Group | G1 | V2 | Confirmation of existing grades |
| Fairhive Homes | G1 | V2 | Viability downgrade - V1 to V2 |
| GreenSquareAccord | G1 | V2 | Governance upgrade and changed basis for viability grade |
| Havebury Housing Partnership (The) | G1 | V2 | Confirmation of existing grades |
| Hyde Housing Association | G1 | V2 | Confirmation of existing grades |
| Inquilab Housing Association | G1 | V2 | Confirmation of existing grades |
| Jigsaw Homes Group | G1 | V1 | Confirmation of existing grades |
| Johnnie Johnson Housing Trust | G1 | V2 | Confirmation of existing grades |
| Joseph Rowntree Housing Trust | G1 | V2 | Confirmation of existing grades |
| Karbon Homes | G1 | V1 | Confirmation of existing grades |
| Leeds Federated Housing Association | G1 | V2 | Confirmation of existing grades |
| Look Ahead Care and Support | G2 | V2 | Governance downgrade and viability downgrade - V1 to V2 |
| Mosscare St. Vincent’s Housing Group | G1 | V2 | Confirmation of existing grades |
| North Star Housing Group | G1 | V1 | Confirmation of existing grades |
| Notting Hill Genesis | G1 | V2 | Confirmation of existing grades |
| Nottingham Community Housing Association | G1 | V1 | Confirmation of existing grades |
| One Manchester | G1 | V2 | Confirmation of existing grades |
| Paragon Asra Housing | G1 | V2 | Changed basis for viability grade |
| Pioneer Housing and Community Group (The) | G1 | V2 | Viability downgrade - V1 to V2 |
| Railway Housing Association and Benefit Fund | G2 | V2 | Governance downgrade |
| Raven Housing Trust | G1 | V2 | Confirmation of existing grades |
| Saffron Housing Trust | G1 | V2 | Confirmation of existing grades |
| Salvation Army Housing Association | G2 | V2 | Confirmation of existing grades |
| South Lakes Housing | G1 | V2 | Confirmation of existing grades |
| Sovereign Housing Association | G1 | V2 | Merger |
| Together Housing Group | G1 | V2 | Confirmation of existing grades |
| Trent & Dove Housing | G1 | V2 | Viability downgrade - V1 to V2 |
| Tuntum Housing Association | G2 | V2 | Confirmation of existing grades |
| Two Rivers Housing | G1 | V1 | Confirmation of existing grades |
| Wandle Housing Association | G1 | V2 | Governance upgrade |
| Weaver Vale Housing Trust | G1 | V1 | Confirmation of existing grades |
| West Kent Housing Association | G1 | V2 | Confirmation of existing grades |
| Westward Housing Group | G1 | V1 | Confirmation of existing grades |
| Wrekin Housing Group (The) | G1 | V2 | Confirmation of existing grades |
| Yorkshire Housing | G1 | V2 | Confirmation of existing grades |
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