Learning from Regulatory Downgrades 2021/22

Learning from Regulatory Downgrades 2022


“ Those who do not learn history are doomed to repeat it” George Santayana

For the past 9 years I’ve been doing an annual report snappily entitled Learning from Regulatory Downgrades. This identifies all the lessons from downgrades and links them to the quotes used by the Regulator. This year I’ve reviewed 7 governance downgrades and all 18 Regulatory Notices issued by the Regulator during 2021/22. The report comes in the wake of the latest fad for ‘naming and shaming’. I’m more interested in ensuring that Board Members, councillors and tenants read and learn from this report and avoid repeating the mistakes of the past.

As with previous years there remains a core of topics around Business Planning, Risk Management, Internal Controls and Stress Testing. These remain central to good governance and sound running of landlord services.

There continue to be social landlords who are non-compliant on health and safety issues. These cover the main 6 topics of Fire, Electrical, Asbestos, Gas, Water and Lift Safety. One landlord, LB Barking and Dagenham, manages to cover all six. Ensuring the safety of tenants must a vital concern for Boards and councillors alike.

However this is now extended with the LB Croydon Regulatory Notice which introduced three new categories: Damp and Mould, of which we will hear much more, Complaints and Treating Tenants with fairness and respect, a requirement which I inserted into the Framework. It is worth noting that the Housing Ombudsman has been more proactive on complaints, and has been prepared to issue severe maladministration notices on complaint handling. It remains to be seen whether this results in regulatory action.

Governance also continues with to be of concern, with issues raised both about the competence of governing bodies, the quality of information shared with them and their willingness to challenge executive staff and inadequate targets. The proposed Tenant Satisfaction Measures should help focus minds on target setting.

For ease of reference I’ve separated those 9 Regulatory Notices into those covering ‘exempt’ or lease based providers. I’m pleased that Government has finally paid attention to this area where some such providers are behaving in ways which drain the public purse whilst failing to provide adequate protection for some of our most vulnerable citizens. Many thanks to Commonweal Housing for their focus on this area. 

For exempt providers the main four recurring topics are around governance, rents, risk and business planning and working with third party agents.

Five local authorities received Regulatory Notices this year, all on health and safety compliance. This is a warning that for at least some Local Authorities meeting the existing regulatory requirements remains a challenge, and that they are poorly equipped for the more proactive future approach from the Regulator.

Welcome news about progress with legislation on the proposals in the Social Housing White Paper. These are likely to bring about more attention to what are called consumer standards with a proactive approach.

Phil Morgan

Former Executive Director Tenant Services, 

Regulator of Social Housing

28th April 2022



Downgrades during 2021/22

LandlordRiskInternal Controls Business Planning Stress Testing Reporting to the Regulator Health and SafetyGovernance Monitoring  Asset and Liability Register
Salvation Army HA G3Risk ManagementInternal Controls  Ineffective Board oversight and scrutiny Inadequate reporting
Swan Housing G3 (had been G2)Business PlanningRisk and Control FrameworkInformation inadequate  Inadequate reporting Ineffective management of development programme
Empowering People Inspiring CommunitiesG3   Not maintained oversight of Health and Safety obligations (separate Regulatory Notice)Made business decisions without understanding impact on business plan or covenant compliance  Failed to provide challenge to Executive 
Mount GreenG2Risk Management Stress Testing   
St Mungo’sG2 Assurance around rent standard compliance  Quality of reporting to Board Limited range of targets Incomplete Asset and Liability Register
Accord G2 Noted issues raised re Health and Safety data during due diligence for merger were not dealt with appropriatelyFireElectricalAsbestos 
Red Kite G2 (already G2, changed basis)Stress testing mitigation  Compliance reporting on health and safetyBoard oversight of key risks Compliance reporting on financial covenants 
Tuntum HA Ltd G2Risk management needs to be strengthened and risk framework needs further workNeed to notify the regulator when issues arise that could impact on compliance  Quality of information is variable

Regulatory Notices during 2021/22 – “Exempt” providers/issues

LandlordRent Standard Governance arrangementsRiskBusiness Planning Third Party arrangements Resources
Ash-Shahada HA Ltd XXX 
Auckland Home Solutions CIC LtdXXXX 
Concept Housing Association CIC XXX 
Empower HA LtdXXX  
Parasol Homes LimitedXXXX 
Reliance Social Housing Ltd XXX 

Please note that Larch HA was also issued with a Regulatory Notice having entered the regulators insolvency process.

