Local Government, Housing and Planning Committee

Meeting date: Tuesday, December 5, 2023

Official Report 715KB pdf

---

Scottish Housing Regulator: “Annual Report and Accounts 2022-23”

We turn to agenda item 3, under which we will take evidence on the Scottish Housing Regulator’s “Annual Report and Accounts 2022-23” from George Walker, who is the chair of the Scottish Housing Regulator, and Michael Cameron, who is its chief executive. I also welcome to the meeting Paul Sweeney MSP, who has joined us for this item.

I begin by inviting George Walker to make an opening statement.

Thank you very much, convener. I might take a minute or so more on my opening statement this time than I have done previously, because so much has gone on since we published our annual report. I hope that that is acceptable to the committee. I promise that I will not drone on for too long.

Thank you so much for inviting us to present the annual report for 2022-23. As you will know, we published it in October, but so much has happened since March—the end of the period that the report covers—that we want to draw your attention to some of those important developments. I will start with homelessness, before sharing some analysis on new build and what is happening there. I will also update you on reinforced autoclaved aerated concrete—RAAC—which is an issue that is pretty hot off the press.

We have previously spoken about homelessness. In February, in “Homelessness services in Scotland: A thematic review”, we said that, for some councils, there was

“an emerging risk of systemic failure.”

That was a significant statement. Since then, the Scottish Government has published statistics that show an increase in the number of homelessness applications. As we sit here, the number of people in temporary accommodation—including children—is the highest on record, and they are spending longer in temporary accommodation than they did in the past.

Our on-going engagement with councils on the delivery of services for people who are homeless has found that breaches of statutory duties are now a regular occurrence in some councils. In the annual assurance statements that have recently been submitted to us as the regulator, 14 local authorities state that they do not always fully comply with their duties, and some acknowledge that they are not always able to meet their duties to people who are homeless.

Our analysis of registered social landlords’ recently submitted annual returns on the Scottish social housing charter has identified that fewer existing homes are becoming available and that, when they do, they are staying empty for longer. The net effect is that fewer homes are available to let.

In addition to the issue of people who are already in temporary accommodation, some councils are concerned that there will be additional demand for homelessness services as a result of the Home Office’s initiative on streamlining the asylum process.

We see that, in some areas, the demand now certainly exceeds the capacity to respond. We are now of the view that there is a systemic failure in the services that are provided by some councils, and that there is a heightened risk for other councils.

We will, of course, continue to monitor, assess and report on homelessness, but we recognise that systemic failure requires an intervention beyond the regulatory powers that have been given to us by Parliament. Yesterday, we published a statement updating our thematic review to reflect the current position with regard to systemic failure in some of the homelessness services that are provided by some councils. We, of course, stand ready to work with the Scottish Government and stakeholders to address the acute issues that we see in homelessness.

We were very aware of Parliament’s recent debate on housing. Our view is that the context for tenants and social landlords has never been more challenging, but social landlords have worked hard and have kept rent increases in the past few years to levels below the prevailing rate of inflation. That has undoubtedly been of immediate help to tenants who are struggling to manage household finances. However, rent arrears are at the highest level since the introduction of the charter, and landlords are facing real pressures in funding future investment in their tenants’ homes and in services.

Related to that, I want to highlight our recently published analysis of registered social landlords’ five-year financial projections up to 2027-28. In that, we can see a reduction in the number of new homes that RSLs will build and in the number of RSLs that plan to build. That is due to cost increases in construction and the impacts of the cost of borrowing for RSLs. They are also planning to cut back or delay investment in existing homes, which is troubling. Those same organisations are halving expenditure on non-core activities, which include things such as the provision of welfare and energy advice. The halving of expenditure on those non-core activities is significant. The impact on current tenants and people who are experiencing homelessness could be very significant. That is further evidence of the significant pressures that tenants and landlords are having to cope with.

As you know, convener, we discussed RAAC when we last met. We have been working with stakeholders to establish the extent of RAAC in social housing in Scotland. From our on-going data collection, which we started in October, we know that nine social landlords have a total of 953 homes with RAAC. We will continue to update those figures as landlords conclude their on-going investigations into possible RAAC, and, of course, we are engaging with those landlords that have confirmed the existence of RAAC in homes to get assurance about their plans to deal with managing it.

Finally, I want to report that we are progressing well with the review of our regulatory framework. We started that in June with a discussion paper, and we used the feedback from that to develop specific proposals that we are consulting on. That consultation closes on 15 December. We will consider and cogitate on the feedback from that, and we will produce a final framework in February, for implementation in April. Alongside that, we are revising our corporate strategy, which will also start from April. I am happy to say that the feedback has been broadly very supportive. There is a clear sense that the sector wants stability and that the existing framework has been working well. We agree with that: the existing framework has been working well. At present, although we are engaging with a number of landlords, I am very pleased to report that we have no statutory interventions under way.

The main proposals that we have made are around allowing for us to ask for further detailed information on emerging topics, such as damp and mould, in the annual landlord assurance statements and to seek clarification on regulatory status based on feedback from tenants and, importantly, lenders to the sector.

We will also do a comprehensive review of the annual charter return. Part of that is safety related—we want to collaborate with the sector to develop key measures around safety issues such as damp and mould. That is complex, so a collaborative approach matters. We will wrap that up with work on the indicators that we will use to monitor landlords’ achievement of the newly proposed social housing net zero standard, and we will do a further combined consultation towards the end of the year.

