Issues at for-profit housing provider raise “serious regulatory concern”

The Regulator of Social Housing has handed Heylo Housing a non-compliant grading after an investigation found it breached the governance and viability elements of its Governance and Financial Viability Standard.

In a regulatory judgement published on Wednesday (21 December), the RSH said issues at the housing provider, which claims to be the UK's largest private investor in shared ownership housing, raised "serious regulatory concern".

Following an in-depth assessment and reactive engagement, RSH also concluded that it "lacks assurance that Heylo RP has adequate control of its social homes", leaving their future subject to decisions driven by the interests of unregistered connected companies.

The regulator added that it does not have confidence in Heylo's ability to manage its risks adequately and ensure its own long-term viability.

Significant weaknesses in its governance were identified by the RSH, including:

• "Inadequate oversight" of the services provided by the managing agent;
• "weak arrangements" for Heylo to be consulted on investment decisions; a lack of assurance that clear roles, responsibilities and accountabilities had been established for the board;
• lack of appropriate terms of reference, standing orders or a framework of delegation;
• failure to review compliance with its chosen code of governance since its inception in 2017;
• And inadequate arrangements in place for Heylo to obtain appropriate support or assistance as necessary from its unregistered parent.

In light of the investigation, Heylo has commissioned an independent review of its governance arrangements, made new board appointments, and is willing to review arrangements with its parent and the wider group, the RSH said.

The RSH announced its investigation into Heylo in July of this year, noting that it was the first time the regulator had launched such an investigation into a for-profit registered provider.

Harold Brown, RSH's Senior Assistant Director for Investigations and Enforcement, said: "It is essential that registered providers do not enter into arrangements that compromise their ability to meet regulatory obligations. It is also vital that they have sufficient control over the social homes they provide to ensure their long-term viability. Heylo RP has failed to do this."

Brown added: "Heylo RP needs to address the issues we have identified, and we will monitor it closely as it works to return to compliance with our standards."

The Governance and Financial Viability Standard is one of the regulator's three economic standards that it asks providers to meet. It looks at how well the organisation is run and if it is financially viable.

Responding to the regulator's decision, Andrew Geczy, CEO of Heylo Housing, said: “We are disappointed with this judgment given the considerable work we have undertaken with the Regulator to explain heylo’s robust structure. We expect to make the successful case for governance and financial viability following further constructive collaboration with the Regulator. 

“Throughout the many months of the IDA process, it became clear the way that the heylo RP fits within the unique heylo structure was an unfamiliar one to the Regulator. As part of that process, the business has already undertaken several steps to address the issues raised by the Regulator during the IDA process prior to receiving the Gradings Under Review. We recognize the ongoing discussion with regards to our corporate structure and would also note that the governance issues have all been addressed since.

“In their assessment of viability in this judgement, the Regulator’s scope was limited to heylo RP; the Regulator did not review or consider the viability of the Investment Partners or the heylo Group as a whole."

Geczy continued: “heylo RP was founded following the acquisition of a Registered Provider in 2017, and therefore the group structure was not reviewed by the Regulator as part of that process. However, heylo and its group of institutional investors are confident that it has been and remains a sound, well run business, with a strong financial standing over that time. Our homes are safe and well maintained, and we are proud of our high customer satisfaction levels. Our strong business model has been evidenced by our ability to attract significant capital investment to the sector with minimal risk, and more importantly, to allow thousands of families to buy an affordable home. We currently have £400m of capital to deploy to help more families own their own homes. We are also proud of our strong partnerships with Homes England and housebuilders across the country.

“Since 2014, heylo has grown into the UK’s largest private investor in shared ownership housing, helping more than 7,000 households get onto the housing ladder, creating tremendous social value. We are committed to continue to deliver many more much needed affordable homes over the coming years.”

Adam Carey