Landlords (not including ‘exempt’ issues)

Conflicts of Interest
HealthReporting to the Regulator and other bodiesDamp and Mould
Repairs Service
Fairness and RespectComplaintsRent Standard
Brent Community Housing(note entered into voluntary winding up)GovernanceFinance
 Failing to submit annual accounts    
Cornwall County Council  Fire
Eldonian CBHAIndependent Report showed issues with:Management Committee did not understand its responsibilities, No Executive team in place FinanceConflicts of interest Eldonian CBHA did not alert the regulator to the existence of the independent governance report    
LB Barking and Dagenham  Fire
Lift safety 
LB Croydon  General
Reference to
electrical safety 
 Three cases of tenants living with significant leaks, damp and mould in their homes, longstanding failures by LB Croydon in relation to its repairs and maintenance service Failed to treat tenants with fairness and respect, and has failed to provide an effective process for tenants to raise complaints  
Norwich CC  Fire
Welwyn Hatfield BC  Fire
Empower People Inspiring Communities(note also G3)   Fire
Southern Housing Group(already G2)      Rent Standard


Areas covered by Regulatory Downgrades

A. Regulation and Boards 1Keep up to Date
  2Tell the Regulator
  3Hit HCA Deadlines 
  5Disposal of tenanted housing 
B. Consumer Regulation 6Health and Safety
  8Tenancy Standard
  9Damp and Mould
  11Treating Tenants with Fairness and Respect
C. Hubris – The Threat to Good Governance 12Comply with the Code of Governance
  139 Years Maximum
  14Board Composition and Skills
  15Annual Appraisals
  16Board Size
  17Review Your Governance
  18Board Payment
  19Board management of its role
D. Risk, Internal Controls and Financial Planning 20Do Risk Properly
  21Financial Planning and Capacity
  22Internal Controls
  23Stress Testing
  25Asset Management
E. Operation of the Board 26Severance for senior executives
  27Clear Relationships
 28 Take Expert Advice
  29Run Board Meetings and Processes Properly
  30Structures and Subsidiaries
  31Accurate Information and reporting 
  32Co-operative Board Relationships
  33Lease arrangements
 34 Regulator Insolvency process


A. Regulation and Boards

Under co-regulation, boards and councillors are responsible for ensuring the Regulatory Framework and Standards are met. This means understanding – and meeting – those requirements, as well as ensuring a professional approach to the Regulator and regulation.  The Regulator consults formally, and informally, on changes to the Regulatory Framework and Regulating the Standards. Boards should keep abreast of such consultations and the impact of subsequent changes. Ignorance is no excuse!

  1. Keep up to Date

Boards need to ensure that they are working to the current version of regulatory requirements. These include the requirement to assess regulatory compliance annually and publish that assessment in their annual accounts.


Consequent risks to the organisation were exacerbated by a culture at a senior level which lacked awareness and understanding of the organisation’s governance arrangements and the regulatory environment within which it operates.

2. Tell the Regulator

It’s important to tell the Regulator as soon as you become aware that things are wrong. Too often, landlords thought they wouldn’t tell the Regulator about problems until they had tried to put them right first. Or wait until their In Depth Assessment was due. Likewise landlords need to ensure their reports are accurate. 


Tuntum also needs to improve its commitment to the transparency requirements of co-regulation. In particular, notifying the regulator when issues arise that have the potential to impact on its compliance with regulatory standards 

Eldonian CBHA

Eldonian CBHA did not alert the regulator to the existence of the independent governance report which set out a range of long standing governance concerns

3. Hit HCA Deadlines on time and accurately

Ensuring that reports and returns to the HCA are on time and accurate is a basic building block in the relationship with the Regulator. Boards can ensure that these returns are reported to boards and monitor their timeliness. Accuracy is essential for both the relationship and the integrity of the board. 

Colne Housing Society

We found that the quarterly return for March 2016 had been completed incorrectly with an overstatement of forecast cash flow outgoings. Also, it was not possible to reconcile the treasury position reported to the board and that reported to the regulator through the quarterly returns. Colne’s most recent financial forecast regulatory return described a less favourable financial position than the business plan agreed by the board in May that it was supposed to replicate. 

These findings are indicative of a lack of overall control and review of submitted data which has resulted in a failure to submit a valid financial forecast return to the regulator by the specified deadline. 

4. Rent

Rent remains an area of current challenge with both examples of non-exempt and exempt landlords having different issues. 

