Decision

Current regulatory judgement: Tower Hamlets Community Housing (23 March 2023)

Updated 23 March 2023

Applies to England

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This publication is available at https://www.gov.uk/government/publications/regulatory-judgement-tower-hamlets-community-housing-limited--2/current-regulatory-judgement-tower-hamlets-community-housing-23-march-2023

RSH Narrative Regulatory Judgement

  • Provider: Tower Hamlets Community Housing
  • Regulatory code: L4260
  • Publication date: 23 March 2023
  • Governance grade: G3
  • Viability grade: V3
  • Reason for publication: Governance and viability downgrades
  • Regulatory route: Stability Check and Reactive Engagement

Regulatory judgement

This regulatory judgement downgrades our previous assessment of Tower Hamlets Community Housing’s governance grade from G1 to G3 and its viability grade from V2 to V3. This means that there are issues of serious regulatory concern that the provider is working with us to address.

Following the 2022 Stability Check and a subsequent investigation, the regulator has concluded it lacks assurance that Tower Hamlets Community Housing (THCH) has a robust business planning, risk and control framework.

Evidence gathered by the regulator during its investigation confirmed weaknesses in THCH’s internal controls framework, and that the board of THCH has not been managing its affairs with an appropriate degree of skill, diligence, prudence and foresight. The board has failed to demonstrate it understands and is managing the risks THCH faces or has appropriate mitigation strategies in place to ensure the long term viability of the organisation and protect social housing assets.

Evidence seen by the regulator demonstrates that financial accounting practices have been inadequate, and this has led to poor quality and incomplete financial data shared with the board, external auditors and the regulator. However, plans have been devised that should lead to an improvement in this area. There has also been an historic lack of transparency with stakeholders and the regulator over the quality of financial data and key risks.

THCH’s financial position is weak, and it is faced with a substantial programme of fire remediation work up to the end of 2025/26. THCH is finalising documentation for a covenant waiver from its funder as it failed to identify the full accounting implications of the Building Safety Act 2022 earlier in the financial year and made a poor decision surrounding budgeting for the recovery of costs. Waivers are also being sought for the subsequent financial years 2023-2026. Irrespective of securing the necessary covenant waivers, THCH’s business plan demonstrates that it is unable to meet the costs of its day-to-day operating activities and repairs liabilities from its rental income stream. There is no capacity for any future development. Finally, stock condition data, upon which forecast stock reinvestment provisions in the business plan are based, is out-dated and over reliant on cloning. Although this is now being addressed, we do not have assurance that the business plan’s cost provisions are based on prudent assumptions.

THCH has been open and transparent with the regulator and has acknowledged the regulator’s concerns. A governance improvement plan has been drafted. THCH is also working with the regulator and external advisors to ensure it has the capacity, capability and support to make the changes required. This is to ensure THCH’s long term viability, and to address the governance and financial viability issues identified in this regulatory judgement.

Other providers included in the judgement

None

About the provider

Origins

THCH is a charitable community benefit society.

It was established in 2000 to take a transfer of 1,249 homes owned by the London Borough of Tower Hamlets. It took further estate transfers in 2004 and 2006.

THCH’s core focus is the delivery of social housing and related services in partnership with the diverse local communities of Tower Hamlets.

Registered Entities

THCH is the only registered entity.

Unregistered Entities

THCH has one unregistered subsidiary, THCH New Homes Limited, set up to develop homes for market sale, it is not currently active.

Geographic Spread and Scale

THCH owns and manages around 3,200 homes solely within the London Borough of Tower Hamlets.

Staffing and Turnover

In the year ended 31 March 2022, THCH reported that it employed the full-time equivalent of 94 staff and a turnover of £22.6m.

Development

The latest financial plan for THCH does not include a development programme.

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