Several large associations experienced the joy of receiving top grades from the social housing regulator, while several others suffered downgrades as a result of concerns over their current and future financial performance.
Clarion, the country’s largest housing association with 123,000 homes had its governance rating upgraded to G1, the highest level possible, a year after it was censured by the regulator for prolonged failures in its repairs service, particularly in east London.
The regulator said it “has assurance that Clarion’s leadership and governance arrangements are sufficient to support the delivery of its objectives and adequately control the new organisation”. The association’s financial viability remained unchanged at V1.
Merseyside based Plus Dane Housing, which has 13,000 homes, was upgraded to the highest ratings for governance and viability. It had its governance downgraded to a non-compliant G3 in 2013 because of “weak” financial and risk management. The regulator said Plus Dane had simplified its organisational structure and reduced the number of registered entities within the group from three to one.
Plus Dane has strengthened the “robustness” of its “underpinning business strategies” and improved the quality of its board reporting, including better stress testing and performance management reporting.
In Essex the 9,200-home Chelmer Housing Partnership had its governance upgraded to the highest G1 rating. A previous regulatory judgement found not all of CHP’s board members had been recruited and assessed based on their skills and how these fit with the business. The regulator said Chelmer’s board now “demonstrates appropriate skills, enabling it to be more proactive in responding to emerging risks and opportunities”. CHP has also improved its risk reporting. London based Paragon Asra Housing with 24,000 homes and North Devon Homes with 3,325 homes in the west country, both had their governance ratings upgraded to G1.
Weaknesses
An east London housing association’s core social housing business is “weak” and it would be unable to pay its loans from this income alone, the regulator has said.
As a result Poplar Harca saw its rating maintained at G1 and V2 – the standard it was given at a previous judgement in December 2016. However, the regulator changed the basis for the V2 judgement, saying that while the 8,900-home association “has an adequately funded business plan” it has “material financial risks to manage”. The landlord’s social housing lettings business, renting social and affordable housing, was described as “currently weak and forecast to remain so for the medium term”.
Earnings generated from this core element of business are not sufficient on their own to cover interest payments,” the regulator said. It added that “sales represent a large proportion of Poplar’s overall business activity” with open market sales set to peak in 2019/20 introducing “significant housing market exposure”.
Supported housing association The Abbeyfield Society which provides sheltered housing and care homes for around 7,900 older people, had its governance downgraded to a G2 rating.
Abbeyfield’s accounting surplus comes from a combination of asset sales and mergers, rather than from its “day-to-day operations”, the regulator said. This creates a “key risk” to its financial performance because both these factors are outside of Abbeyfield’s control, the regulator concluded, “being dependent on the wider property market and the decisions of merging organisations”. The financial performance of its social housing lettings business has “deteriorated” during the past few years and it reported a “significant operating deficit” for 2017/18. In addition Abbeyfield’s business plan forecasts a “significant increase” in operating costs up to 2022.
Park Hill Housing Co-operative based in the capital has been found to be in breach of the regulator’s governance standards after repeatedly failing to submit their financial statements. It is likely to be the subject of action from the regulator.