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The second item of business is the Scottish Housing Regulator. The committee will hear evidence from the regulator on its recent consultation on the regulation of social housing in Scotland, and on its proposals for engagement with tenants and landlords. I welcome the witnesses—Kay Blair is the chair of the Scottish Housing Regulator and Michael Cameron is its chief executive. I thank them for their written submission, which is paper 2 in our large pack of papers for this meeting.
Good morning. The Scottish Housing Regulator’s regulatory framework, “How We Regulate”, was published on 29 February 2012. Can you explain its key features and how it differs from the previous regulatory framework for social landlords?
First, I thank you for inviting us. We were keen to have this opportunity to engage with committee members. Any opportunity to inform people better about what we, as a regulator, are doing is welcome.
I emphasise the point that Kay Blair has made on the importance of the statutory objective that has been set for the regulator. That gives us absolute clarity of purpose. Our independent status also ensures that we are able to focus completely on that statutory objective. For me, that is probably the principal and most important difference from the previous frameworks.
I am conscious that the regulation plans are based on the Scottish Housing Regulator’s assessments of registered social landlords and that each RSL falls into one of three broad categories of engagement: low, medium or high. A regulation plan is published for each RSL with which the housing regulator needs to have a high or medium engagement. How do you decide the level of engagement with social landlords? In particular, how do you identify levels of risk?
We undertake a very thorough assessment of each and every RSL, and we look primarily at the risks to good outcomes for tenants and others. For instance, we look at the landlord’s size, turnover and exposure in respect of both public and private funding, and we look at the landlord’s situation within the community and at community dependence. A risk-based and proportionate approach is taken that puts the tenant and other customers at the heart of our assessment.
Good morning. I thank the panel for coming to the meeting and for answering earlier questions.
I can answer the second part of your question; perhaps Michael Cameron can answer the first part of it.
I am sorry, Mr Cameron, but I would like to follow up on that point. Ms Blair mentioned good governance and that tenant representatives may want to stand down. I would like to clarify that point. Is there anything in the paper that states a timescale for which tenants would be able to serve?
No—there is nothing at all on that. We are keen to have effective succession planning. You may be aware that, in our consultation, we proposed limited tenure on the boards, as is accepted practice in most other sectors. There is a well-established view that board members tend after a time to lose their ability to challenge, and good governance is about effective challenge around the board table. We were keen that our consultation should be a true consultation in which we listened to all the views that came back to us, and a number of people said that that proposal would not be appropriate at this point, but that there are other ways of refreshing boards and ensuring that the challenge is effective: there are other ways of succession planning and of providing more effective induction and training. Therefore, we have concentrated on those areas and have not introduced timescales. It was a true consultation and we acknowledged what people said to us and some of the challenges that might present themselves.
I will go back to our approach to assessing financial health. We take a proportionate approach to that in that we look for each RSL to provide us annually with a basic level of financial information. We subject that to a risk assessment that covers eight key risk areas, which are not necessarily fixed but reflect what we are seeing in the broader environment and the stresses that may exist.
You mention eight key risk areas. Forgive me if you have told the committee before—I am here as a substitute—but can you give us those eight key risk areas?
I will try to remember them off the top of my head, but I may not get all eight. When we analyse the financial information, we consider the information that is provided by the landlord and the broader context. We look at things such as whether the RSL is under any financial stress at that point. For example, we might feel that it is operating in deficit or that, over the longer term, its cash flow suggests that there may be challenges to its on-going viability.
We are debating whether measures are too bureaucratic for social landlords because to produce that amount of paperwork would impinge on their financial health. That is certainly what many RSLs come to me and other members about. If you are asking them to produce the papers, do you expect them to do so timeously? Does that apply to every social landlord? Have you asked in the consultation whether there is a knock-on financial effect of producing documents?
I first stress that the information that we require all landlords to submit to us is information that their own governing bodies should be receiving; nothing we ask for is additional to the financial information returns that an organisation should already be receiving, considering and using to manage its business. We get the annual accounts, which every RSL is obliged to produce; its financial projections—which, again, every RSL should have and should consider as part of its management information; and information relating to loans and lending arrangements, which is also information that is in existence. None of the financial information that comes to us has to be produced specifically for the regulator.
