Local Government and Communities Committee

Meeting date: Wednesday, November 15, 2017

Official Report 596KB pdf

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Scottish Housing Regulator “Annual Performance: Report and Accounts 2016/17”

Agenda item 2 is an evidence-taking session with the Scottish Housing Regulator on its “Annual Performance: Report and Accounts 2016/17”. I welcome from the Scottish Housing Regulator George Walker, who is the chair, and Michael Cameron, who is the chief executive. Thank you for coming along and for your patience—we are overrunning slightly this morning. I invite the chair to make some opening remarks.

Thank you, convener. I thank the committee for inviting us along to present the SHR’s annual report and accounts for 2016-17. As you will know, I took over from Mrs Kay Blair as the chair of the Scottish Housing Regulator in July. We had a good and effective handover period, and I stepped in as the chair from August. I am therefore a relatively new boy. I enjoyed a great handover and was pleased to find a well-run and effective regulator with a high-quality board that had a very clear focus on protecting the interests of tenants and service users. That is important—after all, that is what we are about.

I am delighted to present to the committee the annual report and accounts for 2016-17, and I would like to highlight a few things. The first is the SHR’s work to empower tenants and to draw landlords’ attention to issues, such as rent affordability, that are important to tenants. Secondly, the SHR has highlighted positive practice to help landlords to develop new homes sustainably and thereby contribute to the Scottish Government’s affordable housing target. Thirdly, the SHR has worked hard to maintain the confidence of those who invest and lend to the sector, which is vital. The SHR has also used the statutory intervention powers that Parliament has given it to protect the interests of tenants and, of course, the sector’s good reputation.

We are pleased to take any questions that you might have on the annual report. First, however, I would like to highlight some more current and emerging issues for the regulator. We have started a review of our regulatory framework—in other words, the framework around which we regulate. It was published in 2012 and, at the time, we committed to reviewing it as we moved forward. Right now, we are generating ideas with our stakeholders. In January, we will publish a discussion paper that will be followed by a formal proposal and consultation in the second half of 2018.

That work is timely, as it will allow us to reflect on our experiences, what we have learned over the past five years and the changes in the operating context for social landlords that have taken place over that time. We want to build on the successes of our framework as well as strengthen our approach and adjust in response to new challenges. We know that social landlords continue to perform well across almost all the charter’s standards and outcomes; indeed, last year, 14 out of 16 outcomes improved. We also know that most are managing their resources to ensure their financial wellbeing.

Nevertheless, we are actively engaging with one in eight registered social landlords, primarily on serious governance issues, and over the past three years we have had to use our statutory intervention powers with seven landlords. Throughout the review, therefore, we want to look at what more we—and, perhaps more important, the boards of social landlords themselves—can do before we need to become involved in a situation. We will also review and take account of the changes that are likely to be introduced by the Housing (Amendment) (Scotland) Bill, although I understand that we will discuss that further when we meet the committee again on 29 November.

I will quickly highlight some of the early themes that are emerging from our discussions with stakeholders, which the committee might be interested in hearing about. They include self-assessment against the regulatory standards, strong internal audit, active risk management and the positive use of whistleblowing in organisations. Given that tenants remain at the heart of our work, the committee will not be surprised to hear that a strong emerging theme of our early discussions is tenant safety. We are actively working to promote that agenda, and we are pleased to find that it is very much at the forefront of our stakeholders’ current agendas, too. We will keep the committee updated as we progress through the review.

I also want to mention homelessness, which I know is close to the heart of this committee, in particular. Like you, we appreciate the issue’s complexity and welcome its prominence in the recent programme for government. We are committed to doing all that we can within the limitations of our remit and to using all our influence to drive the changes that we all want to be made. I imagine that members might ask us some questions on homelessness later in the meeting.

The final issue that I want to highlight is rent affordability. The committee will be aware that inflation has now hit 3 per cent—indeed, the figures for October were announced yesterday—and changes to the welfare system present real difficulties for many tenants. Tenants are raising with us their concerns about future rent increases, and we are looking to social landlords to understand what is affordable for their tenants and to consider that in determining rent levels. That will mean landlords giving tenants genuine options and choices during rent consultations, discussing with them the balance between value for money and service levels and demonstrating to tenants and to us how they are taking tenants’ views into account.

