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Birmingham provider downgraded amid concern rents not ‘below market rate’
A Birmingham-based supported housing provider has been downgraded for financial viability after the English regulator flagged concerns that its rents were not “below market rate”.
Birmingham supported housing provider downgraded amid concern rents not ‘below market rate’ #UKhousingA supported housing provider has been downgraded for financial viability after the regulator flagged concerns that its rents were not “below market rate” #UKhousingIn its latest regulatory judgement, the Regulator of Social Housing (RSH) flagged “issues of serious regulatory concern” at Sustain UK, which provides 1,684 homes through short-term leases.
The provider, which already was failing to meet the Rent Standard, has now had its financial viability grade changed from V2 to V3, meaning it does not meet the regulator’s requirements.
“We do not have assurance that Sustain is able to manage financial risks and that its business planning is sufficiently robust to ensure its long-term viability,” the regulator said.
Sustain is a not-for-profit registered provider that works with managing agents, and the RSH highlighted its “heavy reliance” on third parties for both its service delivery and the provision of bedspaces.
For the year ending 2024, the provider passed 88% of its income to third-party management agents, the RSH said.
Yet, Sustain’s governance was “not effective” enough to ensure adequate oversight of its agents and it was not “inappropriately advancing” third-party interests. For this reason, its governance grade remained at G3.
The RSH also said that Sustain’s calculation of its rent and service charges was “inconsistent” with evidence of costs incurred and it has not shown that rents were not “appropriately calculated”.
The body said that while Sustain has a rent-setting policy in place, there is inadequate evidence that it is adhering to it. “We also do not have assurance that Sustain’s rents are below market rate,” the RSH added.
The regulator also said that Sustain’s primary source of income is rent and service charges that are claimed from the local authority through enhanced housing benefit, but said there was a “lack of clarity” on how it calculates this claim.
“We do not have assurance that Sustain is able to manage financial risks and that its business-planning is sufficiently robust to ensure its long-term viability,” the regulator said.
This judgement also said that despite an extensive opportunity to make improvements, there remained “serious failings” in how Sustain is delivering the outcomes of the Rent Standard.
Ian MacGregor, chief executive at Sustain UK, said he was “disappointed” with the decision.
He added: “Sustain UK acknowledges that it has been noncompliant with the regulator’s Rent Standard for a number of years, and that our approach to achieving compliance must now change. We will now take this opportunity to consider the regulator’s feedback, before setting out our measures for ongoing change and improvement.
“I’d like to reassure our residents and local stakeholders that Sustain UK remains firmly committed to maintaining and raising standards across supported accommodation in the Midlands.”
The RSH has also placed Phoenix Community Housing on its gradings under review list.
Michael Tisdell, acting chair, and Denise Fowler, chief executive of Phoenix, said: “The regulator has raised a number of issues with us which we acknowledge. Our board and our executive team take these issues extremely seriously and are working to address them as a matter of priority, while ensuring we continue to deliver homes and services that meet our residents’ needs.”
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