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HCA 'satisfied' after first regulatory judgement of Rochdale Boroughwide Housing

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HCA 'satisfied' after first regulatory judgement of Rochdale Boroughwide Housing

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Published by Max Salsbury for 24dash.com in Housing and also in Regulation

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The Homes and Communities Agency has said it is "satisfied" with Rochdale Boroughwide Housing's financial plans and has concluded that the social landlord is "properly governed".

The agency has awarded RBH a 'G1' rating on its governance scale and a 'V2' on financial viability standard.

Gareth Swarbrick, RBH chief executive, said: “We’re extremely pleased with our first regulatory judgement as a mutual organisation. Our new mutual governance structures, placing our tenant and employee members at the heart of our decision-making process, are the first of their kind. We’re delighted that the regulator has shown confidence in our ability to meet the challenges ahead and to deliver for our tenants and communities”

The G1 rating shows that the HCA believes that RBH is meeting the requirements set down on governance, whilst the V2 rating means it believes the requirements on financial viability are being met.

However, in its judgement the HCA said that the housing provider's financial profile is weak, as "demonstrated by negative operating margins and interest cover ratios and high gearing" but that such a state is common with "large scale voluntary transfer providers in their early years".

RBH took ownership of around 13,700 tenanted homes and 500 leasehold properties as part of a large scale voluntary stock transfer from Rochdale Metropolitan Borough Council in March 2012.

The regulator identified four specific exposures that, either individually or in combination, could impact on RBH’s viability. These are:

  • A requirement to deliver the agreed major works programme in order to meet its transfer promises. The scale of the programme, and the provider’s obligation to meet all of its promises to tenants, needs to be managed and controlled effectively in order to stay within the financial constraints of the business plan.
  • The implementation of welfare reforms is likely to have an adverse impact on the level of rental income lost by RBH from void properties and rental bad debts. It is also expected to have an adverse impact on cash flows as a result of increased rent arrears and costs of rent recovery.
  • Due to the terms of RBH’s loan facility, it is exposed to a degree of re-pricing and re-financing risk in the short to medium term. Access to new funding remains less favourable than in the pre-credit crunch environment. However, it is being proactive in already seeking to find solutions to its long term funding needs and the associated risks. 
  • Sensitivity testing by RBH has again demonstrated that its business plan is adversely sensitive to relatively small deviations from the assumed levels. Added to this, pension fund cost pressures are also beginning to build. The provider has already delivered significant permanent efficiency savings on management and repairs budgets, but as a result there may be limited further capacity available within the business plan to deal with further cost pressures.

CEO Gareth Swarbrick added: "I'm extremely proud of the hard work that our employees, tenants and board members have put in together to ensure that the judgement was positive."

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