Notting Hill Genesis (4880) - Regulatory Judgement: 27 November 2024
Updated 27 November 2024
Applies to England
Our Judgement
Grade/Judgement | Change | Date of assessment | |
---|---|---|---|
Consumer | C3 Our judgement is that there are serious failings in the landlord delivering the outcomes of the consumer standards and significant improvement is needed. |
First grading | November 2024 |
Governance | G3 Our judgement is that the landlord does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the landlord is working to improve its position. |
Downgrade | November 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 | November 2024 |
Reason for publication
We are publishing a regulatory judgement for Notting Hill Genesis (NHG) following an inspection completed in November 2024.
The regulatory judgement confirms a consumer grading of C3, a governance downgrade to G3, and a financial viability grading of V2.
Prior to this regulatory judgement, the governance and financial viability gradings for NHG were last updated in November 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 gained during the inspection, there are serious failings in NHG’s delivery of the outcomes of the consumer standards and significant improvement is needed, specifically in relation to the outcomes in the Safety and Quality Standard. Based on this assessment, we have concluded a C3 grade for NHG.
Our judgement is that the landlord does not meet our governance requirements. The regulatory inspection has found issues of serious regulatory concern and there are significant improvements needed in the business planning, risk, and control framework. Based on this assessment, we have concluded a G3 grade for NHG.
Our judgement is that NHG meets our financial viability requirements and has the financial capacity to deal with a reasonable range of adverse scenarios. It has a number of significant financial risks that must be carefully managed to ensure continued compliance in the short term. NHG is relying on surpluses from the sale of homes while having to also carefully manage its significant asset management expenditure to manage financial headroom. Based on this assessment, we have concluded a V2 judgement for NHG.
How we reached our judgement
We carried out an inspection of NHG 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 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.
We observed a board meeting and resident forum meeting, spoke with tenants, held meetings with NHG including with its non-executive directors, and reviewed a wide range of documents provided to us by NHG.
Our regulatory judgement is based on all the relevant information we obtained during the inspection as well as analysis of information supplied by NHG in its regulatory returns and other regulatory engagement activity.
Summary of findings
Consumer – C3 – November 2024
The Safety and Quality Standard requires landlords to identify and meet all legal requirements that relate to the health and safety of tenants in their homes and communal areas, and ensure that all required actions arising from legally required health and safety assessments are carried out within appropriate timescales. During the inspection of NHG we found serious failings in the delivery of these outcomes.
Although NHG reports overall satisfactory levels of performance in meeting legal requirements there are significant gaps in its health and safety compliance information in relation to third party managed buildings. There are also issues with completing fire remediation actions. Although NHG has demonstrated some progress in completing these actions there continue to be challenges in managing the delivery of this programme of remedial works.
NHG has been unable to identify whether all legal requirements have been met in relation to a significant number of homes managed by external managing agents. NHG is now taking steps to ensure it has the necessary health and safety information for these buildings. Dedicated resource has been put in place and system enhancements are in progress to deliver the improvements needed.
NHG has provided evidence that it is proactively managing building safety risks including an up to date programme of fire risk assessments. However, NHG had a significant backlog of over 2,000 fire remediation actions arising from those assessments and although actions are being completed at an increased rate, the volume of overdue actions is high with some overdue by at least twelve months. Urgent actions have been completed on time and NHG has put in place appropriate mitigations while the backlog remains. NHG has a revised improvement plan, that it is monitoring closely, and we have assurance that its board has sought external advice.
NHG is not meeting its own timescales for the completion of its repairs, maintenance and planned improvements, and this has been a factor in creating a repairs backlog. Following a review of its repairs service, prompted by feedback from tenants, NHG is taking action to make improvements including a new centralised repairs service, increased training for staff, procurement of new contractors and enhancements to systems. This revised approach is not yet delivering the required outcomes for tenants.
