Decision

Calico Homes Limited (L4254) - Regulatory Judgement: 25 September 2024

Updated 25 September 2024

Applies to England

Our Judgement

	Grade/judgement	Change	Date of assessment
Consumer	C2 Our judgement is that there are some weaknesses in the landlord delivering the outcomes of the consumer standards and improvement is needed.	First grading	September 2024
Governance	G2 Our judgement is that the landlord meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.	Downgrade	September 2024
Viability	V2 Our judgement is that the landlord meets our viability requirements. It has the financial capacity to deal with a reasonable range of adverse scenarios but needs to manage material risks to ensure continued compliance.	Assessed and unchanged	September 2024

Reason for publication

We are publishing a regulatory judgement for Calico Homes Limited (Calico) following an inspection completed in September 2024.

This regulatory judgement confirms a consumer grading of C2, a governance downgrade to G2 and a financial viability grading of V2.

Prior to this regulatory judgement, the governance and financial viability gradings for Calico were last updated in December 2023 following a stability check to confirm a G1 grade for governance and a V2 grade for financial viability. This is the first time we have issued a consumer grade in relation to this landlord. 

Summary of the decision

From the evidence and assurance gained during the inspection, it is our judgement that there are some weaknesses in Calico delivering the outcomes of the consumer standards and improvement is needed, specifically in relation to outcomes in our Safety and Quality Standard. Based on this assessment, we have concluded a C2 grade for Calico.

Our judgement is that Calico meets our governance requirements, but needs to improve some aspects of its governance arrangements to support continued compliance, specifically in relation to board effectiveness and to strengthen the effectiveness of risk management processes. Based on this assessment we have concluded a G2 grade for Calico.  

Our judgement is that Calico meets our financial viability requirements, has access to sufficient liquidity and continues to forecast funder covenant compliance with reasonable headroom. Calico’s financial profile reflects the additional investment it is making in tenants’ homes and it needs to manage material risks to ensure continued compliance. Based on this assessment, we have concluded a V2 grade for Calico.

How we reached our judgement

We carried out an inspection of Calico to assess how well it is delivering the outcomes of the consumer standards and meeting our governance and financial viability requirements, as part of our planned inspection programme. Through the inspection, we considered all four of the consumer standards: Neighbourhood and Community Standard, Safety and Quality Standard, Tenancy Standard, and the Transparency, Influence and Accountability Standard.

During the inspection we observed a board meeting and tenant scrutiny panel, spoke to tenants, held meetings with Calico including with its non-executive directors, and reviewed a wide range of documents provided by Calico.

Our regulatory judgement is based on all the relevant information we obtained during the inspection as well as analysis of information supplied by Calico in its regulatory returns and other regulatory engagement activity.  

Summary of findings 

Consumer – C2 – September 2024

During the inspection Calico provided evidence-based assurance that it has appropriate systems for ensuring the health and safety of its tenants in their homes and associated communal areas. Calico demonstrated that it has a good understanding of its compliance with landlord health and safety requirements and performance information demonstrated a good level of reported compliance with legal obligations. We saw evidence that Calico has sought external specialist assurance in this area which included considering how best to make sure the information that it holds is accurate, consistent and complete. Calico has made improvements in response to recommendations from this review.

We found weaknesses in Calico’s understanding of the condition of its homes at an individual property level. Calico has a programme in place to gain an accurate and up to date record of the condition of its homes through physical stock condition surveys, however at the time of our inspection it has not made sufficient progress in delivering this programme. Calico is able to demonstrate that it uses the information it holds to assess the quality and safety of its tenants’ homes and inform decision making on future investment in its homes. We will continue to engage with Calico while it delivers the actions required to complete the gaps in its understanding of the condition of its homes.

The inspection identified weaknesses in the provision of an effective, efficient and timely repairs service, which Calico is taking steps to resolve. Due to a high volume of outstanding repairs Calico needs to demonstrate that it is able to address the backlog this has caused.

In relation to the Neighbourhood and Community Standard, we gained assurance that Calico is working in partnership with relevant organisations to deter and manage anti-social behaviour and hate incidents in the neighbourhoods in which it provides social housing.

Calico has demonstrated that, in line with the Tenancy Standard, it seeks to offer tenures that are appropriate, taking into account the purpose of the accommodation, the needs of individual households, the sustainability of the community and the efficient use of social housing.  

In relation to the Transparency, Influence and Accountability Standard, we saw evidence that Calico had identified weakness in how it handles tenant complaints and made improvements as a result. We observed that Calico has recently implemented a range of engagement and scrutiny arrangements which provide opportunities for tenants to share views and contribute to decision-making. These arrangements will need to continue to be supported so that the feedback provided can be used to inform Calico’s service standards and performance improvement processes.