The new regulator was keen to reassess the information that it requires because we want to ensure that our regulatory approach adds value, and that we are not asking for lots of information that is not relevant to our purpose. I hope that most of the information that we are asking for is, as Michael Cameron has said, information that each RSL has anyway, for effective financial management and governance. We have said that, wherever possible, we will streamline our approach because we do not want to increase the regulatory burden and cost for the sector, so we are mindful that we take that approach where we can. The charter indicators are one area that we looked at and in which we asked what information we really need and how to streamline it to make it much more practical for the sector.
As a result of the process, are we seeing social landlords coming together more and forming bigger organisations than they might have done before because they are perhaps under more financial stress?
There are undoubted challenges in the sector—we recognise that. At the same time it is not, as a regulator, our role to get involved in each RSL’s specific model. In terms of good practice, housing associations are perhaps seeking opportunities for sharing or developing services. To be honest, however, that is not our regulatory role. We are not getting involved in that; it is perhaps more for our public policy to encourage such participation.
The sector has undoubtedly of late been looking at opportunities for sharing services and for constitutional partnerships between different bodies. That is as a consequence of broader changes in the economic and policy environment, rather than of our regulatory framework.
We want board members to upskill and be financially competent. As a result, are fewer people coming forward to take on the role, or has that not had an effect?
To be honest, I do not have the figures. Encouraging people to participate on boards will always be a challenge, regardless of the sector. As far as I am aware, there are still lots of opportunities and people are still applying. At this stage, I do not know whether the economic, financial and business challenges for board members will mean that it becomes even more difficult to attract people to the role. We are encouraging the sector to ensure that it is engaging and that it is offering more opportunities for people to get involved through training and induction. However, getting people on boards is always a challenge.
Will you explain the process and timescales for social landlords to report on progress, if you find that things are not up to scratch?
That will very much depend on the issue that is identified. Our regulation plans will set out the type of engagement that we have with a landlord when we have identified that improvements are required. As part of that, specific timescales would be set out for the landlord. Unless there was an overwhelming requirement for us to intervene immediately to protect tenants’ interests, we would always give the landlord the opportunity for self-improvement. The sequence tends to be that we identify the need for improvement, we work with the landlord to develop an improvement plan and then we monitor progress against that improvement plan. We would start to consider the use of our statutory powers only if we felt that the improvement plan was not delivering the necessary change.
Does Sandra White want to follow up on that?
Yes, thank you. I want to ask about the Scottish social housing charter. How will the information that social landlords provide on how they are achieving the charter’s outcomes and standards fit in with other aspects of the regulatory framework?
The charter is critical not just for looking at the performance of individual landlords, but for enabling tenants and other users to compare landlords’ performance across the sector, so it gives a good baseline for benchmarking. Now that the Parliament has agreed the charter and its outcomes, we are consulting on it.
I have a short question. If social landlords do not adhere to the criteria and do not make the improvements that you suggest, what authority or power do you have to implement the changes?
We have a range of statutory powers that enable us to effect change by a particular landlord. One of the consequences of the 2010 act was that it gave us a wider and more graduated range of intervention powers. For example, we can now serve an enforcement notice on a landlord and can set statutory improvement targets for landlords. Our powers go from being able to put special managers in and put appointees on boards of housing associations and co-operatives all the way up to effecting a transfer of engagements, which effectively means removing housing stock from a landlord and giving it to another. That is the ultimate sanction available to us, but we now have a broad sweep of powers.
That was an interesting answer; I am glad that Margaret McCulloch asked that question.
We are consulting on a value-for-money indicator. It is always challenging to identify and define value for money. This is work in progress for us, but we are keen to be able to divide up each pound that is spent and see how much is spent in each area. In the consultation, we are also testing the kind of report that we will give to tenants to show them how their landlord is performing in key areas and how each landlord is performing in context, so that the tenant can assess their landlord’s performance. We are keen to give tenants meaningful, clear information about issues such as value for money and the landlord’s response to antisocial behaviour.
We will expect landlords to take account of issues such as those that Sandra White raised when they consider their own performance. I am thinking in particular about how they involve tenants and other service users in assessing their performance. We will complement landlords’ work in that area with the activity that Kay Blair has just outlined, so we will provide tenants with good information that enables them to come to a view on whether the landlord is performing in the way that the tenant expects them to.