The Safety and Quality Standard also requires landlords to have an accurate and up to date understanding of the condition of its homes at an individual property level based on a physical assessment of all homes and ensure that homes meet the requirements of the Decent Homes Standard (DHS). Through our inspection we identified that although NHG has a programme in place to gain an accurate and up to date record of the condition of its homes at an individual property level through physical surveys, it has not made sufficient progress and just over 50% of homes have had a survey in the last five years. We saw evidence that NHG has a range of ways to collect and update information about the condition of its homes. However, it needs to continue to deliver its programme of physical surveys in order to have a suitably detailed understanding on which to form a reliable view of compliance with the DHS, identify risks to tenants, and inform investment plans.
The Transparency, Influence and Accountability Standard sets out the outcomes landlords must deliver in relation to being open with tenants and treating them with fairness and respect so that tenants can access services, raise complaints, influence decision making and hold their landlord to account. It also sets out requirements for landlords to provide meaningful opportunities for tenants to influence and scrutinise strategies, policies and procedures.
We gained assurance that NHG treats its tenants with fairness and respect and through the inspection NHG demonstrated that it collects and uses information about its tenants to improve delivery of services and access to those services by tenants. NHG has acknowledged that there is more it can do to improve the breadth and quality of information it holds about the diverse needs of its tenants, particularly in relation to vulnerabilities, and is taking action to address this.
Following consultation with its tenants, NHG launched a new tenant engagement approach with the aim of diversifying and expanding the number of tenants involved in engagement and feedback. There is a clear link from the newly formed resident forum to NHG’s governance and there are examples of tenants’ influence on changes to policies and accessibility of information to tenants. NHG recognises that this work is at an early stage and it will take time for the impact of the new model on decision making and delivery of services to be demonstrated.
The Transparency, Influence and Accountability Standard also requires landlords to address complaints fairly, effectively and promptly. Through our inspection we found limited evidence to provide assurance that NHG is achieving this. NHG’s volume of complaints reduced between 2022-23 and 2023-24 but the complexity has increased and improvement is needed in the time taken to respond to complaints. NHG is taking steps to improve its complaints handling with a new centralised complaint service and the board is monitoring progress closely.
In relation to the Tenancy Standard, our inspection found evidence that NHG’s approach to lettings and allocations is transparent and that measures are in place to monitor adherence to its policies.
In relation to the Neighbourhood and Community Standard, NHG’s approach to anti-social behaviour is clearly set out in its policy that is easily accessible on its website. Anti-social behaviour is included in regular performance reports to the board and we were provided with examples of how NHG works in partnership with other organisations.
NHG is engaging constructively with us on an ongoing basis, including to demonstrate that it is taking reasonable steps to identify and mitigate risks to tenants as it continues to address the issues that led to this situation. We expect the landlord to continue to deliver its improvement plans so that they drive significant change, and to share progress with tenants. Our engagement with the landlord will be intensive and we will seek evidence that gives us the assurance that sufficient change and progress is being made, including ongoing monitoring of how it delivers its improvement programme. Our priority will be that risks to tenants are adequately managed and mitigated.
Governance – G3 – November 2024
Based on evidence gained from the inspection we have concluded a downgrade to G3. There are issues of serious regulatory concern that the landlord is working to address, in agreement with us. NHG has not met all the required governance outcomes and specific expectations in the Governance and Financial Viability Standard.
There is insufficient evidence that NHG has an appropriate and robust business planning, risk and control framework that allows it to adequately manage and address risks. NHG’s risk management, internal controls and assurance framework is not sufficiently robust to enable the board to identify and manage all its risks in a timely way. As a result, there are issues in a range of areas that have resulted in poor outcomes for tenants.
This has been recognised by NHG, and it has demonstrated that it is improving its approach to managing risks and is taking steps to address any identified weaknesses. However, the range of issues that have arisen is challenging and means that the scale of improvement needed is significant. While NHG continues to respond to a number of individual presenting issues, there is more for it to do in order to ensure it delivers change that leads to sustained improvement at an appropriate pace.