I do not want to hog the floor, convener—I wanted to keep my remarks short—so I will hand back to you. Thank you for the opportunity to meet the committee and present our report. I simply wanted to cover a few issues that are at the top of my and the SHR’s agenda right now.

Thank you very much, Mr Walker. Your remarks have set the context very well and mirror some of the thoughts that committee members have.

We now move to questions, beginning with Andy Wightman.

Thank you for coming along today. In your opening remarks, you talked about empowering tenants, and I want to ask you a couple of questions about that. What key things are you doing to empower tenants to hold landlords to account?

We are doing that in a number of areas. We believe that having active tenants, who work closely with landlords and scrutinise performance, ultimately plays a crucial role in shaping and improving housing services.

We do a number of things to empower tenants. First, we are building on the concept of tenant-led scrutiny, which is fast becoming a pretty well-established part of the social housing landscape in Scotland. We aim to empower tenants by giving them good information on landlords’ performance and promoting the need for tenants to have a strong voice. For example, we publish a report on every landlord. Last year, we published more than 180 landlord reports—I think that the figure was 186—to give tenants background on their individual landlords.

We have also developed an online comparison tool, so that tenants can compare their landlord with a landlord down the street or in the next area. The fact that that tool was visited nearly 29,000 times last year tells us that it is being well used, and we hear from tenants that it helps them to better understand landlords’ performance and where it needs to improve. We worked with tenants to develop the landlord reports that I have referred to, and we included the indicators that they told us were most important to them.

That is the primary focus of how we seek to empower tenants, and it is largely driven by the provision of information and access to information.

Thank you. That is useful. I have looked at the landlord reports and the comparison tool, and I think that they are very useful.

Let us move beyond the provision of good information that enables tenants to find out more about the performance of their landlords to the question of membership of some of the larger registered social landlords. I note that, although Bield Housing & Care has 4,690 homes, it has only 74 members, and only 21 people turned up to the annual general meeting. Hillcrest Housing Association has 6,101 homes and only 88 members, 32 of whom turned up at the AGM. In contrast, Antonine Housing Association is a smaller housing association with only 334 homes, yet it has 278 members—virtually every tenant is a member—and 53 of them turned up at the AGM. The performance of Rural Stirling Housing Association is quite good in that regard, too.

If tenants are empowered, it is arguably not necessary to have a regulator, because they will be in control of their landlord. Are you satisfied with the level of tenants’ membership of the landlord organisations? What are the trends over time? I have indicated that there might be a trend whereby the smaller housing associations have much better levels of membership than the larger ones.

Before you answer, Mr Walker, I should point out that the view that we do not need a regulator is not an official committee position. [Laughter.]

Even as the chair of a regulator, I think that, if regulators were not necessary in Scotland because everything was working effectively, not too many of us would object to that.

We would always want membership participation to rise, wherever that is possible. There is no doubt that such participation is higher among the smaller, more community-based RSLs, as Mr Wightman has highlighted. One would worry that, with the bigger, more corporate-style RSLs, there might be a little less connectivity with tenants. Suffice it to say that we would want to actively encourage RSLs to have tenants represented through their scrutiny panels; to have tenants participating on boards, as we do; and to push up membership where they can, as you have rightly suggested. We agree that we would want to encourage RSLs in those areas.

Michael Cameron might be able to comment on the trends or on some of the detail of the issue.

Landlords in Scotland have a range of rules and constitutions that affect the level of membership that they can have. Regardless of that, we would look to landlords to ensure that they maximise all opportunities for tenants and other service users to participate and be involved in the organisation at the levels that they find most appropriate for them. We are seeing quite a significant development in tenant-led scrutiny through scrutiny panels in addition to the more formal routes for participation such as membership of the organisation and becoming part of its board or committee. We would look to landlords to continue to maximise the opportunities for all tenants to become involved in whatever way they feel is most appropriate for them.

Do you have a view on the extent to which landlords’ constitutions should allow tenants to become members of the organisation? It was difficult for me to get the relevant data, because some RSLs are co-operative and mutual organisations whose annual accounts cost £12 to download. I did not pay £12. It is difficult for tenants to obtain information about the constitution or the accounts of their landlord. It costs tenants of Glasgow Housing Association, for example, £12 to get that organisation’s annual return. Given that the whole movement started as a more community-based movement, should it not be possible for tenants to become members?

