A west London housing association has been rated non-compliant on governance matters after the Regulator of Social Housing (RSH) identified issues that allowed the association to come “within weeks of a potential loan covenant breach”.
Shepherd’s Bush Green (picture: Alamy)
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Shepherds Bush Housing Group has been rated non-compliant on governance issues #UKhousing
In a judgement published today, Shepherds Bush Housing Group (SBHG) has been downgraded to a G3/V2 grading, which means it is non-compliant on governance issues.
It comes six months after the 5,000-home landlord was placed on the regulator’s ‘gradings under review’ list, which means it was being investigated for an issue that could impact its compliance with the regulatory standards.
In today’s judgement, the regulator said it “lacks assurance that the board of Shepherds Bush has been managing its affairs with an appropriate degree of skill, diligence, prudence and foresight”.
One of the identified weaknesses included “inaccuracies in board reporting, coupled with a lack of effective board oversight and scrutiny”, which meant that SBHG’s board “failed to identify the potential crystallisation of a serious risk in sufficient time for the board to effectively manage it”.
This led to the housing association coming within weeks of a potential loan covenant breach, which required it to seek an emergency waiver from a third party, according to the judgement.
SBHG achieved covenant compliance at year end, however the “potential ceding of control” by the board was a “serious failure of governance”, the regulator added.
As a result of its investigation, the regulator also identified concerns about SBHG’s fire safety reporting and compliance with the Decent Homes Standard, however it has not found that the housing association breached its consumer standard.
The regulator was also critical of SBHG’s “data quality” and said there were a number of times when the landlord’s communication with the regulator “fell below the required standard”.
In March this year, the regulator announced that it was investigating SBHG over financial matters in addition to its existing probe on governance issues.
However, the regulator has found that SBHG is still compliant with the financial viability standard, with the V2 rating meaning that there are risks the landlord must manage to ensure continued compliance.
The regulator said that SBHG’s financial plan “remains challenging, particularly in the early years where there is limited headroom”.
The housing association remains exposed to an adverse change in the housing market as a result of its sales programme and the ongoing requirement to deliver energy efficiency improvements, the regulator said.
In response to being put under investigation, SBHG has put in place a governance assurance plan that includes an overarching governance review, improvements to financial governance and controls, and several data reviews.
Matt Campion, chief executive of SBHG, said: “Whilst we are disappointed that we have not been able to meet all regulatory expectations, we understand the RSH’s decision.”
He said that the housing association has already taken steps to improve its governance grading and has engaged Savills’ governance team for external support.
SBHG has appointed a new chair, Martin Hurst, as well as a new chair of its audit and risk committee.
Mr Campion said he is “confident” that SBHG can return to a G2 grading, and subsequently a G1 grading, under Mr Hurst.
He said there will be no impact on customers as a result of the downgrade, adding that the landlord is still committed to its service improvement plan, which includes investing £5m in homes this year and £90m on building safety over a number of years.
Mr Hurst said: “The SBHG board and executive fully accept the regulator’s judgement. The organisation had already identified and begun to address many of the points raised in the judgement.
“Since arriving I have been struck by the determination of the board and executive team to learn lessons and deliver the action plan we have in place to make SHBG the high-quality organisation we aspire to be, and which our residents deserve.”
Harold Brown, senior assistant director for investigations and enforcement at the RSH, said: “We remind all social housing landlords that they have a responsibility to notify us promptly about potential breaches of our standards. We will continue to monitor Shepherds Bush Housing Association as it improves its governance.”
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https://www.insidehousing.co.uk/news/news/london-housing-association-rated-non-compliant-after-coming-within-weeks-of-potential-covenant-breaches-76186
