Housing Corporation 'over-cautious' in Ujima collapse

The Housing Corporation “failed to take decisive action” which could have prevented Ujima from becoming the first housing association to go bust, a report into the affair has found.

The independent review, commission by the Corporation, said regulatory tools in place at the time were “not fit” for the purpose of dealing with an association which would not cooperate with the regulator.

The review said bad management and an ineffective board were to blame for the collapse of Ujima. But it also said the Corporation had been “over-cautious… and should have intervened earlier as a series of signals indicated mounting problems”.

The review panel, chaired by Simon Braid the head of KPMG’s UK charity practice, said the Corporation’s investment and regulation arms had not communicated well with each other.

The regulator did not downgrade the association’s traffic lights, which indicate performance, until there was “incontrovertible evidence” to do so.

This provided Ujima with a “perverse incentive” not to provide the Corporation with information, said Braid. He added that the new social housing regulator, whcih will replace the Corporation in December, would have a wider range of powers to deal with poorly performing associations.

In response to the review the Corporation set up a new regulation leadership team, said national deputy directors should approve changes traffic light ratings, has reviewed the risk ratings of every association with more than 1000 homes, has introduced quarterly surveys of credit availability and market risk, and has set up a new, centralised system for handling whistleblowing allegations.

The review team also recommended that housing associations that do not cooperate with the regulator’s requests for information should be put in a higher risk category and be given an amber traffic light to publicly indicate their regulatory problems. It also said the insolvency process for housing associations should be changed.

The report said Corporation was also hamstrung by a fear of being taken to judicial review because it would further delay the process of tackling Ujima’s problems.