Willow Tree Housing Partnership Limited (L2424) - Regulatory Judgement: 30 October 2024
Published 30 October 2024
Applies to England
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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 | October 2024 |
| Governance | G2 Our judgement is that the landlord meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance. |
First grading | October 2024 |
| Rent | Our judgement is that there have been serious failings in the landlord delivering the outcomes of the Rent Standard and significant improvement is needed. | New judgement | October 2024 |
| Viability | V2 Our judgement is that the landlord 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. |
First grading | October 2024 |
Reason for publication
We are publishing a regulatory judgement for Willow Tree Housing Partnership Limited (Willow Tree) following an inspection completed in October 2024 and earlier responsive engagement carried out following a self-referral from Willow Tree relating to the Rent Standard.
This regulatory judgement confirms a consumer grading of C3, a governance grading of G2 and a financial viability grading of V2. This regulatory judgement also confirms that Willow Tree has not met the requirements of the Rent Standard.
This is the first time we have issued a regulatory judgement in relation to this landlord.
Summary of the decision
From the evidence and assurance gained during the inspection, it is our judgement that there are some serious failings in how Willow Tree is delivering the outcomes of the consumer standards and significant improvement is needed. Specifically, this is in relation to outcomes in the Safety and Quality Standard and the Transparency, Influence and Accountability Standard. Based on this assessment, we have concluded a C3 grade for Willow Tree.
Our judgement is that Willow Tree meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance. Specifically, Willow Tree needs to strengthen strategic risk management, enhance the effectiveness of internal controls and improve data quality and reporting. Based on this assessment, we have concluded a G2 grade for Willow Tree.
Our judgement is that Willow Tree has not met the requirements of the Rent Standard. Some of its tenants have been overcharged as a result of errors that Willow Tree made in setting rents over a prolonged period.
Our judgement is that Willow Tree meets our financial viability requirements and has the financial capacity to deal with a reasonable range of adverse scenarios. However, Willow Tree has a weak financial profile and needs to manage material risks to ensure continued compliance. Willow Tree has provided appropriate assurance that it has access to sufficient liquidity and adequate funding is in place. Based on this assessment, we have concluded a V2 grade for Willow Tree.
How we reached our judgement
We carried out an inspection of Willow Tree to assess how well Willow Tree is delivering the outcomes of the consumer standards and meeting our governance and financial viability requirements, as part of our planned regulatory inspection programme. Through the inspection, we considered all four of the consumer standards: Neighbourhood and Community Standard, Safety and Quality Standard, Tenancy Standard, and the Transparency, Influence and Accountability Standard.
During the inspection we observed a board meeting and a resident scrutiny panel meeting, spoke to tenants and held meetings with Willow Tree including with its non-executive directors. We also reviewed a wide range of documents provided by Willow Tree.
We began our responsive engagement with Willow Tree when it made a self-referral to us in February 2024. It had identified issues relating to rent setting. Our responsive engagement with Willow Tree focused on understanding the nature of errors that it had made in setting rents, the actions being taken in response and how the impact on tenants was being addressed.
Our regulatory judgement is based on all the relevant information we obtained during the inspection as well as analysis of information supplied by Willow Tree through its regulatory returns and other regulatory engagement activities, including the earlier responsive engagement in relation to the rents issue.
Summary of findings
Consumer – C3 – October 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 hold this information at an individual property level based on a physical assessment of all homes and to ensure that its homes meet the requirements of the Decent Homes Standard (DHS). Willow Tree had up to date stock condition survey information in place for relatively few of its homes, and the scope of those surveys did not specifically provide assurance in relation to the DHS. We have concluded this represents a serious failing in delivering the required outcomes of the Safety and Quality Standard.
The Safety and Quality Standard 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. Willow Tree’s reported performance information sets out that statutory health and safety requirements are being achieved and related work is appropriately actioned. However, given the limited stock condition survey information, Willow Tree has been unable to provide evidence that it has a sufficient understanding of its homes and the level of overall assurance on safety that it needs to deliver the outcomes in the Safety and Quality Standard. The inspection also identified weaknesses in how information on damp and mould is reported to the board, with improvements required to facilitate more proactive identification and management of damp and mould issues.
We found evidence of weaknesses in the provision of an effective, efficient and timely repairs service. Willow Tree’s tenant satisfaction, complaints and performance information demonstrates that improvement is needed in this area. Willow Tree is taking appropriate steps to resolve these weaknesses, including increasing the size of its property team, which is now working more closely with contractors to improve performance.
We found evidence of weaknesses across several areas of the Transparency, Influence and Accountability Standard. The inspection identified that tenants generally have access to limited information on service performance, which could impact the opportunities to hold their landlord to account. Complaint handling performance information indicates that complaints are addressed promptly, although there is more work needed by Willow Tree to ensure it uses learning from complaints to inform service delivery. Willow Tree does not yet have sufficient information to understand the diverse needs of its tenants and gain assurance that its services deliver fair and equitable outcomes for tenants.
