Decision

Previous regulatory judgement: Hexagon Housing Association Limited (29 March 2023)

Updated 13 December 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Hexagon Housing Association Limited
• Regulatory code: L1538
• Publication date: 29 March 2023
• Governance grade: G2
• Viability grade: V2
• Reason for publication: Governance downgrade
• Regulatory route: Stability Check and Reactive Engagement

Regulatory judgement

This regulatory judgement downgrades our previous published assessment of Hexagon Housing Association Limited’s governance from G1 to G2 and confirms its existing V2 grade for financial viability.

Hexagon Housing Association Limited (Hexagon) continues to meet the requirements on governance set out in the Governance and Financial Viability Standard. However, we have concluded that it needs to improve some aspects of its governance arrangements to support continued compliance.

Hexagon needs to strengthen the accuracy of the organisation’s data to ensure that it is adequate to support the oversight and management of risks to key areas of service delivery, assurance of compliance and to support its decision-making. Following the appointment of a new chief executive Hexagon has self-referred data quality issues to the regulator on landlord health and safety, rents and repairs. There have also been data inaccuracies in regulatory returns. In addition, weaknesses in complaints handling have been highlighted by the Housing Ombudsman. Hexagon needs to strengthen its data systems to ensure that board decision-making and control is underpinned by accurate, timely and relevant data.

Based on evidence gained from the Stability Check, the regulator has assurance that Hexagon complies with the financial viability elements of the Governance and Financial Viability Standard. Following a refinancing exercise completed in 2022, its financial plans are consistent with, and support, its financial strategy. It has an adequately funded business plan, sufficient security in place, and forecasts to continue meeting its financial covenants.

Hexagon continues to face risks that it needs to manage to ensure ongoing compliance, including exposure to the housing market through sales and delivery of its committed development programme. Additional asset management costs relating to fire safety and energy efficiency works, together with higher inflation and interest rate pressures in the current economic environment, impact on its capacity to manage adverse events.

Other providers included in the judgement

Horniman Housing Association Limited

About the provider

Origins

Hexagon is a charitable community benefit society. Its core focus is on the provision of housing for general needs.

Registered Entities

Hexagon is the parent of the group. It owns and manages the majority of the group’s housing stock.

Horniman Housing Association Limited is the only subsidiary within the group. It is a non-charitable community benefit society that owns and manages around 40 homes.

Unregistered Entities

There are no unregistered entities.

Geographic Spread and Scale

Hexagon works primarily in the London boroughs of Lewisham, Southwark, Greenwich, Bexley and Croydon. It manages around 4,500 homes.

Staffing and Turnover

In the year ended 31 March 2022, Hexagon employed 121 full-time equivalent staff. Group turnover for the year was £41m.

Development

Hexagon is mid-way through a development programme that aims to deliver 229 units by 2026. Around two thirds of the programme comprise units for shared ownership with the remainder being units to be let at London Affordable Rent.

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.