Non-compliant G3 rating for provider previously in breach of Rent Standard
A supported housing provider that the English regulator found to be in breach of the rent standard in 2015 has today been rated non-compliant for governance in its first full regulatory judgement.
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Sustain (UK) Limited, which operates a lease-based model for the provision of supported housing, registered as a non-profit provider with the Regulator of Social Housing (RSH) in January 2012.
In 2015 the Homes and Communities Agency (HCA) – the predecessor to the RSH – published a regulatory notice concluding that as well as failing to comply with the Rent Standard, the provider was non-compliant with the Governance and Financial Viability Standard.
The RSH said: “[In August 2015] Sustain had failed to provide assurance that its accommodation met the criteria for specialised supported housing and was exempt from the requirements of the Rent Standard, and subsequently excepted from the requirements of the Welfare Reform and Work Act 2016.
“The provider sought advice which confirmed that the criteria for an exception were not met and that rent should be charged with reference to the social rent rate.”
At the time of the regulatory notice, the HCA found that there were no independent non-executive directors on the board and that each of the executive directors had “other business interests in companies which transact or have transacted with Sustain”.
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Today’s judgement, which rates the provider G3 for governance and V2 for viability, notes that Sustain has now appointed five independent board members and four executives “and some progress has been made to put in place robust governance and risk management frameworks”.
However, it notes that “the board will need to continue its work to address and manage conflicts of interest and to put in place appropriate executive remuneration arrangements.”
It continues: “A review will be undertaken to gain assurance on the appropriateness of the services delivered to and charges received by Sustain’s tenants. There is an appropriate plan in place to agree and implement the necessary actions.
“Until this work is complete the regulator does not have assurance that Sustain meets regulatory governance requirements.”
Sustain today has a bed capacity of 2,365 across 433 properties, operating in the West Midlands, and on its website describes its tenants as individuals who “are experiencing mental health problems, learning difficulties and/or dual diagnoses”.
It provides three-year short-term lease agreements.
In judging the provider V2 for viability, the RSH said that it “take[s] assurance from the way Sustain has sought to mitigate this risk, for example by entering into short-term leases only, with contractual arrangements in place to manage void risk”.
“It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance. Sustain’s financial plan is based on reasonable macro-economic assumptions and it has no external debt or associated covenants.”
However Sustain remains “materially reliant on enhanced housing benefit payments as its source of income. It must continue to carefully manage its position in relation to this exposure to ensure long-term viability and will need to complete planned work to review charges made to its tenants.”
Social Housing contacted Sustain for comment.
In other regulatory judgements published today, two associations received top scores for viability, and one for governance, alongside a number of interim regulatory judgements following merger activity.
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