Of course, throughout the process, we will be happy to keep the committee updated on our work, via the clerks or by coming to visit, should that be needed. I am sure that you will have questions for us, so I will hand back to the convener. We will be happy to answer any questions or to discuss anything that members would like to discuss.

Thank you very much for that very thorough introduction and for getting into some of the detail about homelessness. Thank you, too, for highlighting your awareness of the fact that more data needs to be gathered on damp and mould, which has become an issue that the committee has taken on.

In your opening statement, you mentioned the challenging operating environment for social landlords and the financial pressures on tenants. I would be interested to hear how that has impacted on your regulatory approach and what that means for tenants and other service users and landlords.

I am happy to take that. I will start, and Michael Cameron might want to add something.

It is a very sensible question. There is no doubt in our minds that this is probably the most challenging, volatile and uncertain environment that social landlords, tenants and service users have experienced—that is clear. The economic uncertainty and volatility over the past three years have been unprecedented, and, frankly, at times, it has felt pretty relentless. That is what we hear from tenants and landlords. I could give you rhyme and reason on inflation and the Bank of England, but I think that you all know about that, so I will not get overly bogged down in the detail. We know about the effect that that is having.

There are a couple of points to make. We all know that food and drink inflation remains high, despite the fact that headline inflation rates have fallen. The annual rate hit just over 19 per cent in March, and it fell a little to 17.3 per cent in June. The latest monthly data shows that it has slowed to around 10 per cent, which is good, but that simply means that prices are rising more slowly; they are still rising by 10 per cent. Why do I comment on that? I do so because the reality is that poorer households spend much more of their budget on essentials such as food. We know that they are the most exposed to high food inflation. We must not be drawn into thinking that the fall in headline inflation has taken the pressure off some of those poorer households. In many cases, it really has not.

On your point about the whole sector, we are very aware that, for landlords, cost inflation—especially in maintenance and new construction—is running at between 10 and 20 per cent, which is significant. In our regular meetings with landlords that operate in rural and island areas, we have learned that cost inflation there is even more dramatic. We recently heard of increases in maintenance costs of between 30 and 40 per cent over the past two years. That is just one area where the experience of social landlords is that inflation is running way ahead of the consumer prices index.

I will touch on the fact that the rapid increase in the Bank of England rate to 5.25 per cent is beginning to hit home. About 25 per cent of the borrowing by social landlords is on variable rates, so the rate increase has fed through to increases in interest charges of about £66 million a year. That means that quite a significant chunk of revenue is being hit. There is no doubt in our minds that social landlords have made considerable efforts to minimise the impact of those challenges on their tenants. We can really see evidence of that. They have certainly tried to limit rent increases to levels that are below what they had in their original business plans, which are usually linked to inflation. Of course, that means that landlords will have less income than they originally planned to have in current and future years, which will mean their having less to invest in tenants’ homes and services, as we have said.

Another example relates to landlords’ wider activities. In my opening statement, I touched on the cutback in wider non-core activities, such as welfare advice and energy advice. Social landlords support tenants in a host of ways and, as I mentioned, we are seeing plans to cut the investment in such support by half, which is quite significant. We recognise that the current context means that social landlords are having to make tough decisions to prioritise what they pay attention to and focus their resources on. Those are the most critical issues for them.

I reassure the committee that we absolutely take those challenges into account in our risk assessment this year, which we went public with fairly recently, and that we will continue to respond to that changing landscape and the challenges that landlords and tenants face. The committee can rest assured that we will focus on the big challenges that tenants and landlords face in the cost of living crisis. We will not do regulation by tick box. We will focus on what is in front of us at the time: the cost of living crisis; affordability, of course; the acute issues around the number of people in temporary accommodation; and the emerging requirements for landlords on net zero, damp and mould and residents’ safety. In answer to the final part of your question, the approach that we will take, as a regulator, is to focus on those live issues as they emerge. I hope that that helps.

It is very helpful to hear that that is your approach.

You spoke extensively about the thematic review of homelessness, and you covered part of the question that I was going to ask you. You mentioned that a number of local authorities are not able to comply or meet needs. How are you monitoring how those councils are making progress and moving towards compliance?

Michael, do you want to take that?

Yes, I am happy to pick that up.

As you said, in February, we published our thematic report on homelessness services in Scotland, in which we flagged the very real risk of systemic failure. Yesterday, we updated that statement, as George Walker advised, in order to highlight that we are now of the view that there is systemic failure in some of the services that some councils deliver for people who are homeless. We are engaging with all those councils that we have identified. We will update the engagement plans for each of those councils in order to reflect that current assessment. That will happen in the coming weeks. We will look to all those councils to continue their best efforts to meet their statutory duties towards homeless people and to engage in the dialogue that is going on at a national level to look at alternative approaches to dealing with the most immediate challenges, particularly the acute problems for people who are in temporary accommodation or who want to access temporary accommodation.

As George said, we will continue to work with the Scottish Government and other stakeholders in the area of homelessness to look for opportunities and different ways to address those very real and acute issues.

Is the issue the same across all 14 of the councils concerned, or is it nuanced? Is it really just about a lack of housing stock?

10:30  

We looked across six different aspects of performance and statistics for each of the councils. For example, we looked at breaches of the unsuitable accommodation order or failures to provide temporary accommodation when it is required, but we also looked at issues such as the number of people, including children, in temporary accommodation and the direction of travel in terms of demand for that type of accommodation.

We looked across a number of dimensions. Some of the councils that we are focusing on have the red status, if you like, on some of those dimensions. A smaller number have it across all the dimensions. Therefore, the picture is variable across councils and across the country.

