As the year progresses and the sector continues to grapple with regulations, it’s important to look into the challenges that Housing executives are concerned about.
With the Spending Review announcing the biggest investment in affordable housing seen in decades, its important now more than ever that the sector remains focused on tackling issues head on.
As the leading Board portal for Housing associations, we here at Convene want to stay on top of the issues those within the sector face, and the trends they are growing increasingly aware of.
So, what are the current challenges Housing is facing, and what’s keeping Housing Executives up at night.
Challenges Housing execs are facing
Increasingly, Housing associations have been struggling with regulatory judgements, specifically to do with viability.
Trending reports indicate a significant shift in the financial viability ratings of Housing associations, with a record number of associations now categorized as V2.
V2 rating refers to the financial viability ratings assigned by regulatory bodies (such as the Regulator of Social Housing in England). A V2 rating indicates that the organization meets viability requirements but has some weaknesses or risks that need managing carefully.
This clustering in the V2 band has been observed by the Regulator of Social Housing (RSH), who are closely monitoring how these associations manage their financial risks.
While the number of associations in V3 has increased, it remains relatively low, with only a marginal rise in the number of V3 associations over the years.
The fact that more than half of associations now have V2 ratings shows that financial pressures, perhaps due to economic challenges, increased costs, reduced income, or investment needs, are prevalent and significant across the sector.
Factors contributing to the shift are thought to be rent caps, the COVID-19 Pandemic and its aftermath which have all contributed to the more precarious financial position of associations.
This trend emphasises that the financial resilience of social housing providers is weakening, prompting heightened scrutiny from regulators, stakeholders, and investors.
For housing associations, this development signals a need for careful financial planning, strengthened risk management, and possibly more rigorous oversight and intervention by regulatory authorities.
For Housing executives, the increase in V2 ratings pose several potential issues, as it indicates a larger problem in the sector of keeping up with regulations, but also the risk of public perception and reputation. Now, more than ever, associations want to be out of the press and in the general public’s good books, and an increase in V2 ratings suggest that it will be a harder task for some.
However, viability ratings are not the only aspects to consider, as there are also governance ratings and consumer grades. Alongside this, V2 is still a compliant rating, so even if it is the current trend for Housing associations, it does not mean the sector is not handling regulatory judgements.
What does the Regulator say exactly?
According to the RSH, V2 means there is “enough evidence to assure us that they are delivering the viability outcomes of the Governance and Financial Viability Standard. However, we consider that their financial profile means that if the risks they have identified happen, then it may be more difficult for them to mitigate the impact successfully. These risks may include changes in market conditions beyond the landlord’s control.”
In comparison, V1 ratings indicate for the RSH that there is “enough evidence to assure us that they are delivering the viability outcomes of the Governance and Financial Viability Standard.” This means that they will have:
- A solid financial standing, established on sound and careful projections, showcasing sufficient buffer against financial agreements and suitable liquidity levels.
- A financial strategy that includes sufficient capacity, enhancing their ability to withstand financial risks. There should be evidence that, should the identified risks materialise, the landlord can typically manage and reduce the adverse effects effectively.
RSH has said landlords are taking action to manage viability risks, but it warned “reduced financial headroom reduces the capacity to manage downside risk and increases the risk that a governance failure leads to financial distress.”
The regulatory body emphasised that Boards require a robust internal controls system and a comprehensive grasp of risk within their organisation.
How Convene can help your Housing Association
Housing Associations play an invaluable role in providing quality homes and creating communities. That’s why we’re proud of how many have chosen Convene to help fulfil their social purpose of housing people.
Here at Convene, we have over 200 clients in the Housing Sector, and we are dedicated to helping them achieve that all too important long-term stability.
That’s why software like our Board portal exists. Associations and their Boards need their meetings to run smoothly, and they need systems and software that facilitates this. Without access to relevant information easily, Boards cannot effectively administer their duties.
When it comes to risk management, you need to understand every aspect of your association. Flexibility and communication are key to keeping your employees safe and maintaining legal compliance.
Convene is designed to improve communication within your organisation. Our comprehensive features are trusted by Housing professionals across the UK and include:
- A Document Library with role-based access to ensure your sensitive documents are protected.
- A built-in Audit Trail so you can be sure you are compliant with all regulations.
- Surveys, with the option for anonymity, so you can be sure you are aware of your employees’ opinions.
We want to help build community in the sector, as the No.1 Board portal platform dedicated to Housing Associations.
This is why we’ve created a community for social housing to share their knowledge and insight, and establish those all important connections.
We want to facilitate discussion and wisdom sharing for our Housing community and beyond. We’ll be hosting events, webinars & sharing our articles and newsletters and more, all focused on Housing Governance, Risk and Compliance.
If you’d like to learn from others in the sector and be a part of something, join our community.
