Regulator hands out two notices for rent non-compliance
Two large housing associations have been handed rent non-compliance notices by the Regulator of Social Housing (RSH), among a raft of regulatory judgements for the sector.
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Southern Housing and Network Homes have both been found non-compliant with the Welfare Reform and Work Act (WRWA) from April 2016 to March 2020, as well as the Rent Standard 2020, after they both charged “inaccurate rates of rent”.
In its notice on Southern, the regulator found that the association had charged incorrect rents for 677 of its general needs homes and did not apply a required one per cent rent reduction from 2016 to 2020.
During this time, Southern was found to have overcharged tenants by around £1.05m.
The regulator said that a review of data submitted by Southern in its 2019/20 statistical data return had shown an increase in the average rent charged.
Southern told the RSH the overcharged rents were “misinterpretations of the legislation”. The errors were not identified by Southern until the regulator began its investigations.
The 30,000-home landlord, whose G2/V2 rating was also confirmed in a strapline regulatory judgement the same day (24 November), told the regulator it had considered its approach to rent setting and developed an action plan including resetting the rents to the correct levels and reimbursing tenants who have been overcharged.
Alan Townshend, chief executive of Southern Housing, said the group apologised to everyone affected.
Mr Townshend said: “The group worked quickly to correct this error and can confirm that all the money that was paid in error has already been refunded to the tenants’ bank accounts or to the appropriate benefits agency.”
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In its notice on Network Homes, the RSH found that the group failed to comply with the WRWA requirement between the same period, and did not apply the yearly one per cent reduction correctly.
This meant 425 of its general needs homes were affected and around £548,000 was overcharged as a consequence of the provider applying incorrect increases.
The regulator said Network Homes also had a high number of general needs properties that had rents which were in excess of the rent cap.
The RSH said Network Homes, which manages just over 20,000 homes and has a G1/V2 rating, had not identified the problems until the investigation.
A spokesperson for Network Homes said: “As soon as we became aware of this Fair Rents issue, we took prompt action to put things right.
“This involved fully reimbursing and compensating tenants who were affected, writing to them to apologise and explain our mistake.
“We’ve reset these rents so the tenants are now paying the correct amount. We’ve engaged positively with the regulator throughout and have put in place a robust action plan to strengthen and provide enhanced assurance on our approach to rent setting.”
The notices were published on Wednesday (24 November). Elsewhere, the RSH changed the basis for the financial viability grading of three providers – Octavia Housing, Raven Housing and Poplar Harca – in regulatory judgements that affirmed all three with G1/V2 ratings following completion of an in depth assessment.
The regulator found that Raven complied with the Governance and Financial Viability Standard and can deal with a “reasonable range of adverse scenarios”.
However, it warned that Raven’s “significant development and sales programme” could expose it to housing market volatility and potentially affect income.
Also, an increased spend forecast for major repairs and maintenance could weaken Raven’s interest cover position and covenant headroom.
Jonathan Higgs, chief executive of Raven Housing, said: “We welcome the regulator reaffirming that Raven remains compliant with their expectations, and that we have the financial capacity to deal with adverse scenarios.”
Poplar Harca has an “adequately funded” business plan, sufficient security and is expected to meet its financial covenants, said the regulator.
RSH warned that “on their own”, forecast earnings from core social housing lettings are not enough to cover interest payments over the medium term for the provider. Spend on major repairs negatively affects forecast performance, although elements of this are excluded from loan covenants until 2023.
A Poplar Harca spokesperson said: “Poplar Harca’s board is pleased the regulator has reconfirmed G1/V2 grades.”
The regulator found Octavia Housing to have “sufficient security and is forecast to continue to meet its financial covenants”.
There was an increase in debt and significant building safety costs, according to RSH, which have affected the provider’s financial performance negatively. There is potential for forecast costs to increase once determining stock investment needs is complete.
The provider said Octavia’s plan is “reliant on the successful delivery of further efficiencies from the provider’s modernisation programme”.
Sandra Skeete, chief executive at Octavia, said: “This grading... recognises the regulator’s confidence in our strengthened stress testing and risk management approach, and in our ability to deal with a range of adverse scenarios.”
Additionally, 23 strapline regulatory judgements for providers confirmed existing grades.
These were, at G1/V1:
- Abri Group
- Bernicia Group
- Beyond Housing
- Brighter Places
- Grand Union Housing
- Hightown Housing
- Jigsaw Homes
- Leeds Federated Housing
- NSAH (Alliance Homes)
- Orwell Housing
- Pioneer Housing
- Plus Dane Housing
- Wakefield And District Housing
- Stonewater Limited
- Teign Housing
- South Lakes Housing
At G1/V2:
- Brunelcare
- Gloucester City Homes
- North Devon Homes
- Origin Housing
- Tower Hamlets Community Housing
At G2/V2:
- Wandle Housing Association
- Southern Housing
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