Current regulatory judgement: East End Homes Limited (25 May 2023)
Updated 25 May 2023
Applies to England
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RSH Narrative Regulatory Judgement
- Provider: East End Homes Limited
- Regulatory code: L4434
- Publication date: 25 May 2023
- Governance grade: G3
- Viability grade: V2
- Reason for publication: Governance downgrade
- Regulatory route: In Depth Assessment and Reactive Engagement
Regulatory judgement
This regulatory judgement downgrades our previous assessment of East End Homes Limited’s governance grade from G1 to G3 and confirms its existing V2 grade for viability. This means that there are issues of serious regulatory concern that the provider is working with the regulator to address.
Following an In Depth Assessment and subsequent investigation, the regulator has concluded that it lacks assurance that East End Homes Limited (East End Homes) has adequate governance, risk management and control frameworks in place.
The regulator has insufficient assurance that the board of East End Homes has been managing its affairs and overseeing the business with an appropriate degree of skill, diligence, independence, prudence, and foresight, commensurate to the provider’s size, scale, and risk profile. The provider has identified that it needs to strengthen its board to address skills gaps and take steps to manage potential conflicts of interest on the board.
The regulator’s investigation found that management information has been, on occasion, insufficient to assist the board in making fully informed decisions on material issues and risks facing the provider. The regulator also found instances where the board was not provided with adequate opportunity to make decisions.
East End Homes has been unable to demonstrate that the risks it faces are being appropriately identified, managed, and mitigated. Risk management, stress testing and mitigation strategies are underdeveloped and not yet embedded. Weaknesses in financial planning and governance became evident as part of its recent securitisation exercise.
The regulator also found that current and historical data integrity issues and poor quality data had resulted in an insufficient understanding of the provider’s asset base. As such, East End Homes is unable to provide assurance that it meets the Decent Homes Standard. While the provider has recently taken steps to improve its understanding of its stock investment requirements, having now carried out a stock condition survey on half its stock and recently commissioned a further survey on the remainder, this will need to be fully costed into the provider’s future financial plans.
The regulator’s assessment of East End Homes’ compliance with the financial viability elements of the Governance and Financial Viability Standard is unchanged. It has an adequately funded business plan and having obtained an extension to one of its loan covenant waivers, it is forecast to meet its financial covenants in the latest business plan. However, there remains low headroom against key covenants, and it is forecasting weak financial performance. While it has the financial capacity to deal with a reasonable range of adverse scenarios, it has material risks and needs to manage these to ensure continued compliance.
During the investigation, East End Homes has been transparent and responsive and has accepted the regulator’s concerns. It has commissioned external consultants to develop an improvement plan and an asset management strategy aimed at ensuring it has the capacity, capability, and appropriate frameworks to improve its governance and maintain its financial viability in the medium and long-term.
Other providers included in the judgement
None
About the provider
Origins
East End Homes is a registered charity and is the asset holding parent of the group.
Registered Entities
East End Homes is the only registered entity.
Unregistered Entities
East End Homes has one wholly owned subsidiary, East End Homes Community Development Limited, established to generate funds from non-social housing activities.
Geographic Spread and Scale
East End Homes owns and manages around 3,800 homes in the London Borough of Tower Hamlets.
Staffing and Turnover
East End Homes reported a £21m turnover over for the year ended 31 March 2022. It employs over 100 full-time equivalent staff.
Development
East End Homes is reviewing its development strategy and pipeline of schemes for the future.
About our judgements
Key to Grades
Governance:
| Compliant | |
|---|---|
| G1 | The provider meets our governance requirements. |
| G2 | The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance. |
| Non-compliant | |
|---|---|
| G3 | The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position. |
| G4 | The provider does not meet our governance requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action. |
Viability:
| Compliant | |
|---|---|
| V1 | The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios. |
| V2 | The provider meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance. |
| Non-compliant | |
|---|---|
| V3 | The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position. |
| V4 | The provider does not meet our viability requirements. There are issues of serious regulatory concern, and the provider is subject to regulatory intervention or enforcement action. |
Note: The use of an asterisk (*) against a grade indicates that the assessment refers to a provider that is designated as being for-profit.
Definitions of Regulatory Routes
In Depth Assessment (IDA): An IDA is a bespoke assessment of a provider’s viability and governance, including its approach to value for money. It involves on-site work and considers in detail a provider’s ability to meet its financial obligations and the effectiveness of its governance structures and processes.
Stability Checks: Based primarily on information supplied through regulatory returns, a Stability Check is an annual review of a provider’s financial position and its latest business plan. The review is focused on determining if there is evidence to indicate a provider’s current judgements merit reconsideration.
Reactive Engagement: Reactive engagement is unplanned work which is triggered by new information or a developing situation which may have implications for a provider’s current regulatory judgement.
Stability Checks and Reactive Engagement: In some cases, we will publish narrative regulatory judgements which combine evidence gained from both Stability Checks and Reactive Engagement.
For further details about these processes, please see Regulating the Standards.