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The regulator’s view is set out in the regulatory standards, to which all landlords’ constitutional arrangements must adhere. Those standards are well understood and are supported by almost the entire sector. As a regulator, we publish annual accounts from all registered social landlords. That information is freely available on our website along with a number of other constitutional documents, so landlords can simply visit our site rather than pay £12.

That is excellent. Thank you very much.

What evidence do you have that tenants are using the charter results to hold their landlords to account and scrutinise their performance? You could record the number of visits to the website, but those people may simply be having a look. That is interesting in itself, but what evidence do you have that they are using the information constructively to engage with their landlord?

That is an excellent question. We have a number of sources of evidence. We can look at the number of visits to our website, as you said, but what is more important is what we hear when we engage with a variety of tenants’ organisations and with our own tenant panel of almost 500 tenants. We engage with the panel so that they can guide us and give us feedback on our documentation, how we work, how useful the tools are and so on.

Attending events is also important. For example, I made my first major speech as the chair of SHR at the Tenant Participation Advisory Service Scotland conference of major tenant bodies, which was held in St Andrews a couple of weeks ago, and I spoke about that exact theme. In the question-and-answer session, I heard a lot of commentary from tenants on how useful they found some of the tools that we gave them. To some extent, that has given them the confidence to ask some of the vital first questions. One man said to me, “I read my landlord’s report on the SHR website, which gave me the information and the confidence to start asking my landlord about things. Without that, I would have been a bit hesitant.” We have a number of sources of evidence, and we actively encourage that level of engagement.

I thank the witnesses for joining us. I want to discuss homelessness, which George Walker mentioned, but first I will follow up Andy Wightman’s line of questioning by asking about whistleblowing. Mr Walker mentioned whistleblowing in his opening presentation, and Michael Cameron has also been quoted specifically on the issue.

I am trying to get my head around why whistleblowing would be necessary. Are the whistleblowers tenants who are concerned that they might lose their tenancy if they made an official complaint about something? What issues might people blow the whistle on? I do not know whether you can tell us that, as I do not know how confidential the information is.

There are a number of areas. I will make a couple of remarks, and Michael Cameron might have something more specific to say. We see whistleblowing as part of a suite of feedback loops that includes feedback from tenants to landlords; feedback from tenants to us, as the regulator; feedback between the regulator and the housing provider; and, importantly, feedback from staff.

In my experience, certainly from my corporate background, an open culture is often needed for whistleblowing to work effectively. What I have seen so far—Michael Cameron can comment on this in more detail—is that a number of the statutory interventions that the SHR has made have been based on whistleblowing. For example, in the past year, to which the annual report relates, there were eight instances of whistleblowers coming to the SHR.

If the whistleblowers feel that they have to come to the SHR, that tells me, as the chair, that internal whistleblowing and the culture within the organisations concerned are perhaps not as effective as they could be. Whistleblowing is a useful source of intelligence for us, as a regulator, and it is a mechanism that we would like to work even more effectively within organisations in the future.

We would not necessarily describe a tenant approaching us as whistleblowing. There are a number of routes that tenants can take to raise concerns. The first thing that we would always encourage a tenant to do is to raise the concern directly with their landlord. We set out clear expectations on landlords about how they should manage complaints, and we work closely with the ombudsman in that regard.

We also give tenants a route by which to raise what we describe as significant performance failures. Those will be less about a tenant’s individual complaint than about tenants producing evidence of a systemic failure on the part of a landlord who has been failing to do something or is doing something ineffectively, which is having an impact on the wider body of tenants.

Those are some of the routes that we provide. They tend to be used by tenants who have exhausted the routes that are available to them with the landlord or who feel that those routes are not genuinely accessible.

That is a bit clearer. You are talking about a member of staff whistleblowing about a discriminatory allocations policy, for example—that kind of issue—rather than about issues raised by tenants. It was not clear to me why tenants might want to whistleblow.

It is very much about members of staff—former or current—or, indeed, members of an organisation’s governing body bringing to our attention serious matters that generally relate to a failure to meet our regulatory standards.

