Large landlord downgraded as regulator urges ‘transparency’ over financial reporting

Last October a proposed three-way merger between Flagship, BPHA and Futures Housing Group to create a 60,000-home organisation was abandoned.

Norwich-based Flagship has held a V2 rating since last December, when it was among a wave of landlords downgraded over the wider economic situation. 

On its financial viability, the regulator said that Flagship has “material risks and exposures” it needs to manage and flagged that it is reliant on shared ownership sales surpluses to remain compliant with covenants.

However, it said that the landlord has an “adequately funded business plan, sufficient security and is forecast to continue to meet its financial covenants”.

On the latest rating action, Flagship’s chair Peter Hawes said the landlord was “pleased” that it continues to meet the governance standard. 

“We will now work with the regulator, the board, our staff and tenants to further strengthen our governance arrangements with many processes already in place,” he added. 

Freebridge Community Housing

Another Norfolk-based landlord, Freebridge Community Housing, was downgraded to a V2 over concerns about wider financial risks. 

The regulator flagged that the 6,800-home landlord is planning to refinance its original stock transfer funding to build more homes.

Freebridge, which retained its G1 status, was formed in 2006 through a stock transfer of homes from King’s Lynn and West Norfolk borough councils. 

The regulatory notice said: “Under its current restrictive covenants Freebridge is forecasting limited monetary headroom, which coupled with current economic uncertainty in relation to inflation and interest rates, restricts its ability to manage a wide range of financial risks.”

Anita Jones, chief executive of Freebridge, said: “We are already underway with our refinancing process, working towards more market standard covenants. This will position us well to deliver our ambitious plans and continued investment into our current and future homes. 

"We look forward to returning to a V1 grade in the near future.”

Yorkshire Housing, Leeds Federated Housing Association and South Lakes Housing

Three associations maintained their G1/V2 ratings following in-depth assessments. However, the regulator flagged ongoing risks for the three groups. 

On Yorkshire Housing, which has around 18,000 homes, the RSH said it has an adequately funded business plan, sufficient security and is forecast to continue to meet its financial covenants. 

But it pointed to the landlord’s “significant” development and sales programme, which means it is “susceptible to the crystallisation of housing and economic risks”, the regulator said. 

Nick Atkin, chief executive of Yorkshire Housing, said: “I’m pleased that Yorkshire Housing has retained its G1/ V2 grading following our recent IDA. This demonstrates that we remain financially strong and well managed as a business, despite the significant challenges faced by everyone working in the housing sector.”

Leeds Federated Housing Association (LFHA), which owns and manages around 4,460 homes in the Leeds City region, was among those downgraded to V2 late last year. 

In its latest judgement, the regulator also said that LFHA has “sufficient security, and forecasts to continue meeting its financial covenants”. 

However, it said that the landlord’s operating margins remain “tight” and additional finance is required “in the short term”.

Matthew Walker, chief executive of LFHA, said: “Leeds Fed welcomes the result of the IDA, which confirms we are compliant with the regulatory framework.”

On 3,200-home South Lakes Housing (SLH), the regulator said that investment in decarbonising its homes was resulting in “reduced levels of interest cover”.

A regulatory notice said: “Alongside the current economic uncertainty in relation to inflation and interest rates, SLH has reduced capacity to respond to adverse events.”

However, the RSH acknowledged that SLH has an “adequately funded business plan, sufficient security in place and is forecast to continue to meet its financial covenants under a reasonable range of scenarios”.

SLH was also among those downgraded to a V2 late last year.

In a statement on the new judgement, published on its website, SLH said that its board “will continue to ensure that these risks are effectively managed through strong resilience planning so that we have sufficient financial capacity and a ready-made plan to respond to further adverse events”.

Meanwhile, the regulator has withdrawn a previous regulatory notice for lease-based provider Westmoreland Supported Housing as it said the issues had been “resolved”. The original notice, issued in May 2019, had found Westmoreland had breached the Home Standard and Tenancy Standard. 

However, the Nottingham-based landlord remains non-compliant with the regulator’s standards with a G4/V3 rating, based on a judgement issued in September 2019. Westmoreland was also found to have breached the Rent Standard in 2020. 

Elsewhere, Aster Group, Castles & Coasts, Cornerstone Housing and Wythenshawe Community Housing Group all retained top grades of G1/V1 in strapline judgements. 

Update: at 09.53am, 10.07.2023

A previous version of this article incorrectly stated that Freebridge had retained its G2 status. In fact, it has retained a G1 rating.