St Mungo 

St Mungo is unable to assure itself that it is operating in line with rent setting requirements and needs to strengthen its controls and assurance around Rent Standard compliance

Auckland Home Solutions CIC

Auckland has been unable to demonstrate that it complies with the Rent Standard. Auckland has reported a significant majority of its stock is Specialised Supported Housing (SSH) or Temporary Social Housing (TSH)and therefore is excepted from the standard, but we lack assurance on how the board has satisfied itself that it is meeting this exception criteria

5.Consultation including disposal of tenanted housing

Deregulation removed the requirement to seek permission from the regulator before disposal of stock, including tenanted stock. However this did not remove the responsibility of providers to go through due process when considering disposal. In addition providers must be able to consult tenants effectively. 

Prospect Housing 

The contractual arrangements entered into with third parties has fettered Prospect’s ability to undertake appropriate consultation with tenants, as required under the Tenant Involvement and Empowerment Standard. 

October 2020

Moat Housing

Our judgement is that Moat has not adequately reflected the changed operating environment, arising from deregulation measures which removed the regulator’s powers to give consents for disposals, in its decision making. There was insufficient board oversight of the disposal. As a result, the board was unable to assure itself that the disposal met legal and regulatory requirements. Moat’s assurance that the disposal met its charitable objectives was inadequate. Although legal advice was taken in respect of the transaction, Moat did not obtain specific legal advice regarding the charitable considerations arising from the disposal. Due diligence of the proposed purchaser was insufficiently robust to demonstrate accountability to tenants and obligations to protect social housing assets. The disposal decision was delegated solely on financial criteria. No objective report covering the wider implications of the sale was presented to decision makers to provide assurance that the disposal met Moat’s charitable objectives and other regulatory expectations. 

B. Consumer Standards

6. Health and Safety

While consumer regulation is not actively regulated, it undergoes a ‘serious detriment’ test. Nearly all of the breaches of consumer standards feature health and safety. This also applies to Councils who are not subject to Governance ratings but can be issued with Regulatory Notices. It is worth noting that the Regulator does see weaknesses in health and safety as a governance issue. This section now covers all main health and safety issues including gas, fire, water, electrical, asbestos and lift safety, and safeguarding as well as wider systemic issues. This year also features damp and mould, of which we will hear far more, complaints and treating tenants with fairness and respect. It also covers where mergers have taken place and issued shown during due diligence were not taken on board.

Prospect Housing

Reviews carried out into two serious safeguarding incidents have identified weaknesses in procedures and controls of the landlord over services delivered by third-party managing agents. Prospect identified a range of overdue statutory health and safety checks but had difficulty in ensuring those were remedied through the third-party service providers.

Red Kite

Compliance reporting on landlord health and safety obligations …… is not sufficient to enable the board to exercise effective oversight 


We have also concluded that concerns about landlord health and safety compliance data raised by advisors undertaking due diligence, as part of the merger process, were not responded to appropriately by either legacy organisation

Welwyn Hatfield

In respect of fire safety, Welwyn Hatfield BC has a statutory duty to regularly assess the risk of fire and to take precautions to prevent the risk of fire. In this regard the regulator has learned that around 90% of applicable buildings had an overdue fire risk assessment (FRA). There were also thousands of remedial actions identified in FRAs carried out in 2018 that had not been completed, around half of which had been given the highest risk rating and needed to be done immediately, or as soon as reasonably practical.

With regard to electrical safety, Welwyn Hatfield BC is required to ensure that electrical installations are in working and safe condition both at the start of any tenancy and throughout that tenancy. Welwyn Hatfield BC has reported that hundreds of its properties have never been inspected and a smaller number were inspected over ten years ago and the lack of recent inspections means the Council failed to have an assurance they were suitably maintained. For asbestos safety, the evidence provided by Welwyn Hatfield BC shows that over a hundred re-inspections and reviews of communal areas were overdue. The evidence also shows that with regards to water safety, hundreds of properties did not have a compliant Legionella Risk Assessment (LRA). The Council was yet to establish whether a similar number of properties required an LRA. 

7. Repairs

For some time there had only been one instance of customer service failure breaching the serious detriment test. This initially resulted in a G3 rating and reoccurrences (despite reassurances) have resulted in a downgrade for the resulting merged Group. More recently the issue of damp and mould has raised concerns about the repairs service too.

LB Croydon

Through our investigation, including our engagement with LB Croydon and the information it has supplied, as well as our consideration of an independent report commissioned by the council, the evidence shows that these issues arose as a result of widespread and longstanding failures by LB Croydon in relation to its repairs and maintenance service. The independent report found that the issues arose as a result of numerous factors including staffing and cultural issues, issues in how the council responded to tenants’ concerns and complaints and weak performance management.