I will bring in Pam Gosal for a supplementary question.

Thank you, convener. Good morning, panel. I have two supplementary questions. You mentioned 14 councils. Three councils have declared a housing emergency so far, and many are breaking statutory duties every day. Is it time for the Scottish Government to declare a housing emergency?

We set out very clearly that we consider that there has been systemic failure in provision of services to homeless people. Language such as “housing emergency” does not sit in our regulatory framework. It is for others to consider whether that is an appropriate form of language.

We look at individual councils and the position in them. In the coming weeks, we will set out our assessment in the published engagement plans for each of the councils, and we will then engage with them on what they are in a position to do.

It is important that we will also engage with the Scottish Government and other stakeholders to consider wider options for tackling the acute issues that we are seeing, particularly in provision of temporary accommodation.

Thank you for that response, but councils are going through really challenging times. I have, over the past couple of weeks, had the opportunity to speak to many council representatives who have spoken about budget cuts and pressures.

More than 200,000 people are on the social housing waiting list, including 100,000 children. What should the Scottish Government do that is different, in order to ensure that those lists are drastically reduced? You mentioned that you are looking at councils, but the councils are looking to the Scottish Government for support and help. Do you feel that there is anything that the Scottish Government could do differently?

Our role is to regulate individual landlords, including local authorities. That said, we engage with the Scottish Government on the wider systemic situation. A systemic failure requires a systemic intervention, which is well beyond the powers that Parliament provided us with: we do not have systemic intervention powers.

At the heart of the issue is the supply of homes to allocate to people who are experiencing homelessness. The Scottish Government has a programme to deliver new social homes. That is critical. It takes time, however, to deliver new-build programmes and developments.

We see real challenges around the cost of new builds. George Walker touched on our analysis of the financial projections of RSLs, which has given us a clear sense that RSLs are significantly reducing plans to build new homes and reducing the number of homes that they will build.

The supply side remains critical. The Scottish Government is considering a national acquisition plan to see whether there are alternative approaches to delivering the increase in supply that will be needed. Our sense, however, is that that now needs to happen at pace in order to deal with the immediate challenges that are in front of us all.

There is also a need to consider direct provision of support to local authorities and registered social landlords to enable them to maintain the services that people who are experiencing homelessness need now, and that they will need to help them sustain tenancies.

Thank you.

Good morning to you both. I will follow up on Pam Gosal’s point. After this item with you guys, we will discuss a paper that tells us that, in Scotland, there are 70,000 long-term empty houses. How does that square with your comments about the systemic failure of some councils to deal with homelessness? How do we have such a huge number of long-term empty houses and such a high number of homeless people in Scotland?

Many of those empty houses are, obviously, not in the social rented sector, so there is an imperative to understand where those homes are and how quickly and effectively they might be brought back into use. For a home to be let as a social home, it has to meet the Scottish housing quality standard. That, in itself, can be a challenge for some empty homes.

A national acquisition plan such as I mentioned is one vehicle through which that could be done. I know that a number of other initiatives are in place to bring empty homes back into play. In the current financial context, in which we see the costs of construction being prohibitive in some regards, maximising use of existing stock is increasingly important.

As for empty homes in the social housing sector, we have engaged with some landlords to ensure that they are maximising their bringing those homes back into use. Part of the conversation that is happening with the Scottish Government and other stakeholders is about whether there are further initiatives that could accelerate that.

We know that it is taking longer to get homes that become empty back into use. A lot of that is to do with challenges around the cost and availability of contractors. There are challenges around the ability of utilities companies to ensure that appropriate supply is available in homes when they are ready for re-let. That is a growing concern among social landlords.

There are a number of areas in which initiatives can be undertaken. The statement, “There are a lot of empty homes out there”, understates the challenges in bringing some homes back into use. As I said, a number of initiatives are in play that might help to increase supply through targeting of homes that are available for purchase or homes that are empty and can be brought back into use.

Do you track the important figures, such as the number of long-term empties in the social rented sector that are being allocated to people who are temporarily or long-term homeless?

We monitor landlords’ performance in letting and management of empty homes, and we produce annual statistics on that. We are in conversation with the Scottish Government and other stakeholders on whether it would be helpful for us to put in place more regular data collection from landlords on some of the key things—letting of homes, management of empty homes and the number of homeless people being allocated such homes on a short-term basis, for example—in order to understand the effectiveness of any measures that are brought forward.

We will have a meeting later this week at which that topic will be discussed further. Although we do that annually, it might be that we will, before too long, do it more frequently. That would reflect the approach that we took during the pandemic, when we had monthly data collections from landlords on key areas of performance, in order to ensure that everyone understood the pandemic’s impact on landlords’ ability to deliver services. A similar approach might be put in place within the next couple of months.

That is really helpful, Michael. Thank you very much for that.

George, in your remarks and in response to questions, you made really positive comments about attempts by landlords to control their expected rent rises. You mentioned that several times. Can you flesh that out a wee bit and talk, conversely, about the impact of that initiative and work that they are doing to invest in their stock? Can you add more about the numbers? How many landlords are doing that? Is it widespread? Is it a small number? Can you give the committee a sense of how many landlords are embracing your recommendations?

I have some information to give you. I probably do not have specific numbers to hand, but I can provide you with more data. What I am about to say is maybe more high level, if I can put it that way.

On coming back from the pandemic, I suppose that the place to start is with the good news that we hear from landlords. In many cases, they are back to providing pretty much the full range of services that they were providing pre-pandemic. That is a good thing; it might even be surprising, given the cost challenges that they have been hit with.

