RSH Narrative Normative Ruling
- Provider: Origin Housing Limited
- Regulatory code: L0871
- Publication date: December 14, 2023
- Governance grade: G3
- Feasibility grade: V3
- Reason for publication: Governance and viability downgrades
- Regulatory Pathway: In-Depth Assessment and Reactive Engagement
Regulatory judgment
This regulatory judgment downgrades our previous assessment of Origin Housing Limited's governance grade from G1 to G3 and downgrades its financial viability grade from V2 to V3. This means that there are serious regulatory issues that the provider is working with us to address.
Following the investigation, the regulator concluded that it has no assurance that Origin Housing Limited (Origin) has an appropriate, robust and prudent business planning, risk and control framework. Origin has failed to ensure adequate monitoring, reporting and compliance with its funders' agreements. Inadequate resources and data errors in financial reports to the board were such that Origin has not been managing its affairs with an adequate degree of skill, diligence, prudence and foresight.
In May 2023, Origin identified material errors in its reporting of interest payable for the 2023 financial year, which significantly reduced the available margin above its covenant requirement. A review commissioned by Origin has confirmed deficiencies in its internal controls related to the accuracy of its budget setting, financial performance reporting and forecasting. These weaknesses led to errors in year-end covenant calculations and therefore exposed Origin to serious and material risks.
In July 2023, one of Origin's funders identified that Origin had miscalculated its covenant requirements, resulting in a potential default for the 2023 financial year. Origin failed to ensure that it adequately understood its covenant requirements and, Consequently, he had to seek an agreement for a loan variation and comply with the refinancing. conditions set by the financier. Origin did not immediately notify the regulator about the possible breach of the agreement.
Origin's financial situation is weak and requires close and effective management. In September 2023, a further review of budget assumptions and annual performance resulted in additional adverse variances affecting Origin's ability to meet funder covenants for the 2024 financial year. There is a reliance on uncertain cash flows, such as disposals of fixed assets and the lack of assurance that Origin has robust and appropriate mitigation strategies available. Poor financial governance and weak internal controls have impacted Origin's future financial viability, putting its social housing assets at undue risk.
Origin is working with the regulator to address the issues raised in this ruling, as well as to prevent breaches of agreements and ensure access to sufficient liquidity. Origin is developing an action plan to strengthen board oversight, internal controls and financial reporting. Origin continues to pursue a potential partnership with another registered provider to improve its financial resilience.
Other suppliers included in the ruling
Origin Housing 2 Limited
About the supplier
origins
Origin is a registered charitable provider of social housing incorporated under the Co-operative and Community Benefit Societies Act 2014. Its main activities are the development and management of housing and the provision of care and support services.
Origin develops new homes with its own funding and grants from the Greater London Authority as a strategic partner.
Registered entities
Origin is the parent entity and main registered shareholder within the group. There is another registered entity, Origin Housing 2 Limited, which is also a social housing provider.
Unregistered entities
There are four unregistered entities in the group. Origin Finance Limited and Origin Finance 2 plc are financing vehicles. Origin Housing Developments Limited and Origin Properties Limited are engaged in property development. The latter also offers investment property lease management services.
Extension and geographical scale
Origin owns and manages around 7,700 homes mainly in London and Hertfordshire.
Staffing and Turnover
For the year ending 31 March 2023, Origin recorded a turnover of ยฃ68.4 million and employed 279 full-time equivalent people.
Development
Origin aims to deliver 1,112 new homes by 2028, comprising a mix of social renting (66%) and shared ownership (29%) and open market sales (5%).
About our trials
Key to qualifications
Governance:
| Obedient | |
|---|---|
| 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 ongoing compliance. |
| Not compliant | |
|---|---|
| G3 | The provider does not meet our governance requirements. There are serious regulatory issues and, according to us, the provider is working to improve its position. |
| G4 | The provider does not meet our governance requirements. There are issues that raise serious regulatory concerns and the provider is subject to regulatory intervention or coercive measures. |
Viability:
| Obedient | |
|---|---|
| V1 | The supplier meets our feasibility requirements and has the financial capacity to address a wide range of adverse scenarios. |
| V2 | The supplier meets our feasibility requirements. You have the financial capacity to deal with a reasonable range of adverse scenarios, but you need to manage material risks to ensure continued compliance. |
| Not compliant | |
|---|---|
| V3 | The supplier does not meet our viability requirements. There are serious regulatory issues and, according to us, the provider is working to improve its position. |
| V4 | The supplier does not meet our viability requirements. There are issues that raise serious regulatory concerns and the provider is subject to regulatory intervention or coercive measures. |
Note: Use of an asterisk
against a rating indicates that the evaluation refers to a provider designated as for-profit.
Regulatory route definitions
In-depth assessment (IDA): An IDA is a tailored assessment of a supplier's viability and governance, including its approach to value for money. It involves on-site work and considers in detail a supplier's ability to meet its financial obligations and the effectiveness of its governance structures and processes.
Stability Checks: Based primarily on information provided through regulatory filings, a stability check is an annual review of a supplier's financial situation and its latest business plan. The review focuses on determining whether there is evidence indicating that a provider's current judgments warrant reconsideration.
Reactive engagement: Reactive engagement is unplanned work that is triggered by new information or a developing situation that may have implications for a provider's current regulatory judgment.
Stability Checks and Reactive Participation: In some cases, we will publish narrative regulatory judgments that combine evidence obtained from both stability checks and reactive participation. For more details on these processes, seeRegulation of standards
.
