Regulator slams private equity-linked association which ‘put tenants at risk’

A housing association linked to a new model of private equity investment has been downgraded to a non-compliant rating today for “potentially putting its tenants at risk”, the Regulator of Social Housing has said.

Trinity Housing Association was given a G3 rating for governance and a V3 for financial viability - making it non-compliant on both counts in a stern and damning judgement from the regulator published today.

It said Trinity was “unable to evidence that it is meeting its statutory health and safety obligations thereby potentially putting its tenants at risk”.

Some properties housing vulnerable tenants, it said, have already been moved to other providers with “a shortened tenant consultation period”.

Furthermore, the regulator said, the board at the West Midlands-based association has “failed to manage its significant risks” and has “ceded control to third parties”.

The regulator added that Trinity’s failings amount to a “fundamental failure of governance”, exactly the same words it used to describe First Priority, a housing association with a similar model that almost went insolvent earlier this year.

It said: “The fact the board has failed to manage its significant risks, has ceded control to third parties and has allowed tenants to potentially be put at risk is a fundamental failure of governance."

Trinity and First Priority are both part of a new sub-class of housing associations which do not own many of their own homes, but rather lease them from private investors and listed funds.

Typically, these associations lease specialist supported housing for people with mental health issues and pay index-linked returns to the funds.

According to the regulator, Trinity owns or manages 1,309 homes in 56 local authorities containing 2,345 bed spaces aimed at “vulnerable adults with complex learning and physical disabilities”.

Documents submitted to the stock market reveal that Trinity leases homes from the real estate investment trust (REIT) Civitas. As of September, payments from Trinity to the fund accounted for 6.9% of Civitas’ annual income.

The regulator’s judgement stated that Trinity has in the past breached “certain lease terms due to its inability to make payments as they fell due”.

It added: “Cash flow projections presented to the regulator demonstrated it had not been able to secure access to sufficient liquidity to meet future lease payments.”

According to the judgement, the regulator, in conjunction with investors, has “solved the immediate cash crisis and bought the provider time”. It noted, however, that recovery will be “challenging”.