Are those things perfect? No—there are gaps here and there, but it is fair to say that landlords have stepped up to that challenge. Of course, they have been hit not only by the pandemic but by the dual challenges of the global impacts and inflation, which we have touched on.

I will come on to the rent question in a second, but I must first highlight that there is a struggle related to the fact that there is lower turnover of homes now than there was pre-pandemic. It is quite significant that turnover has not come back to pre-pandemic levels, and that situation plays through the system. Around 1,700 fewer homes became empty during the past 12 months—that is a big number—but it is nearly 5,000 fewer than in 2019-2020. That is a significant slowing of turnover, if you like, of social housing, which is impacting on landlords and tenants.

You asked about empty homes and so on. Michael Cameron touched on the fact that landlords were struggling to re-let rapidly enough. I will give you some specifics on that. In 2019, it took about 32 days to re-let an empty property. Today, it is taking 56 days. That is a gap. Michael touched on some of the reasons for that increase: there are, for example, issues around availability and cost of services to deliver re-letting.

I will draw your attention to the fact that, of course, such delays mean that landlords lose rent from those empty homes, even in re-letting. By our estimates, there is between £38 million and £39 million—£38.7 million, to be exact—of lost rent due to that delay. You can see where some of the challenges are.

What are landlords doing to alleviate that? It is fair to say that landlords are making significant efforts. The evidence says that, over the past couple of years, rents have increased at below the rate of inflation. I will give you some numbers on that. Consumer prices index inflation was averaging 8.7 per cent, the average rent increase by social landlords was 5.1 per cent and the median was 5 per cent. It was reasonably far behind what CPI inflation was showing.

I make it clear that averages and medians can mislead. There was a range of RSLs’ increases, from zero per cent—some had no rent increases—up to as high as 8 per cent. However, that 8 per cent was still behind the 8.7 per cent average inflation at the time. That gives members a sense of the scale of the rent increases that RSLs have been tackling and what they have been trying to do against the current backdrop.

The final thing that I want to draw your attention to, because it is important, is the fact that, during the pandemic in particular, we had concerns around gas safety inspections and access to homes. You can imagine that, during the pandemic, access to homes was difficult for landlords and worrying for tenants. There was a gap in some landlords getting that done. However, I am pleased to say that, post-pandemic, social landlords are back to carrying out those inspections and have, in the past year, completed 99.8 per cent of gas safety inspections. That is a significant recovery from where they were when they struggled with access during the pandemic.

Going back to your question, I say that I hope that the rent increase numbers give you a flavour of the situation. We will have a look at what other specific data we can give you on numbers, landlords and so on, because we have all the data on the suite of what landlords have been doing with rents. I am sure that we can provide you with that.

Again, that is really helpful. The only other thing that occurs to me to ask is this: if the median rent rise is below inflation, will that have any impact on landlords’ ability to retrofit their properties to meet net zero?

10:45  

Michael Cameron might have something to say specifically on retrofit. I do not, at the front of my mind, but I touched on the idea of reinvesting in existing stock and the five-year financial projections that we are looking at. There is no doubt that evidence is emerging that landlords are finding it challenging to reinvest in their existing stock, which can mean investment in a host of things from replacing roofs to a regular cycle of fitting new kitchens and bathrooms.

Michael, do you have anything to add on retrofit? I do not want to comment on something on which I do not have the information at the front of my mind. Generally, there is a reinvestment challenge, if I can put it like that.

Yes. Specifically on retrofit to tackle energy efficiency and net zero, George is right that the financial projections show a reduction in planned investment by landlords in existing homes. Also, the vast majority of plans did not necessarily include the future cost of meeting energy efficiency requirements and net zero, largely because of the on-going review of energy efficiency in social housing.

The proposal was published last week for the social housing net zero standard. When the consultation has concluded, landlords will have greater certainty about the expectations and the standards that they will have to meet. We expect to see landlords starting to plan the costs of delivering those standards, and we will see that coming through in the financial projections. We anticipate that the cost of retrofitting will be substantial.

The other uncertainty—you will hear this from landlords, if you speak to them—is the level of public subsidy that might be made available to help them to invest in their homes to meet the new standards. At the moment, there is a degree of uncertainty about that. We anticipate a substantial investment requirement. The exact impact on rent levels for tenants will be, in a large part, determined by the answer to the question about public subsidy.

Thank you, Michael.

George Walker anticipated my last question and almost answered it. You obviously have second sight and know what I am going to ask. The question is about the time that landlords take to re-let their properties. You mentioned that it is now taking longer. Do you pin that on the residual impact of Covid?

We hear a mixed economy, if you like, of answers on that. There is a flow through from two things. First is the availability of the services and providers for re-letting, which not all landlords have in-house. The service is often outsourced, and landlords might use a mix of insourced and outsourced providers. There are issues of availability and access to services—some of which is about people, as I understand it, and landlords recruiting skills and qualified trades to do that work themselves or through outsourced partners. That has possibly followed on from the pandemic and the recruitment challenges that we hear exist in so many sectors since then.

The second thing is inflation and cost. Earlier, we rehearsed some of the numbers involved, and I gave you a flavour of the construction and repair inflation that we see. We hear from landlords about inflation at 10 to 20 per cent for those things, so there is an impact from that. We have tended to hear about a combination of those two things from landlords.