I will move on to homelessness. What evidence do you have about the effectiveness of local authority homelessness services? As you will know, we are inquiring into homelessness, and we have heard evidence that some people have not been able to access their statutory homelessness rights. What evidence do you have on that? Has that issue been exercising you?

Yes—absolutely. It has been a key area of focus for the SHR for a number of years now. Our sense is that many people who experience homelessness get a good service from local authorities and an outcome that meets their needs. However, that is not universally the case. We know that the use of temporary accommodation is increasing, and that more families with children are being accommodated in temporary accommodation.

This year we are engaging with 18 councils on homelessness. Some of the issues that we are engaging on involve that increase in the use of temporary accommodation—in particular, bed and breakfast accommodation. There are issues around access to temporary and emergency accommodation, and there are high levels of repeat applications. People are spending an increasing amount of time in temporary accommodation, and there are high levels of lost contacts—a person applies for assistance but then loses contact with the council. Those are all issues on which we are engaging with councils in the current year.

Have you found the mini-report, “Homeless Services—experiences of service users”, useful in informing your approach?

Yes. That research gave us a fantastic insight into service users’ experiences. It is worth stressing that most users told us that they had had positive experiences. In particular, they found their engagement with the staff who deliver the service to be positive, and they felt supported.

One of the major conclusions of the research was that many people who experience homelessness suffer distress that is caused by the amount of time that they might have to spend in temporary accommodation awaiting a permanent solution to their situation, with a sense that their life has been put on hold until that outcome is achieved.

On the back of that, we have ensured that our annual risk assessment of local authorities’ performance on homelessness identifies councils where there are above average or lengthy waits in temporary accommodation, and we have brought those issues to those councils.

Thank you—although I note from the report that a minority of participants reported difficulties in accessing homelessness services. On the back of what Mr Cameron has said, are there specific problems in areas where the local authorities do not have any houses, although there is a statutory duty on homelessness? For example, are there specific issues in stock-transferred areas, where the local authority is not the landlord?

In some locations where stock has been transferred, there can be particular issues. We are currently doing quite a bit of work with Glasgow City Council on challenges that are being experienced by homeless people—particularly in terms of movement from requiring assistance to finding a permanent solution. The council obviously looks to its registered social landlord partners to help it to discharge its duties in that regard.

We stress the importance of RSLs recognising their responsibilities to assist councils—all councils. However, particularly when a council has no housing stock of its own, it is crucial that partnerships are effective and focused on delivering the right outcomes for homeless people.

My final question on the issue was to ask whether you need to do more work on finding out whether RSLs are coming up to the mark and assisting local authorities to meet their statutory duty.

That is an important part of our annual risk assessment. We look at the information that we have about the level of lets to homeless people by local authorities and RSLs to help us to understand better where the arrangements are working well and where they are not working so well. In Glasgow, we are looking at the end-to-end journey of a homeless person from the point at which they are referred by the council to an RSL and then, sometimes, back again, so that we can better understand where that works well and effectively and where there are failure points in the process, or barriers to effective solutions.

We are in the midst of that work so it is too early to draw any firm conclusions. We will be feeding back our conclusions to the relevant partners in Glasgow in December, in particular where we identify improvements that are needed by the council or by RSLs to ensure that the process works effectively.

We will also share more widely with other councils and RSLs any positive practice that we find, to ensure that they learn from it, and we will continue to take account of all the information that we gather through that work in how we then engage with RSLs and local authorities.

Thank you. I think that the convener had wanted to ask about that specifically. Maybe we could have the information on that once you finish the work that you are doing on it.

I will be happy to do that.

I will just mop up one or two things around that. Obviously, being a Glasgow MSP, I have a constituency interest. The Scottish Housing Regulator reports back to the local authority on how it is managing the homelessness pathway and undertaking its statutory duties, and it recommends areas of improvement and commends areas of good practice. However, it is evident that there have been issues in Glasgow. Will that report become public?

The work that we are doing will not necessarily deliver a formal report. We are trying to be very agile, and to move quickly and get the right information out. I will be happy to share the conclusions of that work with the committee.