In relation to the Neighbourhood and Community Standard Willow Tree is making improvements to the quality of information its board receives.
We have assurance that Willow Tree meets the tenure requirements of the Tenancy Standard. The inspection found evidence that Willow Tree’s approach to lettings and allocations is transparent, and that measures are in place to ensure terms of tenancy are appropriate and meet the needs of tenants.
Governance – G2 – October 2024
Based on the evidence gained from the inspection, there is assurance that Willow Tree’s governance arrangements are meeting the requirements of the Governance and Financial Viability Standard. However, Willow Tree needs to take action to improve some aspects of its governance arrangements.
We have assurance that Willow Tree has an appropriate business planning, risk and control framework in place. However, we found evidence through the inspection that improvement is needed to increase the effectiveness of internal controls across a number of areas and to strengthen strategic oversight of risk. The board has recognised this and is seeking external assurance on enhancing its risk management framework. Work is also underway to finalise a new asset management strategy and to update the value for money strategy to reflect post-merger strategic objectives.
The board has demonstrated a focus on gaining assurance in areas that pose the most significant risks to tenant outcomes. Performance on landlord health and safety compliance is well understood with arrangements in place to give the board oversight of this risk.
The board is aware that there is a need for a continued focus on data quality and reporting. A key element of this involves transferring and validating data held on legacy systems into a centralised housing management system. More detailed and timely information would allow the board to monitor and challenge delivery of customer service outcomes on a more informed basis and enhance the data available for tenants to scrutinise and hold their landlord to account. Also, improvement is needed in controls around the accuracy of regulatory returns submitted to the regulator.
Willow Tree was able to provide evidence that financial viability has been prioritised through robust reporting to the board and there is evidence that financial risks are being managed. Stress testing information indicates that mitigation strategies are in place. The merger business case and cost savings have been delivered and the board has set a new strategic plan.
Willow Tree demonstrated that it has reviewed the extent to which it is delivering outcomes in regulatory standards and is taking action on the identified gaps. Willow Tree’s board is focused on the improvements needed and there are clearly defined improvement plans identified, against which resources have been allocated. There is a positive direction of travel in putting in place post-merger assurance for key areas, including in relation to information held on the condition of homes and in arrangements for tenants to be able to influence and scrutinise landlord services.
Rent – Serious failings in delivering outcomes – October 2024
The self-referral from Willow Tree in February 2024 related to a potential failure to deliver the outcomes of the Rent Standard, specifically in relation to following the requirements of the government’s Rent Policy Statement. The main element of this was potential errors in its calculation of formula rents going back over a number of years, as there was no evidence that the correct valuation data has been used for rent setting.
Following externally commissioned work to obtain the appropriate valuations,
WTHP has corrected its formula rents and has also retrospectively applied permitted flexibility on setting actual rents above formula rent levels. This has identified that actual rents have been overcharged in 185 tenancies. We have assurance that refunds have been made, calculated at £133k going back over the last six years, and corrected rent notices have been issued.
Willow Tree failed to comply with the requirements of the Rent Policy Statement in two respects. Firstly, formula rent calculations were not based on appropriate valuations. Secondly, tenants were not consulted on the decision to apply the permitted rent flexibility above corrected formula rent levels when establishing the revised actual rents to be charged
Taking into account the extent of these issues and potential impacts on tenants, we have concluded that there have been serious failings in how Willow Tree has delivered the outcomes of the Rent Standard.
Viability – V2 – October 2024
Based on the evidence gained through the inspection, we have concluded that there is appropriate assurance that Willow Tree’s financial plans are consistent with and support its financial strategy. Willow Tree has evidenced that it has an adequately funded business plan, sufficient security in place to support its financial plans, and is forecast to continue to meet its financial covenants under a reasonable range of adverse scenarios. Willow Tree’s board has effective oversight of funder covenant compliance.
Willow Tree is increasing its investment into existing homes, including in relation to energy efficiency works, which is putting pressure on its financial performance. A key financial risk for Willow Tree is the potentially higher repairs costs that may arise once more robust stock condition information is in place. There is also a risk posed by a reliance on sales income, including from the disposal of some of its existing homes, to maintain covenant compliance. These risks impact on Willow Tree’s capacity to respond to adverse events.
Background to the judgement
About the landlord
Willow Tree is a community benefit society created by way of a transfer of engagements of Tamar Housing Society Limited into South Western Housing Society Limited on 31 March 2023. Its main purpose is the provision of social housing for general needs, which includes some RentPlus properties. It also provides homes for shared ownership and housing for older people.
Willow Tree owns and/or manages around 1,500 homes across the South West of England, with the majority being in Devon and Somerset.
Willow Tree employs the full-time equivalent of 31 staff. Its turnover for the year ended 31 March 2024 was £9.7m.
Willow Tree plans to develop 60 new homes over the next three years.
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.