I should also draw attention to the challenge of reconnecting gas and electricity supplies to homes as they go through the turnover. We are aware, because we have discussed the issue with it, that the Scottish Government has flagged concerns about that at United Kingdom level. That is certainly coming up as an additional challenge. One might think that landlords have control over what they spend and control in relation to access to services, to a degree, but they have no control over that. That is one thing that has emerged recently.

George Walker mentioned a figure for loss of income due to lost rent. Was it £38 million or around that?

It was £38.7 million, I think, just to be clear.

Can landlords attempt to recoup that?

That is the cost of lost rental while properties sit empty, which they do for an average period of 56 days now, as I said.

Is there any sense from landlords of how or whether they intend to try to recoup that loss?

That resource is gone. There is nowhere to recoup it from. The house is empty; there is no tenant in the home who would be due to pay rent. The longer a home stays empty, the greater that lost rent figure becomes. We are very aware that landlords work hard to minimise the length of time for which a property is empty, principally so that they can provide a home to somebody else as quickly as possible, but also because they recognise that homes that are empty have a significant financial impact on them.

Homes being empty is bound to have an impact on landlords’ retrofitting intentions as well, is it not?

Absolutely—because that money is gone from their available resources. That is another reason why, as I said, landlords work very hard to try to minimise the length of time for which homes are empty.

However, as George Walker said, there are, unquestionably, contextual factors that are making it increasingly difficult for landlords. The availability of materials and supply, the cost of labour and materials, and other challenges around utilities companies and connection of energy supply are making it increasingly difficult for landlords to bear down on the length of time for which homes are empty.

Okay. Thanks very much, both of you, for the answers.

On that last bit, local authorities have robust void strategies, but there is huge pressure on the housing revenue account just now.

The annual report on the social housing charter shows that tenant satisfaction with the quality of their homes remains around the same: 84 per cent compared with 85 per cent previously. What are you doing to ensure that you meet your priorities around quality of homes and tenant and resident safety? You have touched on that a bit, but will you expand?

Landlords’ compliance with the Scottish housing quality standard is the principal measure of the quality of the homes that are provided to tenants by social landlords. Landlords’ compliance with the Scottish housing quality standard improved, between 2021-22 and 2022-23, from 73 per cent of all homes meeting the standard to 79 per cent. That is still below the compliance rate prior to 2020-21, when it sat at 87 per cent. Most of the homes that fail the Scottish housing quality standard do so on one criterion only. There is a broad range of criteria within the Scottish housing quality standard that homes have to meet and, as I said, the vast majority fail on just one. Less than 4 per cent of homes fail on more than one criterion.

It is important to flag up that the Scottish housing quality standard was amended in the past couple of years to include the requirement for electrical installation condition reports to be carried out every five years and for interlinked smoke and heat detectors to be installed in every home, with compliance targets of March 2022 and February 2021 respectively. The decline in overall compliance levels with the Scottish housing quality standard has principally been because of the challenges that landlords have experienced in meeting those target dates. Landlords are continuing to work through that backlog. There is a clear sense that that was impacted by issues to do with the availability of materials and labour as a consequence of all the economic challenges that we have touched on.

We are engaging with a number of landlords around our compliance levels, and we expect to see full compliance with those particular elements around electrical safety and fire safety when landlords report their performance in the annual return on the Scottish social housing charter that they will give us next year.

On satisfaction levels, you are right that there was a very small reduction in overall satisfaction levels, but, generally, the picture shows that almost nine out of 10 tenants remain satisfied with the homes and services that their landlords provide. It is down ever so slightly to 87 per cent. We look for landlords to carry out a satisfaction survey at least every three years, and, in January 2023, we updated our advisory guidance to landlords on surveying their tenants and service users. That was to include a wider range of available approaches to ensure that they have the capacity to reach as many tenants as possible through those satisfaction surveys.

Just under half of all landlords did surveys in 2022-23, which means that the figures that we are presenting have changed on the basis of that volume of surveys having been carried out during that year. There have been some slight decreases in satisfaction levels in some regards. The percentage of tenants satisfied with the quality of their home decreased slightly from 85 per cent to 84 per cent. Tenants satisfied that their rent is good value for money decreased slightly from 82 per cent to 81 per cent. Tenants satisfied with the repair service remained level at 88 per cent. There are fairly marginal changes in the overall satisfaction levels. In the context that we have just been describing, you might very well consider that to be a positive outcome.

Thank you. In the interests of time, I will stop there.

In 2021-22, 12,000 incidents of damp and mould were recorded in social homes across Scotland. We heard, in our previous evidence session, the ombudsman mention that complaints around that had quadrupled. Do you need to do more work in that area to ensure that good practice is widespread and that tenants live in safer homes? What support should the Scottish Government offer to ensure that social homes are warm enough to prevent the re-emergence of damp and mould?

I am happy to kick off on that question. Clearly, ensuring that tenants live in safe and warm homes is a critical priority for all social landlords. In December 2022, we wrote to all social landlords with advice on the importance of timely and effective action to respond to any incidents of damp and mould. That is very much in the frame of the requirements around tenant and resident safety. In that letter, we asked all governing bodies of RSLs and all committees of councils to consider the systems that they had in place to ensure that their tenants’ homes are not affected by damp and mould and that they have appropriate and proactive systems to identify and deal with any reported cases of damp and mould.

