Decision

Octavia Housing (L0717) - Regulatory Judgement: 9 July 2024

Updated 9 July 2024

Applies to England

Our Judgement

	Grade/Judgement	Change	Date of assessment
Consumer	C3: Our judgement is that there are serious failings in the landlord delivering the outcomes of the consumer standards and significant improvement is needed	First grading	July 2024
Governance	G3: Our judgement is that the landlord does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the landlord is working to improve its position.	Based on previous assessment	September 2023
Viability	V3: Our judgement is that the landlord does not meet our viability requirements. There are issues of serious regulatory concern and in agreement with us the landlord is working to improve its position.	Based on previous assessment	September 2023

Reason for publication

We are publishing a regulatory judgement for Octavia Housing (Octavia) to confirm a consumer grading of C3.

This is a result of our responsive engagement with Octavia about the Safety and Quality Standard. This is the first time we have issued a consumer grade in relation to this landlord.

In September 2023, following responsive engagement, we downgraded Octavia’s governance grade from G1 to G3 and its viability grade from V2 to V3. Our responsive engagement with Octavia in relation to our governance and financial viability requirements is ongoing, and this regulatory judgement does not include an assessment of Octavia’s delivery of those requirements. Octavia’s G3 and V3 gradings published on 6 September 2023 remain its most recent governance and viability gradings.

Summary of the decision

Our judgement is that there are serious failings in how Octavia is delivering the outcomes of the consumer standards and significant improvement is needed, specifically in relation to outcomes in our Safety and Quality Standard. Based on this assessment, we have concluded a C3 grade for Octavia.

How we reached our judgement

Further to our earlier regulatory judgement published in September 2023, we have been carrying out responsive engagement with Octavia in relation to its failure to meet requirements of our Governance and Financial Viability Standard. 

This responsive engagement remains ongoing and in late 2023 identified concerns about the consistency of the health and safety compliance data shared with the Octavia board.

Following a serious fire in one of Octavia’s properties – Petworth Court in Wembley – in January 2024 and a subsequent self-referral by Octavia in relation to its management of fire, electrical and gas safety, we carried out further responsive engagement that focused on the Safety and Quality Standard, in particular the health and safety outcomes.

This further responsive engagement with Octavia included reviewing documents and compliance data provided to us by Octavia in relation to the Safety and Quality Standard, with follow up meetings and discussions with Octavia.

During our responsive engagement we found evidence that Octavia is not delivering the required outcomes of the Safety and Quality Standard. Our judgement is based on all the relevant information provided by Octavia during the responsive engagement process. In making our decision, we have considered how well Octavia is delivering against the outcomes of the Safety and Quality Standard.

Summary of findings 

Consumer – C3 – July 2024

The Safety and Quality Standard requires landlords to have an accurate, up to date and evidenced understanding of the condition of their homes that reliably informs their provision of good quality, well maintained and safe homes for tenants. It also requires landlords to identify and meet all legal requirements that relate to the health and safety of tenants in their homes and communal areas, and that all required actions arising from legally required health and safety assessments are carried out within appropriate timescales.

Following a serious fire at one of its properties in January 2024 and wider review of its landlord health and safety compliance, Octavia made a self-referral to us in respect of fire, electrical and gas safety. Having sought further information including assurances on other areas of building safety, we have concluded that there are serious failings in the oversight, management, and delivery in several areas of Octavia’s landlord health and safety responsibilities.

London Fire Brigade has issued Notifications of Fire Safety Deficiencies in respect of 13 of Octavia’s buildings since May 2023. Octavia currently has over 1,200 overdue fire safety remedial actions categorised as either high or medium priority and has failed to take sufficient steps to mitigate the potential risks to tenants identified.

Octavia was unable to provide sufficient assurance that it meets other landlord health and safety requirements. Octavia has failed to hold complete and accurate records to confirm where health and safety inspections are required, whether they had been carried out within legally required or recommended timescales, and whether smoke and carbon monoxide detectors are installed as legally required.

Octavia has been proactive in engaging external support, increasing staff resource, and creating improvement plans to increase its oversight of its health and safety compliance. It is currently undertaking investigations to identify and address gaps in its records, develop an effective programme of health and safety assessments and confirm the full extent of remedial actions required to meet all legal requirements.

