An unannounced inspection of Werrington YOI, in Stoke, by the Prisons Inspectorate found bullying to be a problem and called for more to be done to understand its scale and nature.
The report said that although steps had been taken to reduce the potential for bullying, young people still talked to inspectors about the practice of "rent" - whereby young people were made to pay their peers in canteen items for simply being on the unit.
Meanwhile, some cells were found to be "filthy" and a few were "not in a fit state to house young people".
Inspectors also found that some teaching required improvement and the range of vocational training was limited.
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