Clarion Group (which now includes Circle)

During early 2016 the regulator had received assurance that the performance of Circle’s emergency and urgent repairs service in east London, which had been the subject of a regulatory notice from April 2015, had improved significantly and was then at an adequate level. The regulator therefore removed the regulatory notice. 

The referrals received after that point have related to a broad range of issues, including: performance of heating and hot water repairs services, more general repairs and maintenance including, in some cases, services provided to vulnerable and potentially vulnerable tenants, difficulties in contacting Circle to raise issues and complaints and perceived poor responses by Circle to complaints, leading to a very large number of complaints being outstanding for long periods of time. 

These referrals include a large number of what the regulator terms “statutory referrals” from councillors and MPs, as well as complaints from individual tenants. Collectively, they relate to hundreds of individual repairs issues raised by tenants, and hundreds of complaints about Circle’s handling of repairs and accessing Circle’s services. A high proportion of those complaints have been unresolved for long periods of time.

8. Tenancy Standard

Showing the need to comply with tenancy law for all tenants including evictions. 

WM Housing

WM had failed to ensure that the implementation of its eviction processes provided licensees at this scheme with the level of protection required by law. WM Housing had failed to ensure that the implementation of its eviction processes provided licencees at this scheme with the level of protection required in law. That meant that all licencees at this scheme may have been at risk of an unlawful eviction. WM Housing has provided assurance that the issues identified only relate to this one scheme, but the regulator also noted that this issued had continued for up to two years

Westmoreland Supported Housing

In addition, the board has failed to ensure its tenancy management is effective prompting intervention from a local authority and the regulator after Westmoreland issued eviction notices to a number of its tenants to enable it to hand back properties rather than carrying out a more managed process. The way the board handled this situation and the subsequent sub-optimal outcome that resulted is a significant contributory factor in the regulator’s conclusion that Westmoreland’s governance arrangements are not effective

9. Damp and Mould

This shows that for health and safety issues that the existing powers of the Regulator can play a significant role. The new regulatory regime, albeit it some way off, will allow the Regulator to be proactive on these issues, rather than reactive in this case. It will also allow the Regulator to regulate Local Authorities who make up the bulk of health and safety regulatory notices.

LB Croydon

…..three cases of tenants living in an LB Croydon tower block with significant leaks, damp and mould in their homes, as well as concerns about electrical safety. Through our investigation, including our engagement with LB Croydon and the information it has supplied, as well as our consideration of an independent report commissioned by the council, the evidence shows that these issues arose as a result of widespread and longstanding failures by LB Croydon in relation to its repairs and maintenance service. The independent report found that the issues arose as a result of numerous factors including staffing and cultural issues, issues in how the council responded to tenants’ concerns and complaints and weak performance management. Taking into account the issues present at the LB Croydon tower block, and the wider evidence about how LB Croydon has managed its housing stock and engaged with tenants, the regulator has concluded that LB Croydon has breached the Home Standard and the Tenant Involvement and Empowerment Standard. The evidence shows that some tenants’ homes were uninhabitable and apparently unsafe, and the evidence demonstrates that other tenants may also have been at risk of serious harm as a result of the conditions in their home. As a result, there was actual, and the potential for serious detriment to tenants.

10. Complaints

There had been a reference to complaints as part of the Circle 33/Clarion rulings above. This is also covered in the more recent LB Croydon Regulatory Notice. It is worth noting that the Housing Ombudsman has been more proactive on complaints, and has been prepared to issue severe maladministration notices on complaint handling. It remains to be seen whether this results in regulatory action. 

LB Croydon

 The independent report found that the issues arose as a result of numerous factors including staffing and cultural issues, issues in how the council responded to tenants’ concerns and complaints and weak performance management

The evidence also shows that LB Croydon has ………..failed to provide an effective process for tenants to raise complaints

11. Treating tenants with fairness and respect

Ironically a clause which I inserted into the Regulatory Framework. Fairness and respect have been quoted on a wide range of government, regulator and landlord documents. This is the first time I can recall it being referenced in a regulatory notice or judgement.

LB Croydon

 The evidence also shows that LB Croydon has failed to treat tenants with fairness and respect

C. Hubris – the Threat to Good Governance 

Governance remains key to the effective running of housing associations. However, for a small minority of landlords and Board Members, rules are ‘meant to be broken’ – or ignored. Often they experience other difficulties as hubris clouds their vision of what their role should be.   

12. Comply and Publish (Non)Compliance with the Code of Governance

Housing associations are able to choose an appropriate Code of Governance.  Having chosen their preferred code, there is then a requirement to ‘comply or explain’.  Some associations have not explained at all, others have not given a satisfactory explanation for their non-compliance.  The National Housing Federation recently significantly updated their Code of Governance and providers who use this will be looking to have shown compliance by April 2022.