11:00  

Following on from that, we worked jointly with the Chartered Institute of Housing, the Scottish Federation of Housing Associations and the Association of Local Authority Chief Housing Officers to produce a briefing note to landlords, which we published in February. It was about how to deal effectively with damp and mould problems. The briefing recognises that the issues are complex and can be multilayered and that solutions can include tackling issues with the property, as well as supporting tenants with advice in that regard. The partner organisations that we worked with to produce the briefing went on to run a series of workshops for landlords to disseminate best practice in responding to incidents of damp and mould. Those were incredibly well attended by landlords, which indicates how seriously landlords take the issue.

In July this year, we wrote to social landlords to ask them to include in their annual assurance statement a specific statement on their compliance with all tenant and resident safety issues, including damp and mould. They provide that statement to us at the end of October every year. We received all those statements from landlords at the end of October, and we will use that information, including the specific statements on damp and mould, as part of our risk assessment, which we are now delivering. We have also published all those annual assurance statements on our website, so that anyone, including tenants, can see what their landlord is saying specifically about their approach to damp and mould.

We will fully analyse that information to ensure that we have as good an understanding as possible of the landlords’ response to damp and mould, but we recognise that it is a critical issue and that we need to go further on data collection. That is why, as George Walker indicated, we are developing a suite of indicators to include in the annual return in the charter, alongside a wider suite of indicators that will focus on other aspects of tenant resident safety. We will consult on that in the coming year to ensure that we have a suite of indicators that is as comprehensive as possible to help us to understand landlords’ responses to any reports of damp and mould.

We have asked our tenant advisers, who are tenants who work with us voluntarily to scrutinise landlord performance, to look at the information that landlords are putting out on damp and mould for their tenants. Again, when we have that analysis fully done, we will use that as part of our risk assessment process, and we will reflect any outcomes in the published engagement plans that we produce for social landlords.

May I come back in with a supplementary question, please?

Very quickly, and the response should be brief.

It is great to hear that you are doing so much stuff, Mr Cameron, but, earlier this year, the UK Government passed Awaab’s law in memory of two-year-old Awaab Ishak, who died in 2020 due to poor housing conditions, to force social landlords to fix damp and mould within strict limits. Should similar legislation be passed in Scotland?

That is a matter for the Scottish Government to consider. The guidance that was put out was effective in setting out a good approach that landlords should take. When we develop our suite of indicators, we will look to ensure that they are capable of assessing appropriately whether those responses are being delivered.

You have already touched on my question, which is on a review of the regulatory framework. What were the results of the review of communications with stakeholders, and what changes are you looking to make in that regard?

I will pick up that question. The review is going well. As I touched on in my opening statement, we kicked it off in June with a discussion paper to get feedback from the sector. Probably the best way to summarise the broad feedback is that it was very supportive of our thinking, particularly on two things. First, landlords said to us that they would really quite like a period of stability post pandemic. They also said, “Thank you very much, regulator. We’d quite like it if you didn’t change too much”. To us, that seemed to be not an unfair response. The other thing that came through from landlords and, indeed, from a whole range of stakeholders, including tenants and lenders to the sector, was that the framework was working pretty well. We agree that it has been working well. That was the broad feedback on the discussion paper.

The specifics are now out to consultation, which closes later this month. I will give a little flavour of some of the specifics. It is not a huge number, for reasons that I have explained.

Michael Cameron referred to the annual assurance statements a number of times. We introduced those in the previous framework review, and they have been enormously effective in getting a finger on the pulse of landlords. I have sat with chairs and chief executives in various meetings who have told me how helpful they have found the statements and that they have helped them to look into dark corners that, in the past, they had not always looked in. The statements have given them a focus. We introduced some adjustments to the statements, which were prompted partly by discussions similar to the one that we have just been having on damp and mould, in order to bring aspects such as those emerging issues into the annual assurance statement each year. Clearly, we have signalled that we would give landlords time to prepare for that. We are not about to announce in September that we would like something on damp and mould in October. They were very clear that they would like notice. There are some adjustments to the annual assurance statements to allow that.

There are some specific changes to the language around our regulatory status. The language that we have currently includes terms such as, “working towards compliant” and “compliant”. There is an “in review” category and an “in statutory intervention” category. We have made some adjustments to that language, primarily to the language of working towards compliance, which was very important to lenders and to tenants. They felt that there was some vagueness in it and that the language was not helpful.

We touched on the fact that we wanted to develop the suite of metrics around damp and mould, which Michael Cameron has mentioned. We did not want to take a sledgehammer to crack a nut to do that, hence the collaborative approach that we are taking with the sector, both in the advice that was developed and on the suite. We have expanded that into the annual return on the charter—ARC. We are kicking that off with a series of working groups involving landlords and others. Normally, we would have made that part of the framework review itself, but, partly because of the timing of the new consultation around the replacement of the second energy efficiency standard for social housing—EESSH2—that was published recently, we wanted to combine those two things. That is the final part of that process, and it will be on-going, rather than implementable, from 1 April.

That is an overview summary. We are really quite pleased, having made significant changes to the framework last time around, that it has been working well, which is what we hear from landlords. As the regulator, I will say that it is fairly unusual that those whom you regulate come to you and say, “Actually, this is working quite well. You have made lots of changes, and we do not believe that you need many more changes”. We agree with that, and perhaps the evidence for that is in how well the annual assurance statement is working. Although, as you would expect, we are in discussions and engagement with a number of landlords, no statutory interventions are taking place. I think that I am right in saying that our last one closed a number of years ago.

It was in 2021.

I was hesitating on the year, because I could not quite remember. Michael Cameron has pointed out that it was in 2021. That is perhaps evidence of why we are hearing what we are hearing from landlords, lenders and tenants across the board.

