Housing 21, a leading housing association for older people of modest means, has been downgraded from a G1 to a G2 rating by the Regulator of Social Housing. The Governance downgrade is due to issues involving rent setting processes and controls.
As a not for profit, leading housing association for older people, Housing 21 has always sought to do the right thing for its residents, whilst remaining ambitious in its plans to continue to develop more high quality Extra Care and Retirement Housing.
The introduction of the Welfare Reform and Work Act in 2016 required housing providers to reduce affordable rent charges by 1% each year. Housing 21 reduced the net rent it charged to residents by 1% annually as required by the Act, but maintained variable service charges that reflected the true cost of the services provided. As a consequence the variable service charges applied by Housing 21 over three years were in total £2.8 million higher than was permitted if these were also required to be reduced by 1% per annum. To address this the Board of Housing 21 has pledged to credit this sum back to the service charge accounts of the 80 Extra Care schemes affected.
Housing 21’s considered position had been that setting a net rent and applying a variable service charge provided better value for money and greater accountability than applying a fixed combined rent and service charge. Housing 21 had not sought to charge the maximum affordable rent it is permitted to and in many cases the net rent set by Housing 21 for affordable rent properties was lower than the social or formula rent that would have maintained a variable service charge.
Housing 21 recognises that its approach and application of variable service charges to affordable rent properties was not consistent with the Welfare Reform and Work Act 2016 and is committed to working with the Regulator to agree the basis for future rent setting.
As a separate issue the rents for 17 of Housing 21’s older Extra Care schemes, that had been agreed and set by the Housing Corporation, were found to be above the current permitted formula rent levels.
The rents for these schemes (including five Extra Care schemes provided under a 30 year Public Private Partnership contract) had initially been set above the then ‘target’ rent when they were commissioned to reflect the higher costs of developing Extra Care and limited grant funding applied. The rents on these properties have all been annually adjusted by the permitted percentage, including 1% rent reductions in accordance with the Welfare Reform and Work Act 2016.
These Extra Care schemes are providing a valued service that offers a more desirable alternative to residential care (which is especially valued in the times of Covid-19) and several of them are rated as outstanding by the Care Quality Commission. If the higher rents had not initially been agreed for these schemes it is unlikely they would have been developed.
Housing 21 has agreed to reduce the rents on all these properties to the formula rent levels notwithstanding that this does have implications for the financial assumptions on which the developments were undertaken.
None of the issues raised and steps Housing 21 has agreed to take as a consequence with the Regulator affect Housing 21’s V1 financial status.
Bruce Moore, Chief Executive commented; “Whilst we are naturally disappointed with the downgrade, we are engaging fully with the Regulator and taking decisive action to resolve the situation to ensure that future rents and charges are set and adjusted in a manner that demonstrates full compliance. We remain committed to doing the right thing for our residents and providing them with a quality service with rents and service charges that represent value for money. Our focus is now working collaboratively with the Regulator and to restoring our G1 status as soon as possible.
Despite the downgrade, Housing 21 is confident and committed to continuing to fulfil its mission of providing more and better high quality Extra Care and Retirement Housing for older people of modest means and playing a vital role in keeping more than 20,000 older people safe during the continuing challenge of the COVID-19 crisis”.
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