Decision

Regulatory Notice: Reliance Social Housing CIC (18 October 2021)

Updated 18 October 2021

Applies to England

RSH Regulatory Notice

• Provider: Reliance Social Housing CIC
• Regulatory code: 4778
• Publication date: 18 October 2021
• Governance grade: N/A
• Viability grade: N/A
• Reason for publication: Economic Standards
• Regulatory route: Reactive Engagement

Other providers included in the judgement

None

Regulatory Finding

The regulator has concluded that:

a) Reliance Social Housing CIC (Reliance) is non-compliant with the Governance and Financial Viability Standard. It has failed to ensure that it has effective governance arrangements in place that deliver its aims, objectives and intended outcomes for tenants in an effective, transparent and accountable manner.

b) Reliance has failed to demonstrate that it has an appropriate, robust and prudent risk and control framework in place. It has also not been able to demonstrate that it is managing its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.

c) Reliance has failed to ensure that any arrangements it enters into do not inappropriately advance the interests of third parties or are arrangements which the regulator could reasonably assume were for such purposes.

d) Reliance has not been able to demonstrate that it assesses, manages and where appropriate addresses risks to ensure its long-term viability, including ensuring that social housing assets are protected.

The Regulator’s Findings

The regulator has concluded that it lacks assurance and evidence that Reliance is compliant with the Governance and Financial Viability Standard.

Reliance has experienced rapid growth since 2019, expanding its provision of supported housing, primarily in Birmingham, to over 7,800 units. Reliance has reported in its most recent Statistical Data Return (SDR), that these units are non-social housing which means they are not ‘low cost rental accommodation’ as defined by section 69 of the Housing and Regeneration Act 2008.

Reliance’s primary operating model means it enters into short-term leasing arrangements for properties with third party managing agents. Reliance has landlord responsibility for the tenants of those properties, while the managing agents deliver the landlord and management services and support on Reliance’s behalf under an agreement.

The model operated by Reliance means that it delegates significant responsibilities to a large number of third party managing agents, including the selection, and sign up of new tenants and the assessment of their support needs. These delegations create material risks to Reliance and the regulator does not have assurance that sufficient controls are in place to mitigate the risk of third parties not acting in accordance with the agreements in place.

Ongoing responsibilities delegated to managing agents include service delivery and support for tenants. The regulator does not have assurance that Reliance has effective and embedded systems in place to ensure that managing agents are providing the services and required levels of support to its tenants in accordance with the agreements in place and the housing benefit claim.

The model means Reliance transfers a very significant amount of the rent and service charge income it receives to third party managing agents on an ongoing basis. The evidence we have received from Reliance demonstrates a weak contracting environment and the regulator does not have assurance Reliance has effective systems in place to give it sufficient oversight of these payments. It is the regulator’s judgement that Reliance does not adequately reconcile and monitor the payments made to third parties with evidence that the services are being provided to its tenants. As a result, there is a risk of third party managing agents not providing the services being claimed, or that services and housing management practices are inappropriate. The regulator has not received sufficient assurance that the arrangements entered into by Reliance are not inappropriately advancing the interests of third parties or that taxpayers’ interests and the reputation of the sector are being safeguarded.

A lack of effective board oversight in these areas is a fundamental failure of governance and operational control. Taking into account all the evidence received it is the regulator’s assessment that Reliance is failing to manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight.

Reliance’s stress testing does not meet the requirements of the Governance and Financial Viability Standard. The testing lacks detail and robustness and has not resulted in appropriate mitigation strategies being put in place. Reliance has not been able to demonstrate that it assesses, manages and where appropriate addresses risks to ensure its long-term viability, including ensuring that social housing assets are protected.

The weak oversight of payments made to third parties coupled with Reliance’s inadequate stress testing means that the regulator does not have assurance that Reliance’s long term financial forecasts are based on appropriate and reasonable assumptions and consequently how it can evidence long term viability.

Based on the most recent SDR, Reliance had fewer than 1,000 units of social housing and is therefore classed as a small provider. The regulator does not publish regulatory judgements for providers which fall into this category. Instead, in the interests of transparency, the regulator publishes a Regulatory Notice where it has evidence that a small registered provider is not meeting the regulatory standards. This Notice is published under those arrangements.

Section 220 of the Housing and Regeneration Act 2008 states that the regulator’s regulatory and enforcement powers may be used if a registered provider has failed to meet a standard under section 194 of the Act. The regulator is considering what further action should be taken, including whether to exercise any of its powers.

About the provider

Reliance was registered in 2013 and is designated as a not-for-profit provider. Reliance is a private company limited by shares and a community interest company.

In its 2021 SDR, Reliance reported that it provided 6 units of general needs social housing units and 7,867 units of non-social housing.

About our Regulatory Notices

Regulatory notices are issued in response to an event of regulatory importance (for example, a finding of a breach of the Rent Standard or of a consumer standard that has or may cause serious harm) that, in accordance with its obligation to be transparent, the regulator wishes to make public. More detail about Regulatory notices is set out in ‘Regulating the Standards.’

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.