Why we are engaging with Kingdom
We are engaging with Kingdom because it is a systemically important landlord and about the transfer of engagements from Fairfield Housing Association (Fairfield).
COVID-19 has significantly impacted the services provided by social landlords. We will continue to monitor, assess and report upon how each landlord is responding and we will keep our regulatory engagement under review so that we can continue to respond to the challenges of COVID-19.
We refer to a small number of RSLs as systemically important because of their stock size, turnover or level of debt or because of their significance within their area of operation. We need to maintain a comprehensive understanding of how their business models operate, and how they manage the risks they face and the impact these may have. So we seek some additional assurance each year through our engagement plans. Given Kingdom’s size, turnover and level of debt we consider it to be systemically important.
On 1 December 2021, Fairfield transferred its homes to Kingdom. Fairfield had been subject to our ongoing statutory action since December 2018 because of serious and widespread failures across all Regulatory Standards. In May 2020, Fairfield entered into a shared services arrangement with Kingdom to provide Chief Executive services, governance and organisational support, financial and payroll services and a strategic asset management service.
Fairfield carried out a strategic options review and identified a Transfer of Engagements to Kingdom as the best option to ensure it meets Regulatory Standards and protect the interests of tenants and other service users.
Fairfield and Kingdom developed a detailed business case for the Transfer of Engagements and consulted Fairfield’s tenants on the proposals through a formal ballot of tenants. The majority of those who responded to the ballot supported the transfer. The transfer took place on 1 December 2021 and Kingdom will now support Fairfield with its application for removal from the SHR Register of Social Landlords.
Kingdom is one of the largest developers of new affordable housing in Scotland and receives significant public subsidy to help achieve this. Kingdom plans to develop new homes for social rent and mid-market rent.
What Kingdom must do
- send us by 30 April:
- its approved business plan and updated risk register;
- 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 and compares the resulting covenants with the actual current covenant requirements;
- the report to the Board in respect of the approved 30 year projections, sensitivity analysis and covenant compliance; and
- evidence of how it demonstrates affordability for its tenants.
- provide copies of its Board and audit committee minutes as they become available; and
- support Fairfield to take forward its application for de-registration from our Register of Social Landlords;
- provide quarterly updates from 1 March 2022 on progress with the integration of Fairfield into Kingdom and with the delivery of the commitments Kingdom has made to Fairfield’s tenants and service users.
- ensure that the impact of the pandemic on its development plans is reflected in its business plan 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.
What we will do
- review the minutes of the Board and audit committee meetings and liaise as necessary;
- review the business plan and financial projections;
- meet with Kingdom’s senior staff to discuss the impact of the pandemic on its existing business model and business plan and any risks to the organisation particularly in relation to its services to tenants;
- consider and respond to Fairfield’s application for de-registration in accordance with our requirements;
- engage as necessary on the integration of Fairfield into Kingdom and on the delivery of the commitments Kingdom has made to Fairfield’s tenants and service users; and
- update our published engagement plan in light of any material change to our planned engagement with Kingdom.
Kingdom 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.