Legal & General Affordable Homes Limited (5062) - Regulatory Judgement: 25 September 2024
Updated 25 September 2024
Applies to England
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The judgement(s) on this page concern an organisation that is designated a for-profit registered provider.
The registered provider is not at the head of its group. It is a subsidiary organisation within a larger group of connected companies. The registered provider is not intended to operate as a standalone entity in the group structure. It requires the ongoing support of related parties to fulfil its functions and / or meet its objectives. The nature of this support is described in the judgement(s).
The judgement(s) concern the registered provider only and do not represent an assessment of the non-registered entities within the group.
Our Judgement
| Grade/Judgement | Change | Date of assessment | ||
|---|---|---|---|---|
| Consumer | Not assessed yet | |||
| Governance | G1* Our judgement is that the landlord meets our governance requirements. |
Assessed and unchanged | September 2024 | |
| Viability | V1* Our judgement is that the landlord meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios. |
Assessed and unchanged | September 2024 |
Reason for publication
We are publishing a regulatory judgement for Legal & General Affordable Homes Limited (Legal & General) following a stability check review against the Governance and Financial Viability Standard.
This regulatory judgement confirms a governance grading of G1* and a financial viability grading of V1*.
Prior to this regulatory judgement, the governance and financial viability grades for Legal & General were last updated in October 2023 following a stability check, to confirm grades of G1* and V1*.
Summary of the decision
Our judgement is that Legal & General meets our governance requirements. From the stability check review, there is no evidence to indicate a change in governance grading is required. Based on this assessment, we have concluded a G1* grade for Legal & General.
Our judgement is that Legal & General meets our financial viability requirements and has the financial capacity to deal with a wide range of adverse scenarios. Legal & General’s business plan is based on reasonable assumptions, and it has provided appropriate assurance that it has access to sufficient funding. It also forecasts adequate headroom against funders’ covenants. Based on this assessment, we have concluded a V1* grade for Legal & General.
How we reached our judgement
We carried out a stability check review to assess whether there are any material risks that may result in a change to Legal & General’s financial viability or governance gradings, as part of our annual stability check programme. The stability check review was completed in September 2024.
Our regulatory judgement is based on all the relevant information we obtained during the stability check, as well as analysis of information provided by Legal & General in its regulatory returns and other regulatory activity. This includes financial plans and financial statements and other regulatory returns.
We have not yet assessed this landlord against the consumer standards.
Summary of findings
Governance – G1* – September 2024
From the stability check review, there is no evidence to indicate a change in governance grading is required.
Viability – V1* – September 2024
Based on evidence gained from the 2024 stability check review, we have assurance that Legal & General’s financial plans are consistent with, and support, its financial strategy. Legal & General has an adequately funded business plan and sufficient security in place.
The majority of its funding is provided via both debt and equity from its parent entity, and access to liquidity has been strengthened by the arrangement of private bank facilities. Financial metrics indicate that it will maintain capacity to service its financing obligations and the results of stress testing indicate that it has the financial capacity to deal with a wide range of adverse scenarios.
Legal & General’s business plan assumes a material volume of receipts from selling homes. However, both its acquisition and sales programmes involve entities within the wider Legal & General group of companies, reducing the level of risk that could otherwise be associated with cashflows of this type.
Background to the judgement
About the landlord
Legal & General is a for-profit registered provider. It was registered in December 2018, letting its first properties in late 2019. It is a private company limited by shares and its ultimate parent is Legal & General Group plc, a multinational financial services company and a constituent of the FTSE 100 Index. It owns no non-social housing and offers housing for rent and for shared ownership.
Legal & General manages around 3,000 social housing homes and operates across a large number of local authority areas with concentrations of stock in the South East, Midlands and North West.
Legal & General employs no staff. For the year ended 31 December 2023, it reported turnover of £23.1m. It plans to acquire around 10,000 homes in the period to 2028 and to generate forecast sales receipts of £1.8bn.
Our role and regulatory approach
We regulate for a viable, efficient, and well governed social housing sector able to deliver quality homes and services for current and future tenants.
We regulate at the landlord level to drive improvement in how landlords operate. By landlord we mean a registered provider of social housing. These can either be local authorities, or private registered providers (other organisations registered with us such as non-profit housing associations, co-operatives, or profit-making organisations).
We set standards which state outcomes that landlords must deliver. The outcomes of our standards include both the required outcomes and specific expectations we set. Where we find there are significant failures in landlords which we consider to be material to the landlord’s delivery of those outcomes, we hold them to account. Ultimately this provides protection for tenants’ homes and services and achieves better outcomes for current and future tenants. It also contributes to a sustainable sector which can attract strong investment.
We have a different role for regulating local authorities than for other landlords. This is because we have a narrower role for local authorities and the Governance and Financial Viability Standard, and Value for Money Standard do not apply. Further detail on which standards apply to different landlords can be found on our standards page.
We assess the performance of landlords through inspections and by reviewing data that landlords are required to submit to us. In Depth Assessments (IDAs) were one of our previous assessment processes, which are now replaced by our new inspections programme from 1 April 2024. We also respond where there is an issue or a potential issue that may be material to a landlord’s delivery of the outcomes of our standards. We publish regulatory judgements that describe our view of landlords’ performance with our standards. We also publish grades for landlords with more than 1,000 social housing homes.
The Housing Ombudsman deals with individual complaints. When individual complaints are referred to us, we investigate if we consider that the issue may be material to a landlord’s delivery of the outcomes of our standards.
For more information about our approach to regulation, please see Regulating the standards.