That will be helpful. I do not want to bounce the Scottish Housing Regulator into a commitment to checking with Glasgow City Council what the rules of engagement are, but it would be helpful if whatever information we got could become public information. If a summary of themes, topics, issues, challenges and so on emerges from that work, rather than a formal report, we might decide to get the relevant partners in Glasgow to the committee to discuss that constructively. It would be important that that information is not just extended to the committee in private, but that it becomes a public document. Would that be your intention?

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Absolutely.

That is very helpful. That said, are there any emerging themes that you want to share with the committee now, or will you keep your powder dry until you speak to the local authority in December?

I want to ensure that we have fully analysed the information and tested our emerging conclusions before I put anything on the record.

You will understand why I asked the question, but I appreciate your appropriate answer.

The deputy convener mentioned that the statutory duty sits with local authorities. Is the SHR sympathetic to making that a joint statutory duty with other social landlords, rather than it sitting solely with the local authorities?

That is a matter for Government. If that were to become the position, we would regulate on that basis. Our expectation of RSLs is that they participate fully and contribute meaningfully to alleviation of homelessness in their areas, and that they work constructively with the local authority to achieve that. That will continue to be the basis on which we engage in that important area.

Okay. Does the regulator share or observe best practice, and are social landlords monitoring whether they meet their responsibilities, if not statutory duties, on homelessness? I have one example, but I will not name the housing association, because that would be a bit unfair in this public forum. When the housing association accepts a section 5 referral on behalf of a homeless individual or family, the mechanism is that, if the individual or family does not bid on a property and secure it within six weeks, the social landlord does that on their behalf and the person is accepted for the property. Only some properties are put into the homelessness group under their choice-based letting system. That concerns me. That is just one example; there are lots, out there. Is there national guidance and rules under which the regulator can say whether that is acceptable and whether it has concerns? Would the regulator take a view on that?

With regard to how we assess whether a landlord is meeting its statutory duties or responsibilities in that regard, we look to the relevant legislation and the guidance that the Scottish Government has published, such as the “Code of Guidance on Homelessness”. That said, there is a lot of activity going on in that area, including the housing options approach—which is becoming well developed—the operation of choice-based lettings across a number of different areas and landlords, and the work that will emerge from the ministerial action group. That all suggests that there might be some value in looking at whether the code of guidance needs to be refreshed to ensure that it takes account of all the developments.

I have two further questions. What I hear as a constituency MSP is that it has to be a reasonable offer for it to count, whether that is to do with an elderly person who would have to leave their local support network, or a family with children who would have to move to the other side of the city and take their children out of their current school. A wide variety of criteria might result in an offer being deemed to be reasonable.

Is there a feeling out there that, if a housing officer or someone from the homelessness team says, “This is your offer; you have to accept it or we will discharge our duty to house you under homelessness legislation”, the conversation will be one of light and shade? When someone is asked to accept that an offer is reasonable, can they talk about what a reasonable offer looks like? If I was a homeless individual and I thought that the local authority was going to walk away at that point, I might be scared to rock the boat and say that it was not a reasonable offer. Those who rock the boat come to their MSPs—good on them for doing so.

Is there guidance, support and training in local authorities and housing associations on what is deemed to be a reasonable offer? Is there monitoring of the system to ensure that that happens?

There is guidance on what constitutes a reasonable offer, and that is set out in the code of guidance. I am not sure whether that guidance is fully up to date and takes account of the various arrangements that exist in allocating social housing, such as choice-based lettings. The developments over the past few years have been such that we are probably approaching the point at which a refreshed code of guidance would be of significant value. Dissemination of and training on that guidance would follow that.

I am conscious that MSPs only get the negative cases. People never come to me and say, “Bob, I had a great experience,” and that they had a superb pathway through their horrible homelessness situation. I realise that our view is coloured by the experiences of the people who come to us. However, specifically in relation to homelessness, I was interested in Mr Walker’s use of language in his opening statement, in which he said that he is keen to continue along that road based on “the limitations of” the SHR’s “remit”. That begs the question whether you think that it would be helpful to extend the remit or, at least, to have a discussion about how it could be extended to see what that could look like.