That is helpful. You will be aware that the Government has signalled that the Housing (Cladding Remediation) (Scotland) Bill will include new homelessness duties. Has part of the communication with stakeholders been about pre-empting that? It will be a statutory piece of legislation and will, I accept, cross public services. Has work started already on that?

We have been working closely with the Scottish Government on its plans to introduce the proposed new duties on prevention of homelessness. We will ensure that the approach that we take to setting out a regulatory framework is such that it can accommodate changes in legislation as they come through. We are therefore sighted on what is being proposed. Where the proposals around prevention bring in and place new duties on social landlords, we will ensure that we monitor the delivery of those duties.

That is great. Thank you.

I have a question that kind of connects to the regulatory review. I am interested in how you deal with complaints about how you have dealt with regulatory matters and whether you think that some social landlords’ staff may be unwilling to raise complaints with you.

It is hard for me to say whether people are unwilling to raise complaints. We certainly get complaints from time to time, and we have laid out a clear process on our website for how we handle them.

I would point to a number of things. We have extensive engagement across the sector, including with a number of landlord groups. At any one time, we are engaging with around a third of landlords, through three live groups. One of those, which existed pre-pandemic, is the systemically important landlord group. We then introduced two new groups. We called out to the sector to ask whether landlords would be willing to get involved to up our engagement even further after the pandemic. We planned to introduce a second group but, because the response was so significant—I think that we had 70 landlords wanting to join us—we instead ended up establishing two further groups, in addition to refreshing the systemically important landlord group.

One of those groups focuses on landlords operating in urban areas, while the other is for landlords in more remote rural and island areas, because they sometimes tackle different challenges. As I said, those groups involve around a third of landlords. They certainly engage with us regularly. Do they raise issues and concerns in the discussions that we have? They do. Does that result in specific complaints? Rarely, but things certainly come up. I think that we have an open relationship there.

As to what we are trying to do, we certainly work hard to be an effective, open and transparent regulator. If there are any specific concerns about how we regulate and, I suppose, how that applies in statutory interventions in particular, we have a clear complaints process that can be followed at any time, as is set out on our website. There is, of course, a route to the Scottish Public Services Ombudsman, whom you heard from earlier this morning. That has happened at least once recently that I can think of. It does not commonly happen, but it is certainly there.

Since 2012, we have used statutory powers 12 times, so that is not a significant number of times over 10 or 11 years. We go out of our way to publish a final report and to be transparent about why an intervention was required. I assure the committee that we do not take, or enter into, statutory interventions lightly. That typically happens only after quite a significant period, which is usually after several months of engagement. In fact, statutory powers are used really only where a landlord either cannot or, in some cases—I will be honest—will not engage to tackle the issues that we are raising.

That is a summary of how I would answer the question. We try to be as open as we can be. We certainly encourage people to talk to us, and they do. There may be individual issues that feed in from tenants through the tenant liaison committee, which involves the registered tenant organisations and which we meet regularly—Michael Cameron and I are at each of its meetings for a period—through to the various landlord groups that we have and sometimes the various professional bodies that are around and their memberships. I will not name them, but you know the ones. That is the approach that we take. We are certainly open to concerns, complaints and any other issues that come to us, and we are transparent about the routes that can be taken, internally to us and externally to the ombudsman, to take such things forward.

Thanks very much—that was helpful.

11:15  

Thanks, gentlemen. How does the Scottish Housing Regulator’s oversight of the loss of several community-controlled housing associations to takeovers by a large national housing group square with the Scottish Government’s community wealth building and empowerment missions?

We regulate individual landlords; we do not have any kind of sectoral role. We have no remit from Parliament to effect sectoral change or restructuring or consolidation. The role given to us by Parliament is to monitor, assess and report on landlords’ performance and to intervene as appropriate. We are an effective regulator, doing the job that Parliament has given us, and we will continue to do that in a proportionate and risk-based manner.

The job that Parliament has given us is to ensure that we protect the interests of tenants and others who use the services of social landlords and, in particular, to monitor their performance against the Scottish social housing charter and the regulatory standards of governance and financial management. That is the extent of our role, and we do that. We monitor, we report and we intervene where there are failures against any of the three elements. That is the job that Parliament has given us to do: we believe that we are an effective regulator in doing that.

Do you not think that community control of asset wealth is in tenants’ interests?

All I can say is that we deliver our role of assessing landlord performance against the things that are set out in the Scottish social housing charter and the regulatory standards of financial management and governance. Those are the things that we are tasked with monitoring landlord performance on. If they had different requirements and specifications, we would monitor, assess, report and intervene in accordance with the requirements that were set out. We are doing the job that Parliament has set for us, and we believe that we are doing it effectively.

Just to be clear on your point, do you agree that the current remit of the Scottish Housing Regulator is inadequate to safeguard community control of assets?

The remit of the Scottish Housing Regulator is set by Parliament.

Standard 7.3 in the SHR’s regulatory standards of governance and financial management states that a registered social landlord must ensure that there is “adequate consultation” before engaging in an options appraisal. Why was that not done at Reidvale Housing Association in Glasgow? When it was reported to the Scottish Housing Regulator, no action was taken, allowing the housing association to carry out, post appraisal, a consultation that had predetermined that there should be a transfer of engagements owned by the community to another housing association, assets that are conservatively valued at over £100 million and have no debt secured against them.

The first thing that I would say is that we are happy to meet the member to discuss his specific concerns about a specific organisation. We are always happy to do that with any MSP. I am conscious that there is a lot in the specifics of what you raised.

