Decision

Gentoo Group Limited (L4313) - Regulatory Judgement: 28 August 2024

Updated 28 August 2024

Applies to England

Our Judgement

	Grade/Judgement	Change	Date of assessment
Consumer	C1 Our judgement is that overall the landlord is delivering the outcomes of the consumer standards. The landlord has demonstrated that it identifies when issues occur and puts plans in place to remedy and minimise recurrence.	First grading	August 2024
Governance	G1 Our judgement is that the landlord meets our governance requirements.	Assessed and unchanged	August 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	August 2024

Reason for publication

We are publishing a regulatory judgement for Gentoo Group Limited (Gentoo) following an inspection completed in August 2024.

This regulatory judgement confirms a consumer grading of C1, a governance grading of G1 and a financial viability grading of V2.

Prior to this regulatory judgement, the governance and financial viability grades for Gentoo were last updated in December 2023 following a stability check, to confirm grades of G1 and V2. 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 we have concluded that overall Gentoo is delivering the outcomes of the consumer standards. Based on this assessment, we have concluded a C1 grade for Gentoo.

Our judgement is that Gentoo meets our governance requirements. Gentoo has provided evidence to demonstrate the effectiveness of its governance arrangements and that it continues to effectively manage the risks of its activities, allowing it to deliver its strategic and charitable objectives. Based on this assessment, we have concluded a G1 grade for Gentoo.

Our judgement is that Gentoo meets our financial viability requirements and has the financial capacity to deal with a reasonable range of adverse scenarios. It has demonstrated both an improvement in its financial performance and capacity, and resilience to external economic risks. However, Gentoo is exposed to financial risks, including with its planned expenditure on improving the quality and energy efficiency of its existing homes, and the development and sale of new homes. Its stress testing shows that there is financial capacity in the business plan to mitigate a reasonable range of adverse scenarios. Gentoo has provided appropriate assurance that it has access to sufficient liquidity and adequate funding in place, and that its future financial plans are consistent with its strategy. Based on this assessment, we have concluded a V2 grade for Gentoo.

How we reached our judgement

We carried out an inspection of Gentoo to assess how well Gentoo is delivering the outcomes of the consumer standards and meeting our governance and financial viability requirements, as part of our planned regulatory inspection programme. During 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, a tenant scrutiny panel and a customer committee, spoke to tenants, held meetings with Gentoo including with its non-executive directors, and reviewed a wide range of documents provided by Gentoo.

Our regulatory judgement is based on all the relevant information we obtained during the inspection as well as analysis of information received from Gentoo through its regulatory returns and other regulatory engagement activity.

Summary of findings

Consumer – C1 – 2024

During the inspection Gentoo provided evidence-based assurance that it has appropriate systems in place to ensure the health and safety of its tenants in their homes and associated communal areas. Gentoo demonstrated that it has appropriate processes in place to allow it to use a risk-based approach to identify and prioritise action necessary to address health and safety issues in its homes. It has obtained independent, external assurance over the processes and information underpinning its health and safety performance as part of the board’s commitment to take all reasonable steps to ensure the health and safety of tenants.

We reviewed evidence that shows Gentoo keeps an accurate record of the condition of its homes at an individual property level through physical surveys of its homes and has a process for keeping this information up to date. Gentoo has demonstrated that it uses its understanding of the condition and safety of its tenants’ homes to make decisions on the planning of future investment to maintain and improve homes.

Gentoo owns and manages homes in a range of tall buildings. We have appropriate assurance it understands the risks associated with these buildings and has mitigation plans in place. Gentoo has strategies for engaging with tenants living in these buildings. Its board has oversight of the Fire Risk Assessment programme, which includes works and mitigating actions for these and other buildings where this is required. We saw evidence that Gentoo engages with independent specialists and contractors to gain assurance over the risks present in its buildings, and the design and operation of mitigations against these risks.  

Gentoo demonstrated that it provides an effective, efficient and timely repairs service to tenants. It takes action to improve the service for tenants when issues occur. Gentoo has identified issues with the repairs service to tenants where building management is outsourced, and we saw evidence that Gentoo works proactively to improve its service. We reviewed evidence that gives appropriate assurance that Gentoo’s approach to repairs is informed by the needs of its tenants and makes use of the tenant information it holds to tailor its services appropriately.

We gained assurance that Gentoo works with relevant organisations to deter and tackle anti-social behaviour in its neighbourhoods, and we were provided with examples of this happening in practice. We saw evidence that Gentoo has engaged with its customer committee and scrutiny panel to review its approach for reporting anti-social behaviour and hate crime incidents and has obtained external assurance on its approach. It has acted on recommendations to improve how cases are managed.

In relation to the Tenancy Standard, Gentoo has recently reviewed its allocations policy to ensure all properties are let in a fair and transparent way. Gentoo’s board monitors this through bi-annual reports. We saw evidence that Gentoo supports tenants to sustain their tenancies.