That is a fair question. I was alluding to the fact that we, as the regulator, recognise the complexity of homelessness and, therefore, that a multi-agency approach to it is needed. It is not for us, as the regulator, to mandate particular things; it is for us to operate within our remit and charter, and so on. The comment was recognition that we want to work as part of a multi-agency approach to homelessness.

As it happens, Michael Cameron and I were recently at a meeting with a significant RSL in Scotland that is running a “homes first” pilot. We talked about that, and we heard that it is seeing good results. One of the big points that was made was about the need for all the support mechanisms that sit behind that approach. Of course, a discussion ensued on that, during which there was recognition that there is a limit to the regulator’s role in homelessness, and that we need to work with other bodies on it, because it is such a complex area.

I do not mean to be patronising to the committee: I know that you have done much work on homelessness recently and that you have a lot of knowledge and experience, so I am well aware that you know that.

I was just floating the idea of additional remits for the regulator, to give you the opportunity to talk about that.

We will move on to a different line of questioning.

The average rent in the RSL sector is £11 a week higher than it is in the council housing sector. Earlier this year, you did a survey that found that about a third of tenants had experienced rent affordability issues at some point, that one in eight had had difficulties in the past year, and that 66 per cent were worried about future rent affordability problems. What is your remit in relation to rents, to controlling them and to affordability issues?

Tenants certainly tell us that they are worried about rent affordability. The themes that come up are possible future rent increases, levels of income not rising—as we know has been the case—and changes to benefits, which also have an impact. Feeding into that is the idea of value for money. In fact, the last piece of significant research that we published from our tenant panel, which as I said is a group of about 500 tenants, was on the panel’s views on value for money. The issue is certainly on our radar at the moment, given that, as I mentioned, inflation hit 3 per cent recently, so we will certainly be vocal about it. We have always taken the view that we want housing providers to look at rent affordability for the long term because it is not a one-year gig. I will be speaking about that to housing providers at a conference on Friday. Michael Cameron has a lot of detailed information on that and on some of the work that we have been doing.

It is important to say that we pay close attention to rent levels—in particular, to proposed increases in rent by social landlords—when we are undertaking our annual risk assessment of all landlords. If we have concerns about a rent increase that is being proposed, we engage with the landlord. That said, it is our sense at the moment that current rents for most homes are affordable for most tenants. The level of rent arrears is relatively static at the moment, which may be evidence to support that.

However, as George Walker has already touched on, we are well aware of some of the challenges that are coming in relation to tenants’ incomes, and tenants are communicating to us their concerns about future rent affordability. That is why our message to landlords has been about considering future affordability and the future ability of tenants to continue to pay their rent. As the regulator, that is a theme on which we will continue to engage with landlords.

Is there anything to prevent RSLs from setting whatever rents they like?

There is no national rent policy in Scotland and, therefore, there is not that type of constraint on landlords. As I said, we would take an interest if we saw what we considered to be excessive rent increases, but we do not have a sense that landlords have significant rent increases on their agenda.

We collect financial projections from all registered social landlords, from which we can determine a sense of the rent increases that they are thinking of. Over the past few years, the level of those projected rent increases has been reducing; having said that, our analysis of the most recent set of projections shows them going up again, to about 2.9 per cent. That is why we are flagging it as an important issue.

When landlords are considering rents for future years, they need to ensure that they have meaningful engagement with tenants on what they view as value for money in terms of the rent that they are paying and the level of service that they are getting, but also to take account of the sustainability of the rent levels for tenants into the future.

Should there be something in place to constrain any RSLs who want to impose massive rent increases?

Rent controls are a matter for the Scottish Government and, indeed, for the Parliament to consider. At the moment, the regulatory position is that we do not see any great rush by landlords to look at excessive rent increases. Most landlords are very mindful of the impact that rent increases have on their tenants. However, we will engage with any landlords who we think may be pushing rent levels to such an extent that it will become challenging for tenants to sustain their tenancies in that context.

Mr Simpson also asked about mechanisms, and the really good and powerful mechanism is tenant consultation. Good and responsible landlords consult properly and in detail on such subjects. They come forward with options and get into a real dialogue with their tenants around things such as rent increases, costs and value for money. There is a mechanism whereby the type of information that the regulator can provide, which I talked about earlier, can open up that dialogue. When we talk about consultation, we mean real options and dialogue with tenants—we do not mean a nice letter.