In reply to Margaret McCulloch’s question, you said that you have strong powers, but I was trying to get at something else. A fair rent system is covered by legislation, and tenants can see whether rent is fair. However, social landlords might not put up rent but will put up service charges, which means that tenants pay more money without having a rent increase. Are service charges or depreciation charges covered by legislation, or are tenants just given information about what their landlord charges? Is there any legislation that you could use to ensure that there is not such a wide range of those charges by social landlords? Is there anything that you can do to bring fairness into such charges?
There is no specific piece of legislation that empowers us to control rent and service charges. That is not within the suite of powers in the 2010 act. That said, if it was our view that a landlord was charging excessive rent or imposing excessive service charges, we would take that into account in our regulatory risk assessment.
We have not been given the powers of an economic regulator, so it is beyond our remit to intervene on price. However, as Michael Cameron said, we hope that tenants and others will get much more valuable, meaningful and comparative information so that they will be able much more effectively to hold their landlords to account. I am sure that that is what you hope to achieve through the social housing charter as well.
Earlier in the year, when we took evidence on the draft charter, one of the issues that jumped out was that of tenant and service user involvement. I have two or three questions on that issue.
We have made clear our expectation that each landlord needs to set out clearly and agree with tenants the approach that it will have for involving tenants in the assessment of its performance. We have not been overly prescriptive in that regard, because we have to recognise the diversity of the landlords that we regulate and the fact that a one-size-fits-all approach to self-assessment would not be effective. However, we have a clear expectation that landlords should agree with their tenants how they are going to involve them, and we will look for the evidence that that is happening.
I understand that you are developing a strategy on consultation involvement. Can you update us on what is going on in that regard?
That is our own strategy. We are keen that we involve tenants in the way that we regulate. It is really important that we get that perspective. In asking us to develop a strategy, the board also asked us to consider all the options. Yesterday, the board agreed our plans for involving tenants at every stage of our regulatory assessment, from the way in which we develop our plans to the way in which we assess a landlord.
It sounds as if you have recognised many of the difficulties with consultation. The Parliament and its committees have been involved in consultation for a significant number of years, but we always find ourselves consulting the usual suspects. Our challenge is to find a way to get to the people who do not want to be consulted. I cannot ask you whether your system will be fool proof, because every system has difficulties, but are you at a stage where you believe that your system will allow you to consult people who do not necessarily want to be consulted?
Yes, I sincerely hope so. I absolutely recognise what you are saying. Throughout the consultation, it struck us that we tended to meet the same people in different groups, so we were very keen to go outside that normal community. Will it work? I sincerely hope that it will, but we will ask for continual updates, to make sure that if we have to tweak or refine our policy to get to harder-to-reach groups, we will do that. The board’s intention in that regard is certainly very strong.
My final question goes back to the relationship between landlords and their tenants. In these difficult times, when landlords are under financial pressures, there is a danger that they may let that relationship slip. What powers do you have to ensure that landlords continue to explore and develop their relationship with tenants?
Fortunately, adherence to the charter and the good outcomes in it is mandatory. Landlords do not have an option; they have to deliver. We will make sure, through our engagement with them, that effective attention is given to each area. The tendency may be to concentrate on some of the harder financial aspects, but we will impress on landlords our statutory objective to deliver good outcomes.
Do you think that it is an area for the big stick approach?
Well, sometimes you need a stick and a carrot. You have to know when to use each appropriately, to get the best outcome.
Thank you.
What information will you publish for tenants and service users?
On 1 June, we published a consultation document that set out the range of indicators that we want to collect from social landlords to help us report on progress towards achieving the charter. In that document we set out a prototype tenant report, in which issues of key interest to tenants will be identified, and which will try to present information in a way that is accessible, helps tenants to compare their landlord with others, and gives a sense of the landlord’s direction of travel over time. We have tried to keep the prototype in a format that is accessible to tenants online but which is also available in other ways, as we recognise that not every tenant will have the capacity or understanding to engage in the digital arena. We are keen to get meaningful information to tenants in a way that they can use to hold their landlord to account.
You may have already answered this question, but perhaps you could expand on what you have already said. Can you explain the circumstances in which tenants can report concerns about a landlord’s significant performance failures direct to you, and what action you will take as the regulator?
