Notting Hill Genesis response to regulatory judgement

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Notting Hill Genesis (the Issuer) has issued each of the following:

(a) £250,000,000 2.875 per cent. Secured Bonds due 2029;

(b) £400,000,000 3.25 per cent. Secured Bonds due 2048;

(c) £250,000,000 4.375 per cent. Secured Bonds due 2054;

(d) £350,000,000 3.75 per cent. Secured Bonds due 2032; and

(e) £300,000,000 5.25 per cent. Secured Bonds due 2042,

(together the Main Market Bonds); and

(f) £250,000,000 2.00 per cent. Secured Sustainability Notes due 2036 (the ISM Bond).

27 November 2024, London - Notting Hill Genesis, one of London's largest not-for-profit housing associations, is today responding to the publication of the regulatory judgement by the Regulator of Social Housing. The judgement confirms an unchanged financial viability rating of V2, a first consumer rating of C3, and a change in governance rating from G1 to G3.

Retaining a V2 rating underpins our financial strength, also recently confirmed by our ratings agencies, giving us confidence and a stable platform from which to deliver the improvements we must.

Patrick Franco, chief executive of Notting Hill Genesis, said: "I joined Notting Hill Genesis last year to work alongside dedicated colleagues and improve services for our 130,000 residents, and I am sorry that they are still not getting the service they deserve.

"Although we've made good progress over the past 12 months in line with our Better Together strategy, we accept that we have more work to do.

"I am pleased the regulator has noted our proactivity and co-operation throughout the inspection process, and we will work at pace with them now, as well as with residents, colleagues and other key stakeholders, to deliver our plan.

"Today's regulatory judgement is very disappointing for Notting Hill Genesis, but it confirms the need for us to redouble efforts in our ongoing drive to become a more resident-focused organisation.

"Our Better Together strategy, published in summer 2023, is our three-year plan to deliver better homes and services for residents. We have been working hard to deliver this plan as well as making other significant changes to our service offer, teams and capital allocation, including the decision to prioritise existing homes over development. That decision will see an investment of £770m over the next 10 years. These changes, which we are pleased are recognised by the regulator, are driving improvements. Unfortunately, we have not made progress quickly enough to have avoided these non-compliant consumer and governance ratings in this rightly more stringent regulatory environment.

"Today's judgement also reinforces the need for long-term government support if social housing providers in London are to achieve the higher standards rightly expected of us. We welcome the new government's clear commitment to increasing the delivery of much-needed social homes and look forward to working with them to ensure sufficient support in terms of retrofit and remediation, building more affordable homes, and investing in supply chains and skills development to support those programmes."

Ian Ellis, chair of the Notting Hill Genesis group board added: "The outcome of our inspection clearly reiterates the need for us to quickly improve the standard of our existing homes, to deliver better outcomes for customers and to continue to implement our new risk management framework. Rapidly returning to regulatory compliance and in so doing improving our offer to residents is now the number one priority for the board."

The Regulator of Social Housing state: "Notting Hill Genesis is working positively with us and acknowledges the concerns found through the inspection. They have begun to deliver the necessary improvements and are making key appointments, as well as working with external advisors, to help address the issues identified in this regulatory judgement."

Laying the foundations for change

We launched our Better Together three-year corporate strategy 18 months ago, to recognise and set out the changes we needed to make to deliver better homes and service to our residents.  

The plan is well underway and has been augmented by other significant strategic changes and initiatives including:

Record investment:

·    Significant investment in homes including repairs and building and fire safety. Last year we spent a record £40m on improving the fabric of our homes. This is four times the level of five years ago.

·    More than £1 million investment into overhauling our complaint handling frameworks and creating a new centralised service.

Re-organisation

·    Temporarily scaling back our new homes programme and commitment to re-deploy this capital into existing homes.

·    Significant restructure of our operations function to support a new operating model and ensure we're focusing on the issues that matter most to residents

New leadership:

·    Recent appointments including Mark Smith as chief financial officer, Tabitha Kassem as chief governance and risk officer and Craig Wilcockson as chief people officer. These latter two appointments are new at executive board level recognising their importance in driving change.

·    Vipul Thacker, our group director of central services, is taking up a new role as chief organisational effectiveness officer to create extra capacity at leadership level to focus on specific improvement projects.

Our plan will deliver significant improvements

We are encouraged that the regulator has recognised the plans we have in place. It is incumbent on us now to deliver these plans and evidence our progress.

Consumer standards

Ensuring legal compliance of external managing agents - we have put in place dedicated resource who will continue work to obtain any outstanding documents from external managing agents, so we can be assured of the health and safety of our residents who live in homes managed by such agents.

Fire remediation actions - although the regulator is satisfied that we are proactively managing building safety risks, they are concerned about the volume of non-urgent overdue actions arising from our fire risk assessment programme. All buildings that need one have an in-date fire risk assessment and the average number of actions being completed each month has increased steadily since February 2023, but we need to do more. Work to address them has accelerated and we have a plan and resourcing to clear this backlog. Urgent actions are being prioritised and appropriate mitigations demonstrate our commitment to resident safety.

 Repairs, maintenance and planned improvements - we are investing record amounts in our homes and have created a new centralised repairs service. We are confident residents will notice a significant improvement over time.

Understanding the condition of our homes - we have failed to meet the regulator's expectations around physical stock condition surveys of all our homes. As well as physical stock condition surveys, we gather information about our homes through our programme of local officer annual visits, inspections when homes become empty, ground level and building safety surveys, compliance inspections and aerial photography. We remain on track to deliver our current plan to ensure every home is physically assessed.

Listening to our residents - our new tenant engagement approach creates a clear link between our resident forum and our governance, and we are pleased that the regulator has noted examples of customer influence on changes to policies and accessibility of information. We have also invested £1m in a new centralised complaints service as part of a wider new customer experience team, which we are confident will deliver a material improvement in outcomes for residents.

Governance

Risk management, internal controls and assurance framework - the regulator acknowledged that our stress-testing and mitigation plans are aligned to the strategic risk register and stated risk appetite, and evidence of board oversight and ownership is in place, but our broader risk management, internal controls and assurance framework requires further work. Our risk management implementation plan will continue to deliver at pace to support improvements.

Board oversight of health and safety - we recognise that our reporting to board on this critical issue needs to be improved and simplified. We are addressing this to ensure a consolidated view is in place that supports ongoing effective review and oversight. 

Board skills - we have made new board and committee appointments over the past year in line with the skills and capabilities required to support our strategic priorities, challenges and opportunities. Further key role recruitment is already planned for early 2025. Ensuring our board members have an effective mix of skills will remain a key focus and will also be considered as part of our independent governance review. 

Next steps                                                                                                                

We will continue to work constructively with the regulator to agree a comprehensive and realistic action plan and evidence our progress. That plan will build on the foundations we've established in recent months and on progress we've made to date. 

We'll also continue to engage with our residents to inform and improve services. We are writing to all our residents to apologise that our services are not yet at the standard they expect or deserve and will provide them with further information and regular updates on progress.

Our transformation will take time, but we are committed to seeing this through and are confident in our ability to achieve this.