Orwell Housing

To support continued effective delivery, the board needs to strengthen its capacity to review and challenge its own governance arrangements. It needs to ensure that it reviews its governance performance in a rigorous and evidence-based way. Recent reviews of compliance with its code of governance have not been thorough and the board has not explicitly confirmed its compliance

September 2018

13. Nine or Six Years Maximum

The new NHF Code of Governance now identifies 6 years as the new normal, with the ability to extend by a further 3 years if they have set criteria for doing so. Previously some landlords had members with 20 or even 40 years board membership. Excessive length of membership resulted in poorer governance and overly close relationships between board and staff. 

Tuntum Housing Association Limited 

Tuntum does not comply with the provisions of its chosen code of governance in relation to maximum terms of office for board members. The code specifies maximum terms of nine years but Tuntum has made rule changes which extend this to a 12-year maximum. The association currently lacks clear succession plans for the chair and other board members. In addition, the criteria used by the board for extending terms of office should be clearly specified.

14. Board Composition and Skills

As housing associations diversify in their operations, boards face a growing range of issues on which they need expertise. Examples include development, marketing, finance, commercial activity and treasury management. You need to ensure the board covers all the necessary bases, and not be afraid of change, including change in your governing documents, to ensure this happens. Being tenant-led does not remove Boards from these requirements. The Board should also ensure conflicts of interest are identified and managed appropriately. 

Sustain Housing

Sustain’s board membership did not previously include any independent non-executive members and the provider was not compliant with its chosen code of governance. Inherent conflicts of interest had arisen as a result of related party transactions to companies owned by Sustain’s executives. 


The board is not currently operating at a sufficiently strategic level to ensure that the provider’s agreed strategy reflects its current activities, and that it is being delivered in a cost-effective manner. WATMOS needs to strengthen its assurance on the capacity and skills mix on its board to ensure that it is operating with an appropriate degree of skill, effectiveness, and foresight.

15. Annual Appraisals

Having got your board in place there should be a regular mechanism for appraising their effectiveness and identifying areas for personal development and any gaps in board skills.

Unity Housing

Regular formal board and executive appraisals have not been carried out in recent years, although these have recently been completed with external support. The IDA identified that board skills assessment; succession planning and some aspects of reporting arrangements also require improvement.

16. Board size

Less is more. Make sure your board is 12 or less. There’s a strong body of research published showing that boards that are too big are less effective. It can be hard for larger boards to admit that they are too big and, even harder, that some board members will have to go. The Regulator will want to know if an oversize board has a plan to achieve compliance, and within a reasonable timeframe. 

Bournemouth Churches Housing Association Limited 

The size of BCHA’s board exceeds the maximum specified in its code of governance. It has no plans to achieve compliance and the regulator does not have assurance that it has carried out a robust assessment which adequately supports any case for non-compliance.

17. Review Your Governance

There should be a regular cycle of reviewing the board and its governance arrangements to ensure that they remain fit for purpose.  Having done the review it also helps to take it seriously and implement the recommendations. And, as with many of the matters included in this report, it can be useful to commission (and take note of) external advice.

Abbeyfield Society

The provider has not had an external review of board effectiveness for several years.

18. Board Payment 

Board payment should be proportionate and published. Excessive payments will be damaging for that landlord (and the sector). 

Bedfordshire Pilgrims Housing Association Limited 

BPHA’s code of governance also states that where board members are paid, the agreed payment levels must be appropriate to the organisation’s size, complexity and resources. The regulator lacks assurance that in reaching a decision to increase payments to non-executive directors to levels above sector norms, the board gave adequate consideration to remuneration in relation to BPHA’s size and complexity. In addition, the regulator does not have sufficient assurance that BPHA is meeting the provision of its code that where board members are paid, payment should be linked to specific duties against which performance can be assessed.

BPHA did not satisfy the provision of its code that where board members receive remuneration, details of these payments should be published on a named basis

19. Board Management of its role.

Boards have to fulfil their roles successfully.  

Salvation Army HA

Following the completion of a Stability Check and Reactive Engagement, the regulator has concluded that it lacks assurance that the board of SAHA has been managing its affairs with an appropriate degree of skill, diligence, effectiveness, prudence and foresight. 

Concept HA CIC

Concept’s governance framework has failed to develop at the same pace as its growth and is inadequate for an organisation of its current size. In the last 12 months, Concept has started to develop and introduce new governance arrangements, but these are underdeveloped and yet to be embedded. At the time the work to develop governance arrangements was started Concept was already providing in excess of 3,000 units. Concept has reported in its annual accounts, for year-end August 2020 (published in June 2021), that there are a number of areas of non-compliance with the standards and its chosen code of governance.

