Section 219 HOUSING AND REGENERATION ACT 2008 (“The Act”)

Question

Accepted Answer

Introduction

A registered provider is responsible for ensuring that it manages itself effectively, achieves the standards set by the regulator, and engages positively with the regulator’s regulatory framework. Where a failure against a standard or other problem has been identified, the regulator expects providers to respond in a prompt and effective manner. It may be necessary for the regulator to step in and exercise its powers under section 219 of the Act when a provider fails to do so.

Sections 219 to 225 of the Act allow the regulator to require a registered provider to take specified action to resolve a specified failure or other problem.

Where the regulator considers such a requirement necessary it will issue an enforcement notice. The regulator has published guidance on its use of this power and that document is available here.

The Regulatory Standards that registered providers of social housing are required to meet can be found here together with our approach to regulating the standards.

Grounds for issuing this enforcement notice

On 17 December 2020 the regulator published a Regulatory Judgement (RJ)^{[footnote 1]} concluding My Space Housing Solutions (My Space) was non-compliant with the Governance and Financial Viability Standard (the Standard) and concluded My Space be graded G3/V3. The Regulator found:

significant weaknesses in My Space’s business planning framework;
inadequate risk management processes and internal controls; and
that the board had failed to manage its affairs with an appropriate degree of skill, diligence, effectiveness, prudence and foresight.

In addition, the regulator lacked assurance on how the board had satisfied itself that its rents were meeting the Rent Standard.

Following intensive regulatory engagement over the last 24 months, the regulator has assessed actions taken by My Space to address the issues raised in the RJ and has concluded that:

a) My Space remains non-compliant with the Standard.

b) Aspects of My Space’s compliance with both the governance and financial viability requirements of the Standard had deteriorated over recent months creating a serious risk to the ongoing sustainability of the business.

c) My Space has failed to manage its resources effectively to ensure its viability is maintained while ensuring that social housing assets are not put at undue risk.

d) My Space has failed to manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.

e) My Space has failed to ensure that the arrangements it has entered into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes.

f) My Space has failed to assess, manage and address risks to ensure its long-term viability, including ensuring its social housing assets are protected before taking on new liabilities, and ensuring it understands and manages the likely impacts of taking on these new liabilities on current and future business and regulatory compliance.

g) My Space has not been able to provide the assurance that its governance, risk management and internal control frameworks are effective or that business planning is robust.

h) My Space has not been able to provide the assurance that it meets the relevant definitions of Specialised Supported Housing or Temporary Social Housing which are required to continue to claim the current level of rents which qualify for an exemption to the Rent Standard.

As a result of this an updated regulatory judgement was published on 19 December 2022^{[footnote 2]} which downgraded the previously published judgement from a non-compliant G3/V3 to a non-compliant G4/V4 grade. This downgrade reflects that there are issues of serious regulatory concern, and My Space is subject to regulatory intervention or enforcement action both in relation to governance and financial viability.

In considering whether to serve an enforcement notice, the regulator has considered section 218 of the Act and concluded this is a serious and recurrent case of non-compliance where My Space has failed to address the breach of standards in a prompt and effective manner. The regulator has also taken account of the regulator’s fundamental objectives under the Act and considers the issuing of an enforcement notice appropriate and proportionate in circumstances where in the judgement of the regulator, My Space has been unwilling and/ or unable to address its breaches of standards.

The regulator is serving My Space with an enforcement notice by virtue of its powers under sections 219 to 225 of the Act. Specifically, the grounds for issuing an enforcement notice are under section 220(1) of the Act,

Case 1 – that My Space has failed to meet the requirements of the Standard and the Rent Standard applicable to it under section 194 of the Act.
Case 2 – that the affairs of My Space have been mismanaged
Case 5 – that the interests of My Space’s social housing tenants require protection