That is a significant new part of our framework. The 2010 act required that tenants should be able to report issues of significant performance failure directly to us. There is quite a challenge in that for us, as a regulator, because we are not empowered to deal with individual tenant complaints. That power rests with the Scottish Public Services Ombudsman. We will enable tenants to report to us directly when they identify a systemic failure on the part of their landlord, when the landlord is consistently failing to deliver an important service or to involve tenants appropriately in decision making, for example—when something fundamental goes wrong with the landlord. We have set out the route for tenants to follow, which we have published. We have given examples of circumstances that might constitute significant performance failure, but, again, we have not been prescriptive. We do not want to set out an exhaustive list because I suspect that that would be too restrictive in many respects. When there is systemic failure on the part of a landlord, we want tenants to have a route to report it directly to us.
Thank you.
Malcolm Chisholm has some questions on interaction with other regulators.
Section 18 of the 2010 act requires the Scottish Housing Regulator to seek co-operation between it and other relevant regulators, such as the Accounts Commission and the Office of the Scottish Charity Regulator. Will you explain to the committee how you are doing that?
Yes, indeed. We have regular meetings with other regulators such as OSCR and we agree the roles and responsibilities of each regulator. In the case of local authorities, you will be aware that there is a shared risk assessment and shared scrutiny with Audit Scotland. When we engage with a local authority, we do so in co-operation with the other regulators. It is important that each of us understands who is doing what and what the respective roles and responsibilities are.
Is there something called a joint scrutiny framework for the councils?
Yes. Michael Cameron might want to comment on that.
We direct the entirety of our regulation approach to local authorities through the joint scrutiny framework, which means that all our activity in relation to them is managed through the shared risk assessment with Audit Scotland, Education Scotland and Social Care and Social Work Improvement Scotland—with all the scrutiny bodies that have a role. We take a single approach with those organisations to the identification of scrutiny activity and the co-ordination of that activity.
Does that mean that, in practice, your relationship with local authority housing services is different in significant ways from your relationship with housing associations?
Yes. In the case of RSLs, we have an annual regulatory assessment that determines whether they fall into the low, medium or high category, and then we have regulation plans for them. We have a different approach to councils, where, as Michael Cameron said, our work is done very much through the shared risk assessment.
It is also worth pointing out that we have a broader statutory remit in the case of registered social landlords than in the case of local authorities. We have a regulatory locus around the governance and financial health of registered social landlords, whereas we do not have that for local authorities.
My next question focuses on an aspect of local authorities’ work. The committee’s inquiry into progress towards the 2012 homelessness commitment recommended that the new regulator should report on how it will ensure that temporary accommodation meets acceptable standards. The more general question is how you will scrutinise local authorities’ homelessness services, and the specific question is how you will scrutinise the quality of temporary accommodation.
That will be done very much through the Scottish housing charter and the indicators that we get through it. As the regulator, we can also conduct thematic studies: we can look at a particular issue and conduct a specific and focused piece of work on it. Given the importance of the issue, it might be one of the services that we pick up in the thematic reviews. However, scrutiny will primarily be done through the Scottish housing charter.
I remember that, when we dealt with the charter, there were issues about what it said about homelessness. I think that the wording was changed in the final version. I wonder how carefully you will scrutinise the way in which the 2012 commitment is being implemented. Perhaps you can remind me what the charter says about that, as I cannot remember exactly.
You are right that the statement of the outcome in the charter is relatively broad. I think that the specific wording of the outcome does not mention temporary accommodation in detail. As Kay Blair said, we will gather a range of information to use in our assessment of risk. On homelessness, we will use not only the information that we collect directly from councils, but the wide range of information that the Scottish Government collects. That will give us a clear sense of whether there are risks that temporary accommodation is not of satisfactory quality. Where we identify such a risk, we will engage in further scrutiny. That might be with a specific local authority or through a broader review of the sector’s approach to temporary accommodation through thematic studies.
In Glasgow, we do not have any local authority housing. I am interested in your point that RSLs and local authorities are treated differently. How does that impact on the work on homelessness? How does your engagement with RSLs compare to that with local authorities? If the answer would be too long, you could send the committee a written reply.
I will attempt to give an answer. You are right that, where there have been stock transfers from local authorities to registered social landlords, the local authority retains the statutory duties on homelessness but no longer has its own stock with which to discharge those duties and so has to put in place arrangements with other providers to enable it do so. The member might be aware that Glasgow City Council has a number of protocols and agreements with RSLs to provide accommodation so that the council can discharge its duties on temporary accommodation. In the first instance, our scrutiny would be directed at the local authority, as it is the body with the statutory duties. However, we will look to ensure that registered social landlords co-operate appropriately with councils to ensure that they can discharge those duties.
