The regulator has issued two downgrades for financial viability and one for governance, and confirmed the existing grades of seven housing providers
The Regulator of Social Housing has released a new set of regulatory judgements today, which have seen two housing associations receive financial viability downgrades and one receive a governance downgrade, while another two have been upgraded from V2 to V1.
The regulator has downgraded the financial viability gradings of North Yorkshire-based Broadacres Housing Association and the English Rural Housing Association from V1 to V2, stating that their “capacity to respond to adverse events” is impacted. Both housing providers have retained a G1 governance grade.
Midlands-based Trident Housing Association has been downgraded from G1 to G2, over concerns that its rent setting arrangements have not been operating effectively.
Governance grades G1 and G2 and viability grades V1 and V2 mean that the provider is compliant with the regulator’s standards, while gradings G3 and G4 and V3 and V4 mean the social landlord is non-compliant and will be required to take action to improve its position.
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In its judgement, the regulator stated that Broadacres is investing in improving the quality and energy efficiency of its existing homes, while also developing new homes, including homes for sale, “exposing Broadacres in the short term to housing market risk”.
The assessment indicated that Broadacres’ financial performance is affected by its efforts to build new homes, while investing in existing stock, especially in the context of inflation and interest rate fluctuations.
Broadacres owns and manages around 6,600 homes in North Yorkshire and is aiming to deliver 1,000 new homes in the five years to March 2028.
A spokesperson for Broadacres said: “Broadacres has been regraded to a compliant G1/V2. This reflects our significant investment programme to ensure all our existing homes are SAP (Standard Assessment Procedure) C or better by 2028 and our commitment to build 1,000 new homes by 2028 which exposes Broadacres to housing market risk in the short term. As a strong and ambitious organisation, we remain committed to delivering our corporate strategy, and we have the financial strength to do so.”
The regulator stated that 1,250-home English Rural’s financial profile has weakened due to increased interest costs associated with continued debt-funded development and ongoing investment in its existing homes, which have reduced margins and financial headroom on funder interest cover covenants.
Chief executive of English Rural, Martin Collett, said: “The shift to a V2 rating aligns with our continued strategic commitment of leveraging financial capacity to address the chronic need for affordable rural housing alongside achieving the investment requirements of existing homes and services. Inevitably, the deteriorating financial environment has meant that delivering homes and services to those that need them has come at a greater financial cost, creating a downward pressure on financial comfort.”
Collett added: “The V1 to V2 regrading is becoming more prevalent among housing associations, reflecting the broader decline of economic conditions and hollowing out of business capacity from the disconnect between rent levels and costs.
“Our primary focus continues to be on prudent yet ambitious growth through the provision of quality, affordable housing and enhancing the well-being of rural communities.”
The regulator stated that it had downgraded Trident’s governance grading after it said that a significant number of homes had been re-classified as specialised supported housing due to a “data inputting error”. Following a period of engagement with the regulator, Trident recognised it does not have assurance that its rent setting is operating properly.
Trident has now commissioned a review of its rents. The regulator’s assessment states that though the review hasn’t yet been completed, it has identified “some issues that need further investigation”.
Trident has been contacted for comment.
The RSH has upgraded the financial viability gradings of The Cambridge Housing Society (CHS) and Wakefield and District Housing (WDH) from V2 to V1. Both housing providers now hold V1 and G1 gradings for financial viability and governance.
In a previous judgement from December 2022, the regulator noted that CHS was delivering community-based activities, ranging from support services to extra care.
As CHS has since disposed of its last remaining care homes and nurseries and sold further assets due to changes in its care provision, the RSH has said that CHS’s reliance on non-social housing income has been reduced, and it has also scaled back its development programme.
The RSH’s previous judgement on WDH noted that its development plan and increased investment in existing homes would “reduce headroom against lender covenant requirements”.
The regulator said that WDH’s business plan has been strengthened by an updated capital programme to improve existing homes and reduced exposure to liquidity and interest rate pressures, which has increased its capacity to deal with adverse scenarios.
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Bradford-based Incommunities has had the basis of its governance grade changed, but has still maintained a G2 grading. It has also retained a V1 grading for financial viability.
In October 2020, Incommunities was downgraded to G2 because it needed to strengthen its risk management and control framework.
In 2022, Incommunities self-referred to the regulator for non-compliance with the rent standard, as it had incorrectly classified units of general needs accommodation as supported housing, and incorrectly converted properties to affordable rent on reletting these properties without the necessary permissions.
Thirteen Housing, Rooftop Housing, Ongo Homes, Livin Housing, Connexus Homes, Coastline Housing and Durham Aged Mineworkers’ Homes have had their existing financial viability and governance grades reconfirmed.
Latest RSH regulatory judgements
| Provider | Governance | Viability | Explanation |
|---|---|---|---|
| Broadacres Housing Association | G1 | V2 | Viability downgrade - V1 to V2 |
| Cambridge Housing Society (The) | G1 | V1 | Viability upgrade - V2 to V1 |
| Coastline Housing | G1 | V2 | Changed basis for viability grade |
| Connexus Homes | G1 | V2 | Changed basis for viability grade |
| Durham Aged Mineworkers’ Homes Association | G1 | V1 | Confirmation of existing grades |
| English Rural Housing Association | G1 | V2 | Viability downgrade - V1 to V2 |
| Incommunities | G2 | V1 | Changed basis for governance grade |
| Livin Housing | G1 | V2 | Confirmation of existing grades |
| Ongo Homes | G1 | V1 | Confirmation of existing grades |
| Rooftop Housing Group | G1 | V2 | Confirmation of existing grades |
| Thirteen Housing Group | G1 | V1 | Confirmation of existing grades |
| Trident Housing Association | G2 | V2 | Governance downgrade and changed basis for viability grade |
| Wakefield And District Housing | G1 | V1 | Viability upgrade - V2 to V1 |
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