D. Risk, Internal Controls and Sound Financial Planning

Managing risk is now central to the work of landlords and core to the role of effective boards. Ensuring that there are effective internal controls in place safeguards staff, tenants and board members. 

20. Do Risk Properly

It is essential for the business to have a robust risk framework in place, monitored and used to drive mitigation and improvement. This includes when managing strategic change and responding to stress testing.


 The group’s approach to risk was based on an over-simplification of presenting issues, coupled with too little scrutiny of new deals taking place after the merger. This, alongside an inadequate control environment, especially in relation to the development function, exposed the group to unacceptable levels of risk. In particular the board’s decision to fund its investment programme through a sale and leaseback arrangement was based upon a wholly inadequate analysis of risk and a rudimentary sensitivity analysis, coupled with a failure to consider alternative plans. ..the group failed to effectively manage the risks to delivery of its plans. 

Mount Green HA

Mount Green’s financial performance is weak and forecast to remain so in the short term. The provider’s stress testing shows that it is sensitive to relatively small changes in costs and income, with several scenarios resulting in a breach of its interest cover covenant. To ensure that the board is appropriately sighted on the material exposures which Mount Green needs to manage, the provider needs to develop a more robust and comprehensive risk management framework. A key element of these improvements will involve enhancing mitigation strategies for stress scenarios and clarifying the circumstances in which they would be triggered.

21. Financial Planning and Capacity

When planning for the future boards will need to ensure that plans are robust and well founded. They also need to ensure that there is sufficient capacity to undertake the financial work required, particular where ambitious development programmes are considered.

NSAH (Alliance Homes)

Alliance Homes needs to enhance the board’s oversight of business planning and strategic risk management to reflect a step change in the ambition reflected in its strategy. The regulator lacks assurance that the board is using stress testing appropriately to reflect its revised risk appetite and inform key decision making. There is a lack of clarity about the amount of financial headroom within the latest business plan, which is being used to support planning for a significant increase in development activities. This plan does not provide the regulator with assurance that the board has adequately developed mitigating strategies and triggers appropriate to Alliance Homes’ development ambition. 

July 2018

22. Internal Controls 

It’s important that there are robust internal controls, ensuring the business is well run and the organisation’s money is handled properly. Central to this is the correct use of Internal Audit, which gives assurance that the organisation’s internal controls are effective. Audit Committees should monitor internal and external Audit recommendations clearly and expect progress reporting. 

Southern Housing Group

SHGL’s audit and risk committee has not consistently ensured adequate oversight of the implementation of internal and external audit recommendations. The Board needs to strengthen its assurance framework and ensure that its committee’s terms of reference are operating effectively in practice. 

Red Kite Community Housing

Red Kite has experienced a significant financial loss as a result of a fraud due to a basic failure in its system of internal controls. Improvements are required to Red Kite’s control framework to ensure that key financial controls are robust, operating in line with established policies and procedures and with appropriate leadership oversight. 

23. Stress Testing

Stress testing, including impact, mitigating strategies and formal trigger points, has become more important in these uncertain times.


WATMOS needs to strengthen its stress testing to better inform its business planning. Whilst single and multi-variant stress testing has been conducted, these tests do not demonstrate resilience against some of WATMOS’ specific risks. There is also limited comparison to loan covenants. WATMOS has not identified formal trigger points at which the board would need to take action, and only limited mitigation strategies are in place.

Hightown Housing

Hightown needs to improve aspects of its risk management, specifically its stress testing and recovery planning. Hightown’s stress testing does not clearly quantify the impact of sensitivities and scenarios on the business and its mitigating strategies are insufficiently developed. Stress testing needs to be strengthened to ensure that the board has assurance that the risks stemming from adverse events, and the effectiveness of the strategies to remedy them, are clear.

24. Probity and Conflicts of Interest

All involved, including Board Members and senior Executives, must ensure both personal and cultural commitment to upholding probity.

Greenfields Community Housing

Having received a series of allegations relating to property services and procurement, Greenfields informed the regulator that it had commissioned an independent investigation. The investigation found instances in which procurement processes and internal controls and gifts and hospitality policies, had not been followed at a senior level. The investigations also revealed some evidence of wider cultural shortcomings where some staff had not acted in line with Greenfields’ own policies and that this behaviour had been left unchallenged for a period. May 2018

Brent Community Homes

BCH had been operating with a lack of effective board oversight in a range of areas. This is a fundamental failure of governance and operational control. The impact of this failure is that BCH did not have appropriate probity arrangements in place, and as a result, a material sum of money is unaccounted for. 

