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*An early version of this article said that Southern Housing Group and Network Homes had been downgraded by the Regulator. However, this was not the case and the below story has now been edited to reflect that.
In the latest round of regulatory judgements, the Regulator of Social Housing issued a couple of warnings to housing associations for economic failings.
Southern Housing Group, one of the G15 group of housing associations, was investigated after it hadn't "complied with the Rent Standard 2020 or the legislative requirements of the WRWA 2016 in respect of some of its Fair Rent tenancies."
In the judgement, the Regulator said: "From our review of data submitted by Southern in its 2019/20 Statistical Data Return, we identified an increase in the average rent being charged for general needs properties at a time when providers were required to reduce rents by 1% annually.
"In response to our enquiries, Southern explored the issues raised and identified that it may have made errors in its treatment of some Fair Rent tenancies. As a result, Southern commissioned a series of independent investigations to assess the scale and nature of the errors.
"These investigations identified that between 2016 and 2021, approximately £1.05m was overcharged as a result of Southern applying incorrect increases in some of its Fair Rent tenancies instead of the required 1% reduction."
Key actions the organisation put in place to resolve the issues were:
- resetting the rents in question to the correct levels;
- reimbursing tenants who have been overcharged;
- commissioning an independent review of rent policy and procedures to clarify lines of accountability, strengthen knowledge and skills and improve assurance on rent setting; and
- an internal audit review of validation of rent setting and annual rent changes.
These have now been completed and the organisation kept its G2/V2 rating.
The other organisation is Network Homes, a g15 landlord, who hadn't "complied with the Rent Standard 2020 or the legislative requirements of the WRWA 2016 in respect of some of its Fair Rent tenancies."
In addition, the judgement says: "From our review of data submitted by Network in its 2019/20 Statistical Data Return, we identified both that the average rent being charged for general needs properties had increased at a time when providers were required to reduce rents by 1% annually, and that a high number of general needs properties had rents which were in excess of the rent cap.
"In response to our enquiries, Network explored the issues raised and identified that it had made errors in its treatment of some Fair Rent tenancies. As a result, Network commissioned a series of investigations to assess the scale and nature of the errors.
"These investigations identified that between 2016 and 2021, approximately £548,000 was overcharged as a consequence of Network applying incorrect increases in some of its Fair Rent tenancies instead of the required 1% reduction.
"Network has concluded that the incorrect Fair Rents are due to a misinterpretation of the legislation when calculating the applicable rent increases, and the incorrect application of the exemption which existed in the WRWA 2016 for some Fair Rent tenancies".
The Regulator has now worked with the housing association to:
- reimburse and compensate tenants who have been overcharged;
- engage appropriate external advice on the nature of the errors, how they occurred, and the corrective actions;
- commission an independent review of Network’s approach to rent setting, extending beyond Fair Rents; and
- improve audit and validation of rent setting and annual rent changes.
The organisation retained its G1/V2 rating.
Other judgements included three organisations that had their viability rating unchanged, but had the basis for this changed.
Raven Housing Trust are said to have "material financial risks that it needs to manage to maintain compliance".
The Regulator added: "Its significant development and sales programme exposes it to housing market volatility and potential reductions in income. In addition, increased forecast expenditure on major repairs and maintenance weakens Raven’s interest cover position and covenant headroom, which reduces its capacity to deal with adverse events."
For Octavia Housing, "an increase in debt and significant building safety costs have negatively impacted financial performance, and there is potential for forecast costs to increase once work to determine stock investment needs has been completed" the Regulator has noted.
And the other organisation, Poplar HARCA, were found to need more money to cover debts.
"Forecast earnings from its core social housing lettings business are not sufficient on their own to cover interest payments over the medium term. In addition, increased expenditure on major repairs negatively impacts forecast performance, although elements of this are excluded from loan covenants until 2023.
"Open market sales, delivered primarily through joint ventures, represent a large proportion of Poplar HARCA’s overall business activity and introduce a significant exposure to the housing market, forecast to peak in 2023. In addition, Poplar HARCA is reliant on fixed asset disposals and shared ownership sales to support its liquidity position."
There were also plenty of retentions in the latest round of regulatory judgements.
Hightown Housing, Beyond Housing, Pioneer Housing, Abri Group, Orwell Housing Association, Leeds Federated Housing Association, Alliance Homes, Stonewater, Teign Housing, Plus Dane Housing, Brighter Places, Wakefield and District Housing, South Lakes Housing, Bernicia, Grand Union Housing Group, and Jigsaw Homes all retained their G1/V1 rating.
Tower Hamlets Community Housing, Brunelcare, Origin Housing, North Devon Homes, and Gloucester City Homes all received a G1/V2 rating. Wandle Housing Association retained its G2/V2 rating.