Octavia has reported that it recognises that it can deliver its purpose more effectively by joining another landlord and following the September 2023 Regulatory Judgement has been progressing the work needed to achieve this. Ahead of this being delivered Octavia has been able to draw on significant support from its preferred partner landlord to deliver the improvements required.

Our engagement with Octavia will continue to be intensive. We will seek evidence that gives us assurance that Octavia is making sufficient progress on its investigations and delivery of its improvement programme so that it is meeting its health and safety legal requirements and delivering the outcomes of our standards. We are not proposing to use our enforcement powers at this stage but will keep this under review as Octavia seeks to resolve these issues. Our priority will be that risks to tenants are adequately managed and mitigated

Governance – G3 – September 2023

Based on the evidence gained from our responsive engagement in 2023, which was set out in our Regulatory Judgement published on 6 September 2023, Octavia’s governance grade is G3.

During the 2022/23 financial year Octavia informed us that it had significantly underperformed against budget, creating a need to implement a substantial in-year savings programme and initiate covenant waiver negotiations.

Our investigations identified that the board had not adequately considered the financial implications when taking on new liabilities or ensured appropriate monitoring of the risk thereafter. We also lack assurance that Octavia’s finance systems and resources are adequate to ensure its plans are monitored and accurately reported. Despite attempts to address this over a period of time, Octavia has been unable to make and sustain the changes required. This has led to poor quality and untimely financial data being produced, unrealistic budgets being set and has adversely affected the quality of Octavia’s regulatory returns.

Therefore, the board of Octavia has not been managing its affairs with an appropriate degree of skill, diligence, prudence, and foresight.

Octavia has acknowledged our concerns and a governance improvement plan is being drafted. We continue to engage with Octavia intensively with regard to its governance improvement plan.

Viability – V3 – September 2023

Based on the evidence gained from our responsive engagement in 2023, which was set out in our Regulatory Judgement published on 6 September 2023, Octavia viability grade is V3.

Octavia’s financial position is weak and requires close and effective management. Since 2020/21 business plans have been built on the assumption that a significant efficiency savings programme will be delivered over the period 2020/2025, however progress to date in delivering that target has been slow. 

We lack assurance that Octavia has a robust financial plan that it is capable of delivering. Octavia’s actual financial performance has been significantly worse than budget for the previous two financial years leading to the implementation of reactive non-permanent in-year savings programmes in those years. In addition, Octavia did not have an approved mitigation plan in place from which it could select and implement the substantial savings required to maintain covenant compliance for 2022/23.

Octavia continues to be exposed to material risks and although there is no immediate solvency issue, it has adapted its latest business plan to maintain its viability, following an external appraisal of the business at the beginning of 2023 in response to these challenges. It is progressing key actions, including disposals, re-sizing and temporarily pausing new commitments relating to development. Octavia’s business plan also requires a substantial programme of permanent savings and material receipts from the sale of high value housing assets. Given Octavia’s poor record of delivering against plans, that not all of the savings required have been identified and that the sales assumptions are not derived from a considered stock rationalisation strategy, we do not have the assurance that the plan will be delivered to ensure long term financial viability.

Octavia is working with us to ensure it has the capacity and capability, and in conjunction with external advisers, the support to make the changes required to ensure its long-term viability and to address the governance and financial viability issues identified in this regulatory judgement.

Background to the judgement

About the landlord

Octavia is a traditional housing provider that is registered as a community benefit society. Octavia’s core focus is the delivery of social housing and related services in partnership with the local communities in the areas in which it operates.

Octavia is the only registered entity and there are four unregistered entities in the group:

• Octavia Living Ltd develops, markets, and manages homes for outright sale;
• Octavia Foundation is a registered charity providing community support to Octavia residents;
• Octavia Hill Ltd is currently dormant; and
• Octavia Development Services Ltd is currently dormant.

Octavia owns and manages around 5,000 social housing homes in central and west London. At the year ended 31 March 2023, Octavia Group reported that it had turnover of £57.2m and employs the equivalent of 365 full-time staff.

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.

Further information

• Regulating the standards

• Regulatory standards for landlords