Decision

Previous regulatory judgement: Mount Green Housing Association Limited (23 February 2022)

Updated 15 November 2023

Applies to England

RSH Narrative Regulatory Judgement

• Provider: Mount Green Housing Association Limited
• Regulatory code: L0042
• Publication date: 23 February 2022
• Governance grade: G2
• Viability grade: V2
• Reason for publication: Governance downgrade
• Regulatory route: In Depth Assessment

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

Mount Green continues to meet the requirements on governance set out in the Governance and Financial Viability Standard. However, following completion of an In Depth Assessment we have concluded that it needs to strengthen its risk management, including its approach to stress testing.

Mount Green’s financial performance is weak and forecast to remain so in the short term. The provider’s stress testing shows that it is sensitive to relatively small changes in costs and income, with several scenarios resulting in a breach of its interest cover covenant. To ensure that the board is appropriately sighted on the material exposures which Mount Green needs to manage, the provider needs to develop a more robust and comprehensive risk management framework. A key element of these improvements will involve enhancing mitigation strategies for stress scenarios and clarifying the circumstances in which they would be triggered.

Based on evidence gained from an In Depth Assessment, the regulator continues to have assurance that Mount Green complies with the financial viability elements of the Governance and Financial Viability Standard. Mount Green has a fully funded development programme, sufficient security to support its business plan and is forecast to continue to meet its funding covenants.

While Mount Green has the financial capacity to deal with some exposures, it has material risks and it needs to manage these to support continued compliance. The provider reported a deficit for the year ended March 2021 and low headroom against its interest cover covenant. For the short to medium term, Mount Green’s business plan is forecasting limited capacity, with weak financial operating performance and continuing low headroom against its interest cover covenant. During this period, while Mount Green is no longer exposed to open market sales, it is reliant on fixed asset disposals and first tranche sales to support financial performance and covenant headroom.

Other providers included in the judgement

None

About the provider

Origins

Mount Green is a charitable community benefit society. Its main activities relate to the development and management of social housing.

Registered Entities

Mount Green is the only registered entity.

Unregistered Entities

There are no unregistered entities.

Geographic Spread and Scale

Mount Green owns and manages around 1,600 homes, primarily in Surrey and West Sussex, with a small portfolio in Greater London. About half of the accommodation it provides is general needs, with the remainder comprising supported housing and housing for older people, low-cost home ownership, and affordable rent.

Staffing and Turnover

In the year to 31 March 2021, Mount Green had a total turnover of £12.9m and employed the full-time equivalent of 41 staff.

Development

Mount Green plans to develop 105 units by 2024. The programme comprises 67 units of general needs (affordable rent) and 38 units of low-cost home ownership.

About our judgements

Key to Grades

Governance:

• G1 (Compliant): The provider meets our governance requirements.
• G2 (Compliant): The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.
• G3 (Non-compliant): 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 (Non-compliant): 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:

• V1 (Compliant): The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.
• V2 (Compliant): 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.
• V3 (Non-compliant): 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 (Non-compliant): 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.

Definitions of Regulatory Processes

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’.