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What evidence is there that that is happening? When I met Mr Walker a short while ago, I asked a similar question about what happens when rent policies go to the board for approval. Does one option go to the board and get voted through on the nod because that is the culture within that housing association, or does an options paper go to the board, based on consultation with tenants and residents, which is followed by open dialogue and a decision that is based on that paper? In the latter case, the board is empowered to choose option A over option B or option C, rather than being told, “You can have your rent increase as long as you go for the option on the table. All say yes now.” Is any data collected to show whether that happens?

We published our thematic inquiry on how social landlords consult tenants about rent increases about this time last year. We found that some landlords engage with their tenants in a very meaningful and constructive way, in which they present options and choices and have the sort of dialogue to which George Walker referred. We also found that other landlords need to do more.

We made a series of recommendations to landlords and we plan to follow up on that thematic inquiry in 2018 to see what landlords are doing differently in order to consult their tenants.

We get feedback from our national panel, which indicates that many of the participants have received information from their landlord on proposed rent increases and that they were invited to provide their views. However, there was more of a mixed picture on how clear and genuine they felt that process to be.

Finally, we look to the significant performance failures route as a way for tenants to raise concerns with us if they feel that a rent consultation exercise is not genuine. One or two such significant performance failures have been reported to us by tenants.

That is helpful. We have about 10 minutes or so left for questions.

In your recent report, you go into some detail about risk: your risk assessments, risk committee, risk framework, risk task force and the risk plan. That all sounds good and gives people confidence that you are tackling the issue. However, you also talk about finding some low-risk areas that have been prioritised. What are the greatest risk issues to you as an organisation?

Just to clarify, are you asking about our risk as a regulator or risk as we see it in the outside world? There are two parts to how we look at risk.

I suggest that both come into it.

Okay. I will make some comments on how we look at risk for us as an organisation, although risk also goes out into the risk assessments that we do of RSLs. We signed off the process for that for the coming year at our last-but-one board meeting. Michael Cameron will comment on that aspect.

When I first turned up at the SHR, I was happy to find a very well-defined risk management process in place. We have a risk register, which we reviewed yesterday—we had a board meeting and went through it in some detail. We set risk assessment plans for those risks to us as an organisation that we deem to be higher. Our management team reviews that monthly and our audit and risk committee reviews it quarterly. As a board, we hold a major risk workshop each year, although as a new chair, I have not yet been part of that.

We have a clear way of managing our risk as an organisation. However, as I said, risk and risk assessment go into the world of RSLs as well, so I ask Michael Cameron to comment on that aspect.

Every year we undertake an extensive assessment of the risk that we see in each registered social landlord. Along with our partner scrutiny bodies, we carry out a shared risk assessment of each of the local authority landlords. However, with regard to registered social landlords, we conduct an annual exercise in which we come to a view on the principal risks to our ability to protect and safeguard tenants’ interests. They are not necessarily the same risks that the landlord might have on its own risk register. This year, we identified a number of risks, some of which we have addressed, relating to rent levels and affordability, the impact of welfare reform on landlords’ income streams, and the fact that more landlords are getting back into development and building more houses. That presents a range of risks as well as opportunities.

We are still focused on the other challenges to RSLs’ financial capacity, in particular, risk relating to pension liabilities and the impact that that can have on an individual landlord. We look at the full range of risks in the landlords’ operating environment and we come to a view on the level of risk that each landlord has. We then construct an appropriate engagement for every landlord and publish what that engagement will be in our regulation plans. Last year, we had just shy of 60 plans and, therefore, we are engaging with approximately 60 landlords this year where we have identified potential areas of risk.

Other issues such as fraud, whistleblowing, which you have dealt with in the past, and an anti-bribery regime have come to the fore in recent times. Do you have a policy to manage that?

That is very much part of regulatory standards. We expect all landlords to comply with regulatory standards and to uphold the highest standards of behaviour and ethics within their organisation, and we will absolutely respond where we find any instances of failure to comply with standards. We have done so in the recent past through a number of statutory interventions.

There are no more bids for questions, but I would like to engage in a brief mopping-up exercise for five minutes before closing this evidence session. I will try to keep the questions brief, and brief answers would be helpful.

