Why we are engaging with Cairn Housing Association Ltd (Cairn)
We are engaging with Cairn about its financial management, stock quality, tenant and resident safety, development plans, planned organisational changes and the transfer of engagements from Pentland Housing Association (Pentland).
Cairn has one registered subsidiary ANCHO Ltd (ANCHO).
Cairn last carried out a stock condition survey in 2015. It had planned to procure a rolling programme of stock condition surveys, but this was delayed due to the impact of the COVID-19 pandemic. Cairn is revisiting its stock condition survey and plans to complete this during 2024/25.
Cairn does not fully comply with electrical safety requirements which came into force in early 2022 and form part of the Scottish Housing Quality Standard (SHQS). Cairn is currently progressing inspections to provide Electrical Installation Condition Reports (EICRs) in all of its tenants’ homes.
Cairn has told us about challenges it has faced, including accessing tenants’ homes and the availability of contractors, which has delayed its progress to complete the outstanding works. We expect Cairn to have appropriate plans in place to mitigate the delays in progressing these works.
Cairn has told us about an issue relating to the erosion of a riverbank on land owned by ANCHO. It has made a provision in the accounts to cover a short term repair of the riverbank and is also considering a long term solution.
Cairn is one of the largest developers of new affordable housing in Scotland. It has plans to grow through a considerable programme of new homes for social rent and mid-market rent and will receive significant public subsidy to help achieve this. We will engage with Cairn to get assurance about how it is managing the risks to the organisation including its levels of debt, development plans and the impact of the riverbank erosion.
Cairn is developing detailed proposals for a transfer of engagements of ANCHO. ANCHO’s tenants will then vote on the proposals in an independent ballot.
Following a successful ballot of its tenants, Pentland transferred its engagements to Cairn on 1 April 2022 and the former was removed from the Register of Social Landlords on 14 December 2022. Since then, we have monitored the progress of the integration of Pentland into Cairn and the delivery of the commitments Cairn has made to Pentland’s tenants and service users.
What Cairn must do
Cairn must:
- tell us when it completes the stock condition survey and update us on the outcomes;
- send us monthly updates on progress on achieving compliance with electrical safety requirements;
- send us updates about its plans to address the erosion of the riverbank on land owned by ANCHO;
- send us by 31 May 2024:
- its approved business plan;
- its updated risk register including details of its approach to development risk management and mitigation;
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirements;
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resulting covenant calculations with the actual current covenant requirements;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance;
- the report to the Board/appropriate committee about its approach to risk management and mitigation; and
- evidence of how it demonstrates affordability for its tenants.
- send us an update on its development programme by 31 October 2024. This will include its latest report to the governing body/appropriate committee about development and details of the scale and tenure mix, timescales for delivery and any material delays or changes to the programme; and
- tell us if there are any material adverse changes to its development plans which might affect its financial position or reputation, in line with our notifiable events guidance.
- send us by 31 May 2024 for ANCHO:
- 30 year financial projections consisting of statement of comprehensive income, statement of financial position and statement of cash flow complete with assumptions and explanatory narrative;
- a comparison of projected financial loan covenants against current covenant requirements;
- financial sensitivity analysis which considers the key risks, the mitigation strategies for these risks and a comparison of the resultant covenant calculations with the actual covenant requirements; and
- reports to the Boards of ANCHO and Cairn in respect of the approved financial projections and sensitivity analysis.
- keep us informed about progress with its proposals for a transfer of engagements from ANCHO and its proposals to consult tenants;
- send us the final business case for the transfer of engagements when this becomes available; and
- send us quarterly updates on progress with the delivery of the commitments Cairn has made to Pentland’s tenants and service users.
What we will do
We will:
- engage with Cairn as necessary about its stock condition survey;
- review Cairn's progress on achieving compliance with electrical safety requirements and engage as necessary;
- review the updates on Cairn’s plans to address the erosion of the riverbank on land owned by ANCHO and engage as necessary;
- review the business plans and financial information;
- meet with Cairn’s senior staff to discuss the business plans, the financial information and any risks to the organisation;
- review the development update and engage as necessary;
- engage with Cairn as it develops its detailed proposals for the transfer of engagements of ANCHO and seek assurance that tenants’ interests are protected;
- review the business case for the transfer of engagements and engage as necessary;
- review the updates on the delivery of the commitments Cairn has made to Pentland’s tenants and service users and engage as necessary; and
- update our published engagement plan in the light of any material change to our planned engagement with Cairn.
Regulatory returns
Cairn must provide us with the following annual regulatory returns and alert us to notifiable events as appropriate:
- Annual Assurance Statement;
- audited financial statements and external auditor’s management letter;
- loan portfolio return;
- five year financial projections; and
- Annual Return on the Charter.
It should also notify us of any material changes to its Annual Assurance Statement, and any tenant and resident safety matter which has been reported to or is being investigated by the Health and Safety Executive or reports from regulatory or statutory authorities or insurance providers, relating to safety concerns.