Overall Gentoo’s approach is delivering the outcomes of the consumer standards in relation to transparency, influence and accountability. Gentoo has a strategic objective to understand its customers, and its board receives regular reporting on performance in this area. We saw evidence that Gentoo considers tenants’ diverse needs in the design and delivery of services, and that it monitors its performance in continuing to deliver outcomes to tenants in this area.

Gentoo has oversight of its performance information on complaints handling. We have reviewed evidence that demonstrates it learns from information on complaint types and outcomes and uses this to make improvements. Tenants have been asked to scrutinise Gentoo’s approach to complaints handling and there is appropriate assurance Gentoo is continuing to seek improvements in this area.

We have appropriate assurance that there are a wide range of meaningful opportunities for tenants to influence and scrutinise Gentoo’s strategies, policies and services. Tenants have opportunities to contribute their views, and we saw evidence that Gentoo considers tenant input, including at board level. There is evidence that feedback from tenants has improved service delivery and strategic decision making.

Governance – G1 – August 2024

Based on the evidence gained from the inspection there is assurance that Gentoo’s governance arrangements enable it to effectively manage its risk and adequately control the organisation, allowing it to deliver its objectives. Gentoo’s board demonstrated that it provides challenge on performance against the organisation’s strategic targets and consideration of risk appetite in strategic decision making.

Gentoo has provided appropriate assurance that its board proactively reviews Gentoo’s approach to delivering against its purpose and regularly considers alternative options to ensure Gentoo is achieving value for money in making best use of resources.  

Gentoo has clear roles, responsibilities and accountabilities within its leadership and governance structure. There is assurance its board and committees work in line with its delegations, and that they consider Gentoo’s risk management and control framework. There is evidence of discussion and board challenge of the controls and assurance on strategic risks including a focus on those that relate to safety and other risks to tenants.   

The most recent external review of Gentoo’s governance took place in October 2021. Continuing governance improvement is evidenced through annual effectiveness reviews and in-depth periodic external governance reviews.

Board member skills, experience and knowledge are aligned with the activities of the organisation and there is a structured approach to developing and appraising skills to support succession planning. We have seen evidence of this through board observation, meetings with non-executive directors and the executive team as well as reviewing relevant documents including meeting minutes.  

Gentoo’s board seeks and gains an appropriate level of evidence-based assurance across a range of areas. There is evidence of how this assurance has been used to make improvements to its approach to service delivery, and to mitigate against risks.

Board ownership of stress testing, mitigation strategies and wider governance over risks through regular and structured review of golden rules is evident. Reporting to board provides sufficient detail for the board to ensure effective oversight.

Viability – V2 – August 2024

Based on the evidence gained from the inspection we have concluded that there is appropriate assurance that Gentoo’s financial plans are consistent with, and support, its financial strategy. Gentoo has appropriately evidenced that it has an adequately funded business plan, sufficient security in place to support its financial plans, and Gentoo is forecast to continue to meet its financial covenants under a wide range of adverse scenarios. Gentoo’s board has effective oversight of covenant compliance with actual and projected covenant performance reported quarterly.

Gentoo continues to meet our viability requirements and has financial capacity to deal with adverse scenarios. Its recent financial performance indicates it has delivered a sustainable financial position throughout a period of economic uncertainty, and it continues to forecast generating a positive operating margin. However, in the short-term Gentoo plans significant investment in its current homes and this restricts the capacity available to respond to a wide range of financial risks.

In addition to this investment, Gentoo anticipates generating surpluses from new homes developed for sale. While it is not reliant on these sales, they represent an uncertain cashflow for the organisation and a risk to delivering the planned financial position. We have assurance that Gentoo has reporting and oversight in place to manage the risks of its sales programme.

Background to the judgement

About the landlord

The origins of Gentoo trace back to the stock transfer of homes from Sunderland City Council in 2001. Its principal activities are the development, management and maintenance of social housing. Gentoo is an exempt charity registered under the Co-operative and Community Benefit Societies Act 2014.

Gentoo is the only RSH registered entity in its group and is a non-profit registered provider of social housing. Gentoo has seven unregistered subsidiaries in the group.

Gentoo operates primarily in Sunderland, with a small number of homes in four other local authority areas in the North East. It owns and manages around 29,000 social housing homes. The majority are general needs social rent and affordable rent homes, and a small number of housing for older people.

At 31 March 2024, the group employed 1,018 fulltime equivalent staff. Gentoo’s turnover for the year ended 31 March 2024 was £177.6m and the majority is from social housing lettings with around £30.1m from market sales. Gentoo plans to develop around 1,140 properties between 2024 and 2029, with around 610 general needs, 400 market sale, 90 low-cost home ownership, and 40 other social homes.

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