NHG identified that improvements were needed to its risk management framework and this work is underway. Once completed and fully implemented this will support the board to evidence that it has sufficient oversight of the management of strategic risks. These improvements are needed for the board to be satisfied that there is appropriate assurance that the controls used to manage risks are working, and to demonstrate that the board can operate with an appropriate degree of diligence, effectiveness and foresight.
We found that while there is limited evidence of NHG’s board providing oversight of landlord health and safety compliance, the current level of oversight is limited and requires improvement to be effective. This is due to the balance of reporting between committees and the board and a reliance on exception reporting. Currently, the delegation of health and safety risks between three different committees is not effectively managed, resulting in the board not having comprehensive assurance on the health and safety of tenants in their homes. This approach does not provide the board with assurance over NHG’s compliance position. In particular there is evidence that findings from internal audits and reporting of the compliance position for third party managed buildings have not previously had oversight from the board.
NHG is having to manage pressures across its operations including the challenges of meeting safety and quality requirements for its homes, while also managing its financial position. NHG had already identified that improvement was needed in its financial governance and controls and while changes have been implemented, there is a need to continue this improvement alongside NHG’s other challenges and priorities.
NHG’s board has set and is leading the overall strategic direction of the organisation and receives regular reports enabling it to monitor oversight of its delivery against strategic performance. Stress testing and mitigation plans are aligned to the strategic risk register and stated risk appetite and we saw evidence of the board taking ownership of this.
Further work is required to review the mix of skills on the board to align to strategic priorities. NHG has a governance review planned for later this year and we will work with NHG to ensure the scope of this review includes a review of the board’s skills and its effectiveness.
NHG is working positively with us and acknowledges the concerns found through the inspection. NHG has begun to deliver the necessary improvements and is making key appointments, as well as working with external advisors, to help address the issues identified in this regulatory judgement.
Viability – V2 – November 2024
Based on evidence gained from the inspection, we have assurance that NHG’s financial plans are consistent with, and support, its financial strategy. NHG has an adequately funded business plan, sufficient security in place, and is forecast to continue to meet its financial covenants under a reasonable range of adverse scenarios.
Headroom on NHG’s most onerous interest cover covenant is low in the current and next forecast financial years. There are material financial exposures that must be carefully managed by NHG to remain compliant with its financial covenants during this period and to meet the regulatory financial viability requirements. Mitigating actions are having to be enacted on an ongoing basis to alleviate the impact of these exposures.
NHG’s recent financial performance has been weak and impacted by a number of exceptional accounting adjustments. It forecasts positive operating margins in the future, though its forecast financial profile is weaker than in previous years. In the short to medium term, NHG plans to continue with substantial investment in its current homes, including building safety works, and to also develop new homes. Given the limited level of stock condition survey coverage referred to above in the section on the consumer standards, there is potential for future asset management costs to be higher than anticipated. These factors restrict the capacity NHG has available to respond to a wide range of financial risks.
NHG plans on generating substantial surpluses from the sale of homes over the next five years, including homes developed for sale. In the 2024-25 and 2025-26 financial years, sales surpluses could not be fully eliminated from NHG’s business plan, without compensating mitigating actions being put in place to ensure covenant compliance.
We have assurance that NHG has reporting and oversight mechanisms in place to manage the risks, and track the performance, of its property sales. However, when set in the context of economic pressures, the above factors significantly impact on NHG’s capacity to respond to adverse events.
We will continue to engage with NHG as it delivers the current year’s financial plan and ensures it has a financially sustainable strategy going forward.
Background to the judgement
About the landlord
NHG is an exempt charity under the Co-Operative and Community Benefit Societies Act 2014. NHG operates predominantly in London.
NHG is the group parent and main asset holding body. NHG has 55 legal entities including two subsidiary registered providers, Notting Hill Home Ownership and Springboard Two; three registered charities; 13 associate/joint venture limited partnerships and two public limited companies.
NHG owns or manages around 67,500 homes of which just over 61,000 are in London. At 31 March 2024, NHG employed 1,498 full-time equivalent staff and group turnover was £711.8m. It plans to develop 3,000 homes over the next five years.
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.