Direction

To a scope agreed with the regulator, My Space must commission immediate advice (Solvency Advice) following on from the draft solvency report sent to the regulator on 25 November 2022 to explore the three main options outlined in the report (set out below) and submit the Solvency Advice to the regulator within 14 days of the date of the enforcement notice.
- The ability of My Space to trade solvently
- Company Voluntary Arrangement
- Administration
Taking into account the Solvency Advice, develop an action plan based on the preferred choice of the board from the above options and present this action plan to the regulator within 14 days of the Solvency Advice being sent to My Space.
To write to the Head of Revenue and Benefits at each local authority where My Space currently, or has in the last 3 years, provided accommodation (wording to be agreed by the regulator), to advise the local authority that My Space has concluded that it does not provide Specialised Supported Housing for the majority of its tenants, despite the wording on My Space’s housing benefit/referral application stating that this was the case. Evidence of this correspondence is to be provided to the regulator within 14 days of the date of the enforcement notice.
To a scope agreed with the regulator, My Space must commission immediate advice as to its rent compliance position (Rent Advice), including whether it meets the definition of social housing. This Rent Advice must be provided to the regulator within 28 days of the date of the enforcement notice.
Following receipt of the Rent Advice, My Space must provide to the regulator an action plan to address its rent compliance position within 14 days of the Rent Advice being sent to My Space, which will as a minimum cover:

a. Compliance with the definition of social housing

b. Compliance with any exceptions claimed from the Rent Standard and Policy Statement on Rents for Social Housing

c. Plan for stock rationalisation as a result of property not qualifying as social housing

d. Plan for reducing rents where necessary and the impact this has on the overall financial viability of My Space

e. Plan for consultation with tenants who are required to decant, move, or change landlord as a result of property being decommissioned, reclassified, transferred to another registered provider or handed back to landlords.
To appoint an appropriately skilled, experienced and independent board, to ensure that My Space has the capacity and governance to work towards bringing the organisation back to compliance. The board should be in place within 2 months of the date of the enforcement notice.
To obtain the services of a suitably skilled and experienced Finance Director to deliver the action plan arising out of the Solvency Advice and meet all regulatory and legal reporting requirements to an industry standard. The Finance Director should be in place within 28 days of the date of the enforcement notice.
To a scope agreed with the regulator My Space must commission an independent appraisal of options to address its continued non-compliance with the standards (the Appraisal) to be delivered to the regulator within 28 days of the date of the enforcement notice and must include as a minimum consideration of:
- Renegotiation of the terms of My Space’s long-term lease agreements which apply to its properties such that that the regulator can be reasonably satisfied that My Space is able to manage the associated risks and become compliant with the standards.
- Seeking a business combination or merger such that the current operating model is not material to the overall business model of the enlarged registered entity (should that be appropriate).
- Voluntary de-registration as a registered provider or winding down (followed by de-registration).
Based on the outcome of the Appraisal, the My Space board shall develop an action plan and timetable to ensure compliance with the standards for the regulator’s consideration delivered to the regulator within 28 days of the date of the Appraisal.
In addition to My Space’s standard notification obligations, My Space is to engage with the regulator ahead of any new material property transactions or material changes to the organisation as soon as is reasonably practicable while a non-compliant regulatory judgement remains in place.

The Regulator of Social Housing expects My Space to co-operate fully with the regulator and to co-ordinate its communications strategy on all matters relating to enforcement actions with the regulator, and to give the regulator the opportunity to comment on the content and timing of any news releases or other public statements.

Further Information

In coming to the decision set out in this enforcement notice, the regulator has taken into account all relevant matters and representations referred to in the regulatory framework and Annex 1 of the regulator’s ‘Guidance on the regulator’s approach to intervention, enforcement and use of powers ‘with particular reference to ‘Guidance note 9’.
Please note that a registered provider given an enforcement notice may appeal against it to the High Court pursuant to the Housing and Regeneration Act 2008.
The regulator may withdraw the enforcement notice at any time by giving notice to the registered provider.
Please be aware that if My Space does not comply with this enforcement notice, the regulator will consider exercising other regulatory or enforcement powers.
The regulator may choose to publicise the serving of this enforcement notice.
Please note that a copy of this enforcement notice has been sent to Homes England, the Charity Commission and the corresponding equivalent regulators for Wales.
Any information or correspondence pertaining to this enforcement notice should be sent to the regulator, addressed to:

Harold Brown
Senior Assistant Director, Investigation and Enforcement
Regulator of Social Housing
Level 1A – City Tower
Piccadilly Plaza
Manchester M1 4BT

Signed on behalf of the regulator

Harold Brown
Senior Assistant Director, Investigation and Enforcement

Date of enforcement notice: 12 January 2023

Enforcement Notice: My Space Housing Solutions (16 January 2023)

Applies to England

ENFORCEMENT NOTICE