Decision

Withdrawn regulatory judgement: Shepherds Bush Housing Association Limited (22 June 2022)

Updated 19 March 2024

Applies to England

Withdrawn on 19 March 2024: Shepherds Bush Housing Association Limited became a subsidiary of The Guinness Partnership Limited on 4 December 2023.

RSH Narrative Regulatory Judgement

• Provider: Shepherds Bush Housing Association Limited

• Regulatory code: LH0050

• Publication date: 22 June 2022

• Governance grade: G3

• Viability grade: V2

• Reason for publication: Governance downgrade

• Regulatory route: In Depth Assessment and Reactive Engagement

This regulatory judgement downgrades our previous assessment of Shepherds Bush Housing Association Limited’s (Shepherds Bush) governance from G2 to G3 and reconfirms its V2 viability grade. This means that there are issues of serious regulatory concern but that the provider is working with us to address them.

Following Reactive Engagement, the regulator has concluded that it lacks assurance that the board of Shepherds Bush has been managing its affairs with an appropriate degree of skill, diligence, prudence and foresight. The regulator has insufficient assurance that Shepherds Bush’s governance, risk management and internal control frameworks have been effective or that its business planning framework allows it to monitor and accurately report on all its loan covenants.

Weaknesses in the financial governance arrangements and inaccuracies in board reporting, coupled with a lack of effective board oversight and scrutiny, meant it failed to identify the potential crystallisation of a serious risk in sufficient time for the board to effectively manage it. As a result, Shepherds Bush came within weeks of a potential loan covenant breach which required it to seek an emergency waiver from a third party. Although covenant compliance was achieved at year end, the potential ceding of control by the board is a serious failure of governance. In addition, the event highlights weaknesses in Shepherds Bush’s approach to risk management and that its reporting and monitoring systems are not sufficiently robust.

Through the In Depth Assessment of Shepherds Bush, the regulator identified concerns about fire safety reporting and its compliance with the Decent Homes Standard (DHS). Although we have not found a breach of the consumer standards on this occasion, during our engagement with Shepherds Bush it was difficult to obtain a consistent data set. Data quality is an ongoing issue with Shepherds Bush and the most recent board minutes show the board continuing to question the quality and reliability of the data it is receiving.

The principles of co-regulation and transparency are fundamental pillars of the regulatory framework. There have been a number of incidences where Shepherds Bush’s communication and provision of information fell below the required standard. This includes a lack of notification to the regulator of the concerns about the fire safety and DHS compliance, and the lack of timeliness in reporting the potential covenant breach.

In response to being placed on the regulator’s Gradings Under Review list, Shepherds Bush accelerated several actions to improve its governance and put in place a Governance Assurance Plan that includes an overarching governance review, improvements to the financial governance and controls and several data reviews.

The regulator’s assessment of Shepherds Bush’s compliance with the financial viability elements of the Governance and Financial Viability Standard is unchanged. Based on evidence gained from its latest financial forecasts, the regulator has assurance that Shepherds Bush complies with the financial viability element of the Governance and Financial Viability Standard and that its financial plans are consistent with, and support, its financial strategy.

Delivery of Shepherds Bush’s financial plans remains challenging, particularly in the early years where there is limited headroom. It remains exposed to an adverse change in the housing market due to its sales programme and the ongoing requirement to deliver its efficiency savings programme. Effectively managing the risk of these financial exposures relies on Shepherds Bush’s accurate and timely financial reporting, monitoring and data integrity. However, the organisation has an approved business plan based on reasonable assumptions, including significantly increased building safety expenditure, that is covenant compliant in all years and can withstand a reasonable range of stresses.

Other providers included in the judgement

None

About the provider

Origins

Shepherds Bush is a charitable community benefit society. Its core activity is the provision of affordable housing. This includes supported housing and shared ownership. It also owns some commercial properties.

Registered Entities

Shepherds Bush is the only registered entity.

Unregistered Entities

Shepherds Bush has one unregistered subsidiary, Shepherds Bush Housing Developments, which is currently dormant.

Geographic Spread and Scale

Shepherds Bush owns and/or manages around 5,000 homes across nine boroughs in West and South West London, predominantly in the London Borough of Hammersmith and Fulham.

Staffing and Turnover

As at the 31 March 2021 Shepherds Bush employed 189 full-time equivalent staff and had a turnover of £40.3m.

Development

Shepherds Bush plans to develop 600 new homes by 2028. The majority of these are affordable housing for social rent or low-cost home ownership.

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.

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.