25. Asset Management

Interestingly the first asset management/investment example has arisen. Although technically covered by a consumer standard this was not covered by a Regulatory Notice, instead being captured as a financial planning issue. There is also a need to ensure Asset and Liability registers are up to date.

Yorkshire Housing Group

There is evidence to indicate some under-investment in YHG’s existing homes in recent years. Our expectation is that asset management forecasts reflect professionally sourced, reliable and up-to-date data. It has not been clear whether YHG has been using reasonable assumptions in its plans despite external stock condition survey work being commissioned and reported to its board.

E. Operation of the Board

As well as meeting basic rules on good governance, boards need to establish and maintain proper working relationships with staff, ensure meetings are well run and seek and take notice of external advice.

26. Senior Executive Severance Pay

In a nutshell: Don’t give your departing chief executive or senior executive a big severance package (or allow it to happen).

Four landlords have been downgraded for such packages with substantial reputational damage both to them and the sector. Associations need to ensure their approaches are watertight. In particular, regularly review your employment policies and executive contracts well away from the emotion created by the departure of a hard-working stalwart.   

Ongo Homes 

Although the decision making on this matter did not sit with Ongo Homes, there were opportunities for Ongo Homes’ board to identify and manage the risks for it associated with executive remuneration, including the potential for discretionary payments to be agreed. The controls and mechanisms in place to manage risks of this nature, which included the chair of Ongo Homes’ board being a member of the unregistered parent’s board, were not operated effectively by Ongo Homes. 

As a result, Ongo Homes’ board has found itself liable for significant discretionary financial costs without visibility or effective input to the decision-making, and has failed to safeguard its reputation, and that of the sector. 

27. Clear Relationships

Be clear about the respective roles of board members and executives.  You need to have a good working relationship based on those clearly defined roles, don’t delegate too much to staff and be particularly clear about roles where chief executives are also board members. It also means being precise about delegation to Board working groups and committees.

Equity Housing Group

There is a lack of clarity regarding the respective roles and responsibilities of the board and its committees. This has resulted in duplication, and also, in some instances, insufficient board attention on matters which have been over-delegated. It was not clear that the board had adequately addressed past weaknesses in establishing clear accountability throughout the structure. 

We have concluded that the board’s strategic focus has been diminished due to its continued involvement in operational issues following the establishment of a new executive team. The division of responsibility between the executive and the board needs to be re-examined and firmly established. 

28. Take Expert Advice

There will be times when boards cannot have all the skills they need within the set of board members to provide adequate expertise and advice when considering courses of action. It is right to seek external advice in these situations and use that to support decision-making. It is also important that, having sought advice, boards should heed it and act accordingly. 

Great Places Housing Group Limited 

It did not always recognise the need to seek independent expert advice and did not always make the best use of advice it did receive

29. Run Board Meetings and Processes Properly

Board meetings should be run properly – and minutes should be taken.  This is a fundamental matter of record keeping.

Saffron Housing Trust Limited 

The board of Saffron had been advised that defects in governance processes and a failure to comply with its rules meant that some board members had not been appointed properly. The failure had occurred over a period of several years. Significant decisions were made during this period involving third parties and funders and there was uncertainty about the validity of all the decisions that had been made at those meetings given some board meetings had been inquorate. 

30. Structures and Subsidiaries

It is essential to have a firm grip on complex structures and subsidiaries. This is driven, in part, by the increasingly diverse nature of the sector in setting up subsidiaries for tax efficiency and/or creating new lines of income. Boards should be aware that there are potential risks in complex structures and take account of the overall impact of that risk and potential impact on social housing run by the landlord. This includes clarity about apportionment of running costs and rigour in rule changes. 

Incommunities Group Limited

IGL self-reported that it had not implemented rule changes correctly, for two of its subsidiaries, in April 2018. The error was discovered in May 2020 when the provider was carrying out work relating to further governance changes and accounts approval processes. During the intervening two-year period it refinanced and issued a bond and as a result these two subsidiaries made incorrect certifications about their rules to lenders. 

IGL’s internal controls did not ensure that the new rules were implemented correctly or identify that it had not registered them with the Financial Conduct Authority. Since May 2020, IGL has worked with funders and lawyers to rectify the situation but the reliance on incorrect rules left IGL reliant on the goodwill of the group’s funders. IGL and the two subsidiaries had to ratify decisions made between April 2018 and May 2020, including in respect of its funding arrangements. 