Mr Stewart mentioned risks to your organisation. The report notes:

“We are smaller, having frozen recruitment throughout 2015/16 to respond to a reduction in our funding. We have also made savings in our other administrative costs wherever possible ... All public bodies face funding pressures in the coming years. Our revenue budget for 2017/18 is £3.8m.”

It would be remiss not to ask how the SHR is managing that budget in the context of required efficiency savings and so on. Would Mr Walker or Mr Cameron like to comment on that?

We conducted a half-year review this week. We believe that we will come in in line with our £3.8 million budget. Our budget has been reduced by approximately £1 million and, therefore, we have taken out significant costs over the past five years. However, 80 per cent of our costs are staff related and, although I said that we will come in in line with our budget, that will be because we are maintaining a number of vacancies. We have a concern about that. There is no fat left to trim when 80 per cent of the costs are staff related. The staffing complement has reduced from 80 to 50 and, therefore, the savings have been significant.

As we move forward with the spending review, how we will respond is on the mind of the board. We will respond appropriately when we see the outcome of the review. We have engaged with officials and the minister on that, and we are comforted that they are aware of our issues; that is helpful. The outcome is for others to decide, not us.

That is in the public interest, so I am glad that it is on the record. You mentioned that one of the risk factors was the Scottish Government’s target of 50,000 new, affordable homes over this session of Parliament; delivering on that is a significant challenge for housing associations and local authorities. Much of it comes down to corporate governance and the ability, for the first time after a number of years for some housing associations and local authorities, to manage large projects. How content are you that the housing association movement and local authorities are well placed to deliver that target in terms of their ability to manage such projects?

We have had a strong focus on that over the past couple of years. You may be aware that one of the organisations that we had to use our statutory intervention powers on got into trouble because it got back into building houses after a significant period of time and did not have the capacity to manage that effectively. Partly in response to that, but also recognising that the target is there and that more landlords are getting back into developing and building new houses, we did a thematic inquiry last year and published a very well-received set of principles to guide landlords through their implementation of development programmes. We will keep an eye on whether that is having the impact that we would want it to have. The issue is high on our risk agenda in terms of the assessment process that we go through for every landlord.

That is a positive thing. It is good that landlords are getting back into the business of building affordable homes, but it has to be managed. I am delighted that the housing regulator is keeping a close eye on that.

My final question is about ensuring that we have balance in our questioning in this session. We have heard a bit about engagement with registered social landlords. Can you say a bit more about governance? It is important that we hear about not just the reasons for your engagement in the governance category but how you seek to improve practice and build capacity.

You raise a matter that is very important and dear to our hearts at the SHR. As I said, we have engaged with one in eight RSLs around issues of governance and we have had seven statutory interventions in the past three years, which have mainly been about governance that has not been as effective as we would have liked it to be. Governance will be a significant theme as we go through our regulatory framework review. We are already looking at issues around governance, because we believe that good governance is the core aspect. We are looking at the building blocks of good governance in areas such as internal audit and whistleblowing, which we have touched on. We are getting into the meat of that. Indeed, I will be talking about governance at a major conference on Friday; it is a very important area for us.

Michael Cameron might have something to add, as a regulator over the past five years. I have been talking to the committee about good governance being a high-profile issue for us, but I do not want to lead you to believe that there has not been a lot of activity going on. Make no mistake: governance is a challenge.

When we engage with a landlord using our statutory intervention powers, we publish a report and account of that engagement when it is concluded. One of the important purposes of such reporting is to give all landlords an insight into what went wrong and an opportunity to review their approaches to ensure that they can learn any lessons that might come out of the report. We have published two such reports and we have just concluded a third statutory intervention, so we will move shortly to publish a third report. Following that, we will look to draw broader lessons out of those three situations to ensure that the sector learns lessons and to see whether there is anything that we need to take out of that. As George Walker said, that will feed into the review of the regulatory framework.

Thank you. I thank Mr Walker and Mr Cameron for attending the meeting today. It has been a very worth-while evidence session. As usual, I ask you to email the clerking team if you have anything to convey to us that you did not have the opportunity to mention. However, I hope that you have had that opportunity.