Calico has recognised that it needs to improve the information that it holds about tenants and is taking action to address this. Calico evidenced that it regularly provides a range of relevant and accessible information to tenants, including about its performance in delivering landlord services.

Governance – G2 – September 2024

Based on the evidence gained from the inspection, there is assurance that Calico’s governance arrangements are meeting the requirements of the Governance and Financial Viability Standard.

However, we found evidence through the inspection that improvement is needed so that Calico’s board can demonstrate that it ensures decisions are made in the best interests of the organisation and with the independence needed, particularly in being able to achieve value for money from use of charitable resources. A greater degree of transparency and clarity is needed on interactions between Calico and other organisations in the group structure. This is particularly important when receiving significant services from, and disposing of charitable assets to, other organisations within the group.  

Calico’s board was not able to provide sufficient assurance that it regularly reviews whether its operating arrangements enable it to deliver against its purpose, ensuring value for money and making best use of resources. An external review of the current structure was commissioned in late 2023 and further work is needed to consider its findings. 

We have assurance that Calico has an appropriate business planning, risk and control framework in place. However, we found evidence through the inspection that improvement is needed to increase the effectiveness of assurance the board receives in some areas and to strengthen its strategic oversight of risk.

Calico needs to take action to ensure the effectiveness of its governance arrangements and ensure that the quality of governance is aligned to the activities and associated risks of the organisation. It is a significant period of time since an in-depth review of governance was carried out and there is a reliance on self-assessment only. Calico also needs to put in place a formal process for board recruitment, skills assessment, development and succession planning. There have been delays in managing risks around board succession planning, however there are now plans in place for refreshed board membership.

Viability – V2 – September 2024

Based on the evidence gained through the inspection, we have concluded that there is appropriate assurance that Calico’s financial plans are consistent with, and support, its financial strategy. Calico has an adequately funded business plan, with access to sufficient liquidity and security.

However, Calico’s financial performance is weakened, primarily as a result of high levels of investment in existing homes, the need to invest in improvements to its repairs services and the development of new homes. This will mean that Calico has the capacity to respond to a reasonable range of adverse scenarios, but it will need to manage these material risks. 

Background to the judgement

About the landlord

Calico is a small, charitable provider which currently manages 5,372 social housing homes in Burnley, Lancashire. Around 1,100 homes are housing for older people.

Calico is a subsidiary of The Calico Group. The Calico Group is a non-charitable, unregistered, non-asset holding, not for profit organisation, containing eight subsidiaries which provide a range of services including care and support services, training and adult education, drug and alcohol treatment and commercial building and construction.

Based on the audited accounts for 2022-23, Calico employed 216 full-time equivalent staff and generated turnover of £29.1m.

Calico aims to develop 234 homes in its core operating area by 2025-26.

Our role and regulatory approach

We regulate for a viable, efficient, and well governed social housing sector able to deliver quality homes and services for current and future tenants.

We regulate at the landlord level to drive improvement in how landlords operate. By landlord we mean a registered provider of social housing. These can either be local authorities, or private registered providers (other organisations registered with us such as non-profit housing associations, co-operatives, or profit-making organisations).

We set standards which state outcomes that landlords must deliver. The outcomes of our standards include both the required outcomes and specific expectations we set. Where we find there are significant failures in landlords which we consider to be material to the landlord’s delivery of those outcomes, we hold them to account. Ultimately this provides protection for tenants’ homes and services and achieves better outcomes for current and future tenants. It also contributes to a sustainable sector which can attract strong investment.

We have a different role for regulating local authorities than for other landlords. This is because we have a narrower role for local authorities and the Governance and Financial Viability Standard, and Value for Money Standard do not apply. Further detail on which standards apply to different landlords can be found on our standards page.

We assess the performance of landlords through inspections and by reviewing data that landlords are required to submit to us. In Depth Assessments (IDAs) were one of our previous assessment processes, which are now replaced by our new inspections programme from 1 April 2024. We also respond where there is an issue or a potential issue that may be material to a landlord’s delivery of the outcomes of our standards. We publish regulatory judgements that describe our view of landlords’ performance with our standards. We also publish grades for landlords with more than 1,000 social housing homes.

The Housing Ombudsman deals with individual complaints. When individual complaints are referred to us, we investigate if we consider that the issue may be material to a landlord’s delivery of the outcomes of our standards.

For more information about our approach to regulation, please see Regulating the standards.

Further information

• Regulating the standards

• Regulatory standards for landlords