Another registered provider being reviewed by regulator – on 18 September 2018 the Regulator of Social Housing published a ‘Grading under review notice’ on Trinity Housing Association Limited. The notice says that “Trinity Housing Association Limited does not currently have a regulatory judgement as it previously held less than 1,000 homes. We are investigating a matter regarding Trinity’s compliance with the Governance and Financial Viability Standard.”
This follows a similar announcement on Inclusion Housing Community Interest Company on 29 May 2018 – “Inclusion does not currently have a regulatory judgement as it previously held less than 1,000 homes. We are currently investigating a matter regarding Inclusion’s compliance with the Governance and Financial Viability Standard.”
Trinity Housing Association was the registered provider for 5% of Civitas Social Housing‘s portfolio (by value) at 9 May 2018. It is not represented in Triple Point Social Housing REIT’s portfolio. An article in Social Housing on the Trinity announcement says LXi REIT is also exposed to Trinity Housing Association. [We asked the company for confirmation that this was the case and LXi confirmed that they have no exposure to Trinity.]
Inclusion Housing was Triple Point Social Housing REIT‘s largest registered provider at 30 June 2018, accounting for 24.7% of its rental income and 19.5% of its units. Inclusion accounted for 4% of Civitas’ portfolio (by value) at 9 May 2018. Civitas acquired one property where Inclusion was the registered provider on 2 August 2018.
According to an announcement made by the regulator on 26 September 2018, Inclusion and Trinity are two of four registered providers “being investigated in relation to an issue which may result in a downgrade from current compliant grades (G1 and G2 for governance, V1 or V2 for viability) to non-compliant grades (G3 or G4 for governance, V3 or V4 for viability)“. Although, as per the statements above, Inclusion and Trinity had not previously been assigned a rating.
In the article in Social Housing, Civitas is quoted as saying “Civitas Social Housing notes the Grading Under Review notice issued by the Regulator of Social Housing in relation to Trinity Housing Association. As one of our 15 housing association partners, Civitas enjoys a positive and supportive relationship with Trinity and we look forward to the matter being concluded in due course. Whilst at the time of the last statistical data return to the regulator Trinity had fewer than 1,000 social homes under management, it has since passed through this barrier.”
[QD comment: The issue of a grading under review notice may not necessarily lead to any action by the regulator. In an extreme scenario, one or both of these registered providers could be subject to same sort of enforcement action as was applied to First Priority Housing. This resulted in Civitas reassigning its First Priority leases to another registered provider. Civitas estimated that the total hit to the fund in that case was approximately £300,000, 0.05% of NAV (and it was seeking to recover this).]
The regulator’s approach to regulation is explained in “Regulating the Standards” – the grades are explained on pages 21 and 22. It may also be worth reading our initiation note on Civitas.
CSH / SOHO / : Another registered provider being reviewed by regulator