Social housing investor Civitas (CSH ) has reported an increase in quarterly rental growth and collections despite ongoing issues with My Space Housing Solutions, which is subject to an enforcement notice from the Regulator of Social Housing (RSH).

Investors in the £329m real estate investment trust (Reit) have had little to cheer in recent months as Bolton-based housing provider My Space felt the wrath of the regulator, which is forcing it to renegotiate the terms of existing leases with companies like Civitas.

Civitas rents nine properties to the provider making up 1.3% of its rent roll and in a trading update said that while occupation and rent deliver had been strong until ‘recent months when My Space stopped passing through rental income that is being generated’. Social housing peer Triple Point Social Housing (SOHO ) leases 34 properties to My Space, making up 7.5% of its rent roll.

Civitas Investment Management is still ‘engaging with My Space to monitor the position and is considering whether it is appropriate to take steps to reassign leases over the nine properties so that the company can continue to revenue the rental income that is being generated by these assets’.

The group used the trading update to reaffirm its ‘robust financial position’, and although My Space rents have not been forthcoming, this was an ‘exception’ in its tenant roster as rents continued to grow in the three months to 31 December, in line with a 6% increase reported in the interim results. Shares in the group were trading up 2.1% at 55p.

The company said rental uplifts have ‘been achieved at a similar level to those reported previously’, reflecting a ‘combination of leases that are uncapped together with those that are capped at 4%’.

‘It also reflects selective smaller adjustments that have been agreed to create greater timing alignment between the date of lease indexation and the date that the approved provider…secures rental uplifts with local authorities,’ it said.

Soaring inflation has provided a boon to index-linked rents, although the trust said it is ‘expected to decline significantly throughout 2023’, and it is offering an ‘element of flexibility’ to approved providers to ensure the longevity of its relationships with providers and help local authorities provide ‘long-term value for money’.

Rent collection levels also remain in line with recent levels, and Civitas was quick to distance itself from the problems at Home Reit (HOME ), which invests in  homeless accommodation, but has seen its share suspended over a delay to the publication of its results following an attack by short-sellers and activist investors.

‘The company has not experienced any material changes to its rent collection of the nature that has recently been reported elsewhere in the homeless accommodation sector, which is not a service generally provided by the company,’ it said.

While the company does not provide accommodation for homeless people, it does have a ‘small number’ of properties used for housing asylum seekers, which make up 1% of the portfolio and are leased to companies with government-backed contracts.

The main focus of the trust is properties that are ‘typically suitable for the delivery of high acuity care’ and the average number of care houses provided in a typical Civitas property is 50 hours per week. Due to these care levels, the portfolio qualifies as ‘specialist supported housing’ and is therefore’ exempt from the ‘rent standard’ which limits the maximum rents social housing tenants pay.

‘The delivery of active and long-term care within our adapted properties is a key differentiator for the company in supporting the rent roll and we invest considerable resource in maintaining a detailed understanding of the operations of the care sector in the UK,’ said Civitas.

The ‘rent standard’ has been one area of consternation between My Space and the RSH, which is concerned that the housing provider’s properties do not meet the definition of specialist supported housing and it has misclaimed for many of its unit under the rent standard rules.

Civitas maintained that its portfolio has ‘always been directed to support the delivery of high levels of care for vulnerable individuals in bespoke, adapted care-based housing’.

‘We do this in a granular manner, drawing on the in-house expertise of managers experienced in housing benefits, property management and care management,’ it said.