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Former non-compliant landlord receives top governance grading

Large North East landlord Gentoo has achieved the top governance grade from the Regulator of Social Housing (RSH), three years after being deemed non-compliant.

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Both Gentoo and Ongo Homes have received governance upgrades today (picture: Getty)
Both Gentoo and Ongo Homes have received governance upgrades today (picture: Getty)
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Today’s judgement caps a remarkable turnaround for @GentooHomes, which came close to a regulator-overseen takeover as it dealt with major governance issues #UKHousing

Large North East landlord @GentooHomes has achieved the top governance grade from the Social Housing Regulator, just three years after being deemed non-compliant #UKHousing

Former non-compliant landlord receives top governance grading #UKHousing

Gentoo Group, which owns around 30,000 homes, has been returned to the top grading for governance (G1) and retained its V2 grading for financial viability – indicating it meets requirements but “needs to manage material risks”.

It was one of two housing associations previously declared non-compliant by the RSH over executive pay-offs that have been handed governance upgrades today – Ongo Homes, which was declared non-compliant last year, has been upgraded from G3 to G2/V1.

Today’s judgement for Gentoo caps a remarkable turnaround for Gentoo, which came close to a regulator-overseen takeover as it dealt with major governance issues.

The Sunderland-based landlord was deemed non-compliant on governance grounds in October 2017 but upgraded to G2 in September 2019, meaning it met standards but still needed to improve.

It had attracted the ire of the regulator after paying its departing assistant chief executive Steve Lanaghan early pension funds and double the three months’ salary he was contractually owed.


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The RSH said in a regulatory judgement that a recent in-depth assessment of Gentoo found it “has continued to make positive progress in developing and improving its governance”.

“It has refreshed and simplified its approach to strategic planning and agreed a strategy that ensures a continued emphasis on its core functions as a social housing landlord,” it added.

This strategy “focuses on increased investment in current stock and an expanded programme of affordable home development”.

The judgement also said that Gentoo had restructured its executive team and recruited new board members while revising its “risk framework and corporate oversight functions” and strengthening data backing its asset management work.

But it warned that an accelerated major programme “constrains Gentoo’s financial performance in the short term” on viability, while market sales activity exposes it to “housing market volatility and potential reductions in income”.

Keith Loraine, the chair of Gentoo, said: “Today marks a monumental milestone for Gentoo following a three-year journey to achieve a G1 governance rating.

“The return to G1 compliance with the Regulator of Social Housing is a testament to colleagues who have worked tirelessly to address the issues and concerns caused by previous poor leadership and weak governance, while engaging openly and honestly with the Regulator of Social Housing during the process.

“We have refocused on our core social purpose of serving our tenants in Sunderland and have made the necessary changes to strengthen governance and management. This has been key to us rebuilding trust and restoring faith in Gentoo.”

The 9,800-home, Scunthorpe-based Ongo Homes was hit with a non-compliant G3 grading in February 2019 after an unnamed executive was allowed to access their pension before it matured.

Ongo was previously found to have “failed to manage its affairs with an appropriate degree of skill, independence, diligence, effectiveness, prudence and foresight”, with “significant weaknesses” in its board oversight and risk management.

The housing association is a subsidiary in a group where the parent is not registered as a social landlord – a structure that has been criticised by the RSH in the past.

It “had not been appropriately sighted on decisions taken by its unregistered parent and as a result was not in a position to prevent key risks from materialising”, the regulator said.

Since then, Ongo “has simplified its structure and adopted a common board arrangement”, today’s judgement added, improving the association’s oversight of “the activities undertaken across the organisation, particularly those which may impact on the registered provider”.

A further governance structure review is planned, while Ongo Homes has worked with its group parent to develop a new corporate strategy.

“It now needs to ensure that the wider organisational arrangements supporting delivery of the strategy will enable Ongo Homes, as the registered provider, to utilise its capacity effectively,” the RSH said.

Bob Walder, chair of Ongo, said: “We are obviously very pleased to hear today’s announcement and the upgrade to a G2 rating reflects the teamwork and effort over the last 18 months by everyone concerned.

“We will of course remain focused on our tenants and communities as we go forward and we hope to re-attain the highest G1 rating in due course.”

The RSH has also published strapline judgements confirming the existing grades of 17 other providers, including giant housing association Sanctuary (G1/V2).

Update: at 12.28pm 25.11.20

A comment from Ongo was added to the story

Regulatory judgements in England explained

The Regulator of Social Housing publishes regulatory judgements for all providers owning 1,000 or more social housing homes.

These judgements set out whether the provider is complying with the regulator’s governance and financial viability standards.

The regulator carries out an assessment either through a scheduled in-depth assessment, or reactive engagement (in which the regulator acts following information about a provider).

It then awards the provider a rating from one to four for financial viability (V) and a separate rating from one to four for governance (G).

Providers must score two or higher in both categories to be judged as complying with the standards.

As providers have increasingly taken on more risk to cross-subsidise social and affordable housing delivery through market-facing activity, the regulator has changed a number of associations’ viability ratings from V1 to V2.

The regulator often categorises this kind of regulatory action as ‘regrades’ rather than downgrades. Click here to read more.

 

Key to ratings:

V1/G1: Compliant

V2/G2: Compliant

V3/G3: Non-compliant and intensive regulatory engagement needed

V4/G4: Non-complaint, serious failures, leading to either intensive regulatory engagement or the use of enforcement powers

 

Rating straplines in full:

Governance ratings:

G1: The provider meets our governance requirements.

G2: The provider meets our governance requirements but needs to improve some aspects of its governance arrangements to support continued compliance.

G3: The provider does not meet our governance requirements. There are issues of serious regulatory concern and in agreement with us the provider is working to improve its position.

G4: The provider does not meet our governance requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.

 

Financial viability ratings:

V1: The provider meets our viability requirements and has the financial capacity to deal with a wide range of adverse scenarios.

V2: The provider 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.

V3: The provider does not meet our viability requirements. There are issues of serious regulatory concern and, in agreement with us, the provider is working to improve its position.

V4: The provider does not meet our viability requirements. There are issues of serious regulatory concern and the provider is subject to regulatory intervention or enforcement action.

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