Broadacres HA Ltd

Since its acquisition in 2012, the main commercial subsidiary’s financial performance has been poor. The BHA board has failed to effectively monitor the risks associated with this activity and there are inadequate mitigation strategies in place to manage them. Foreseeable risks have crystallised and the unregistered non-charitable subsidiaries are increasingly reliant on the continued support of the registered parent. As a result BHA is exposed to a combination of material losses, impairment and write offs. The structural arrangements in place, including intra-group lending and parental guarantees between group members, has resulted in BHA accepting the majority of the downside risk and its on-lent investment at risk has increased to £18m 

31.Accurate Information

To provide robust challenge, boards need to ensure they have access to adequate and accurate information including targets for performance. This has become more important in recent years.

Swan HA 

Information presented to the board and regulator has been inconsistent, and together with the failure to monitor covenant compliance effectively, has led to a loss of regulatory confidence in its accuracy and reliability. The regulator is therefore not assured of the robustness and quality of the data being used by Swan to inform its financial planning and reporting.

St Mungos

In addition, the quality of reporting to the board requires improvement to facilitate more effective monitoring of performance against the provider’s strategic aims. A limited range of targets in both internal and external reporting restricts the ability of the board and other stakeholders to assess strategic performance.

32. Co-operative Board Relationships

To operate effectively board members need to be able to work together successfully.

Aldwyck Housing Group Limited

However, there has since been evidence of dissension among board members which has exacerbated concerns about governance. As a consequence the regulator has concluded that it does not have sufficient assurance that Aldwyck currently has the capacity and capability to exercise effective control over the provider’s affairs.

33. Lease arrangements

This paper is not going to cover the full depths of the issues involved in lease arrangements. However the issues for regulatory compliance are profound and multi-faceted and include a wide range of financial, business planning, risk management, internal controls, governance, and involvement, health and safety and rent issues. I’ve included one example below as it covers all the points raised in this year’s rulings on exempt providers. 


3CHA provides more than 700 units of supported housing although it reports them as general needs on its regulatory returns. 3CHA’s primary operating model means it enters into short-term leasing arrangements for properties with third party managing agents. 3CHA has landlord responsibility for the tenants of those properties while the managing agents deliver the landlord and management services on 3CHA’s behalf under an agreement.

The model operated by 3CHA means that it delegates significant responsibilities to third parties including the selection and sign up of new tenants. These delegations create material risks to 3CHA and the regulator does not have assurance that sufficient controls are in place to mitigate the risk of third parties not acting in accordance with the agreements in place.

The model means 3CHA transfers a very significant amount of the rent and service charge income it receives to third parties on an ongoing basis. The regulator does not have assurance that 3CHA has effective systems in place to give it sufficient oversight of these payments. It is the regulator’s judgement that 3CHA does not adequately reconcile the payments made to third parties with evidence that the services are being provided to its tenants.

The Governance and Financial Viability Standard requires registered providers to ensure that any arrangements they enter into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes. There is also a requirement that governance arrangements shall safeguard taxpayers’ interests and the reputation of the sector. The evidence received from 3CHA demonstrates a weak contracting environment and inadequate monitoring and oversight of very significant sums of money which are transferred to third parties on an ongoing basis. As a result, there is a risk that third party managing agents do not provide the services being claimed, or that services and housing management practices are inappropriate. The regulator has not received sufficient assurance that the arrangements entered into by 3CHA are not inappropriately advancing the interests of third parties or that taxpayers’ interests are being safeguarded.

A lack of effective board oversight in these areas is a fundamental failure of governance and operational control, and so we conclude that 3CHA is failing to manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.

3CHA’s stress testing does not meet the requirements of the Governance and Financial Viability Standard. The testing does not consider the range of scenarios 3CHA might face or have appropriate mitigation strategies in place as a result. 3CHA has not been able to demonstrate that it assesses, manages and where appropriate addresses risks to ensure the long term viability, including ensuring that social housing assets are protected.

3CHA has provided the regulator with conflicting information in relation to the classification of its stock and the rent it is charging. We lack assurance on how the board of 3CHA has satisfied itself that it is meeting the required outcomes of the Rent Standard and the associated rent-setting requirements.

34. Regulator’s Insolvency process

We also have a repeat entry in the Regulators Insolvency process. I suspect there will be more in the future. 

Larch HA

In February 2022, creditor action taken against Larch Housing Association Limited (Larch) led to the provider entering into the regulator’s insolvency process and the commencement of a moratorium. The regulator is engaging on this matter in accordance with its published statutory guidance.

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