Previous regulatory judgement: Sovereign Housing Association Limited (28 June 2023)
Updated 27 June 2024
Applies to England
© Crown copyright 2024
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/regulatory-judgement-sovereign-housing-association-limited/current-regulatory-judgement-sovereign-housing-association-limited-28-june-2023
RSH Narrative Regulatory Judgement
- Provider: Sovereign Housing Association Limited
- Regulatory code: 4837
- Publication date: 28 June 2023
- Governance grade: G1
- Viability grade: V2
- Reason for publication: Governance upgrade
- Regulatory route: Reactive Engagement
Regulatory judgement
This regulatory judgement upgrades the previous published assessment of Sovereign Housing Association Limited’s governance from G2 to G1 and confirms its existing V2 grade for financial viability.
In the June 2022 regulatory judgement for Sovereign Housing Association Limited (Sovereign), we concluded that the provider needed to strengthen its governance and compliance frameworks around landlord health and safety to improve the effectiveness of the board’s oversight of landlord health and safety compliance and ensure it was based on robust and reliable data. Sovereign also needed to ensure that it understood how its overall internal controls and assurance framework had failed to manage this strategic risk over a number of years and to apply the learning to strengthen its wider internal controls and assurance framework.
Following Reactive Engagement, the regulator has assurance that Sovereign has now satisfactorily addressed those issues.
Sovereign has externally validated its data, introduced new systems and processes, strengthened its internal controls and improved board reporting and oversight of its landlord health and safety risk. It has also made improvements to the wider risk management internal control and assurance framework.
We regraded our assessment of Sovereign’s compliance with the financial viability elements of the Governance and Financial Viability Standard in November 2022 and this remains unchanged. Based on evidence gained primarily from the 2022 Stability Check, the regulator has assurance that Sovereign’s financial plans are consistent with and support its financial strategy. The provider has an adequately funded business plan, sufficient security in place, and is forecast to continue to meet its financial covenants under a reasonable range of adverse scenarios.
Sovereign is increasing investment in its existing homes and undertaking a business transformation programme that is intended to achieve future operational and financial efficiencies. This work, together with higher inflation and interest rate pressures in the current economic environment, weaken Sovereign’s interest cover position, increase the materiality of its exposure to sales risk and reduce its overall capacity to respond to adverse events.
Other providers included in the judgement
Sovereign Living Limited
About the provider
Origins
Sovereign is a charitable community benefit society and was formed over 30 years ago to receive the transfer of homes from West Berkshire District Council. It has subsequently grown through mergers and development. The most recent merger was with Spectrum Housing Group in November 2016.
Registered Entities
The group has one registered subsidiary, Sovereign Living Limited (Sovereign Living), which is a non-charitable community benefit society. The schemes developed through Sovereign Living are limited to the delivery of affordable home ownership on behalf of the parent. Sovereign Living’s turnover was £7.3m for 2022-23.[footnote 1]
Unregistered Entities
Sovereign has 13 wholly owned subsidiaries (four of which are dormant) and eight Joint Ventures (JVs). The subsidiary activities are not material to the group. JV activity is routed through the Sovereign Housing Partnerships Limited subsidiary, which is a member of eight 50/50 JVs. Three JVs are currently active.
Geographic Spread and Scale
Sovereign has 60,000 homes and operates across the south of England
Staffing and Turnover
In 2022-23, Sovereign employed 2,101 full-time equivalent staff and generated a turnover of £448.1m.[footnote 2]
Development
Sovereign aims to develop over 8,400 new homes by 2028.
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.