I can say that we engaged early with Reidvale in its consideration of a possible transfer and that we highlighted the importance of its engaging with tenants on proposals. We expected it to carry out effective consultation with its tenants. Reidvale then developed a detailed tenant consultation plan and commissioned the Tenants Information Service as an independent tenant adviser, which was a requirement that we placed on it. We have engaged closely with Reidvale to get appropriate assurances on how it was consulting its tenants and that tenants have been given meaningful opportunities to feed into the transfer proposals and give their views. At the end of the day, tenants will have a vote on it. That tenant vote is on-going, and we expect Reidvale to abide by the outcome.

At that stage, of course, the precondition for transfer had already been set. The regulator has a role in overseeing those processes. In the case of Reidvale, we know that Places for People group, a London-based organisation, was present at Reidvale’s annual general meeting, posted promotional material on Reidvale’s website, sent targeted literature to tenants, put up signage in the area and struck a deal to take over a community centre owned by Reidvale Housing Association after the housing association withdrew funding for it. Do you think that that sort of aggressive and insidious lobbying is appropriate?

We will ensure that tenants have the opportunity to vote on any proposal that is set in front of them, and we will expect Reidvale to abide by that tenant vote.

I have observed 18 separate regulatory breaches, conflicts of interest and procedural abuses by the interim director and management committee co-optees at Reidvale Housing Association. I and other members of the Parliament have written to you about that today. If a potential transfer partner has breached data protection law by obtaining the personal contact information of a target housing association’s tenants to canvass them, without their explicit consent, with unsolicited text messages and calls, what action will the Scottish Housing Regulator take in that instance?

Thank you for writing to us. We will take any of that information under consideration to identify whether there have been any failures on the part of Reidvale or any other party to the transfer. I will say again that I am happy to meet you to discuss those concerns.

Okay. I very much thank you for answering my questions, and I look forward to further discussion.

Can I just add to what Michael said?

Yes.

I just want to reassure you, Mr Sweeney, about how the board looks at this. You asked direct questions about your support for community control. The board is completely agnostic about structures or ownership, and I can tell you that we have two strong tenants on our board who would not let us be otherwise, even if we wanted to be. We are interested in fulfilling our statutory duty, which is to protect the interests of tenants, and therefore the board has looked at and been very well sighted on what has gone on at Reidvale and any issues that may affect tenant interests.

I will give you a flavour of what those are for Reidvale. There were and remain serious governance and financial management weaknesses at Reidvale. There is no business plan. There is no up-to-date stock condition survey. There is no long-term investment programme. We have now established that many of its homes require significant investment and, in its most recent annual assurance statement, it said that it cannot meet its investment requirements. It told us that it would need to significantly raise rents and borrow to fund the necessary investment to maintain its homes. To give you a sense of what that means, Reidvale is telling us that it needs to raise rents by 5 per cent in year 1 and 10 per cent a year thereafter to fund those things.

There are very high overheads that are well beyond the overheads that we see at other landlords. Salaries are higher than those that are being paid at other landlords. The organisation has not managed its resources to ensure its financial wellbeing or its financial position. There were serious weaknesses in the governing body, and it is currently having to rely heavily on the support of voluntary co-options.

Reidvale told us about weaknesses in its organisational structure, its pensions approach and its commercial assets and investment requirements. There are examples where it has not received remuneration for commercial properties that it has rented or given to organisations to use at no cost. The rent increase last year, for some of the reasons that I have explained, is, as you might expect, among the highest across social landlords, at 6 per cent, and a recent internal audit reported very weak assurance in the delivery of the factoring role. With an organisation like that, the board of SHR worries about those things and how they will, in the long run, affect and impact on tenants, rather than about structures, local control and so on.

I want to reassure you that the board of the regulator is very sighted on the issue and is closely briefed, as I am personally. I also want to reassure you about what is on our agenda when we discuss an organisation such as Reidvale, because I know that you will want to understand what role the board would play and what would be on our agenda for that. That is the role that the board plays, and we can get this list of concerns around Reidvale. That is not to say that community ownership is not a good and important thing, but what matters most is that Reidvale can deliver for its tenants.

If I may come back briefly, convener, I appreciate the challenges in governance that Mr Walker and Mr Cameron have outlined and which I am sighted on as well, but the fundamental point is that this is about 900 tenements in a highly desirable part of Glasgow with no debt secured against them, and it is unusual for a housing association to have that level of fiscal headroom to raise capital through secured debt against the properties.

Furthermore, there does not seem to be any proactive effort to support the community to improve the governance of the housing association without having to surrender control of the assets.

Also, several professionals who are engaged in community-controlled housing associations across the Glasgow area offered to come in to the housing association to support the restructuring without having to surrender control of the assets to a large national housing group but were denied en bloc by the Scottish Housing Regulator. Those are matters of concern, as I understand it, in terms of co-options on to that board. In the light of that and what you have said today, we should consider how to strengthen protections for community-controlled housing in Scotland.

Certainly, as you say, if we have a community empowerment agenda, we perhaps need to look at that. It was also helpful to hear that the board of the Scottish Housing Regulator has a specific and clear remit to look after the interests of tenants. How we deal with tenants and community is something that we should take away.

I thank our witnesses for coming in and giving their evidence. It has been very helpful to hear about your work over the past year and, obviously, the challenging landscape in which social landlords and tenants live and work.

I suspend the meeting briefly for a changeover of witnesses.

11:26 Meeting suspended.  

11:32 On resuming—