I want to return to the notion of holding landlords to account. Obviously, the provision of information to tenants is the main string to your bow in that respect, but you also have inquiry powers. Can you give us a little more information on the nature of those powers and how you intend to exercise them?
The inquiry powers are relatively broad ranging. They enable us to require the provision of information, and extend all the way to the power to do what might traditionally be categorised as an inspection. The powers enable us to do that full range of engagements with landlords. We can use that suite of powers, following our risk assessment, to get further information from landlords so that we are properly assured of their performance or to hold them to account publicly should we feel that the performance is not as it should be. The powers are broad. We have set out in our framework the way in which we will deploy them.
We started by discussing the engagement between the regulator and various social housing providers. Do you have a traffic-light system that would trigger an inspection of the type that you talk about?
We do not have a traffic-light system but, through our annual risk assessment process, we determine a landlord’s exposure to the risks that we look at, which covers their performance against the charter. If we feel as a consequence of an assessment that we need to engage with a landlord, we will determine through that process whether an inspection or another form of inquiry is the right tool to use to follow through. That will be set out in our regulation plans for RSLs, or in the assurance and improvement plans for local authorities that are put in place jointly with the other scrutiny partners.
Is the use of such powers routine or a more extraordinary intervention?
I would hesitate to say that the use of such powers was routine. If we identify issues, I hope that we have the landlord’s co-operation to address and improve the situation, because of our engagement. We always give landlords time to undertake self-improvement. However, if we see that issues are not being addressed, we have different levels of powers to use, which can in the end involve putting in interim managers or taking a much more drastic approach, to ensure that the outcomes that we want are delivered.
In that vein, we are familiar with other inspectorates undertaking themed investigations. You mentioned that homelessness and the quality of temporary accommodation will be the subject of a themed inspection that you will undertake.
That may be the case.
Will you give more thoughts on your use of the themed approach?
I mentioned welfare reform. We have discussed its impact on sustained revenue streams for social landlords. We might want to investigate that a bit more, to ensure that landlords are profiling accurately all their tenants and other users so that they are sufficiently in tune with the individual challenges that such people will face, which relates to maintaining revenue streams. I am sure that members are all aware of the huge issues and challenges in relation to financial capability, access to basic bank accounts and so on. As a board and as a regulator, we will want to take more interest in that.
We will look to the use of thematic inspections or studies as a way to focus on particular issues, such as welfare reform, as they emerge and to explore those areas of performance that lend themselves a little less to performance indicator-type review. I am thinking of tenant participation, equalities and diversity—issues that require a more qualitative assessment. They will probably also feature in our programme of thematic work.
I take it that you will not overload your people with too many of those things early on. Are you planning the process carefully?
Absolutely. Effective planning is critical. We are conscious of the fact that we have fewer than 60 people to regulate the whole sector. Like other public sector organisations we also face significant reductions in our budget, so we must ensure that we use our resources in the most cost-effective way, and most of our resource will go towards addressing our three key priorities, which we have mentioned. There are all sorts of things that we would like to do in addition, but we must be pragmatic and sensible about concentrating our resources on those key areas to deliver the outcomes that we want.
Can we go back a bit, to an answer to a question that Alex Johnstone asked about tenant participation? You said that you will establish a tenants panel. I would like some more information on that. Will that be a panel for tenants’ representatives from throughout Scotland, taken from each RSL, and will there be any money involved? Will RSLs have to contribute to it?
We gave the go-ahead to establish the panel yesterday and we will develop it because it is really for us, the regulator, not for RSLs. Its aim is to ensure that we get to more remote people, younger people and more diverse groups. It will mainly use new technology, but with the caveat that not everybody whom we want to reach uses new technology. It will be a sounding board for us, through which we will reach people more easily using a method and location that they are more comfortable with. Expecting people to come to us or the venues that we recommend is sometimes challenging. We are keen to get to people where it suits them best and we do not want to overload them with requests for information. That will be a challenge because, as has been said, not everybody is lining up to speak to the regulator—that is not always the first priority on people’s list of things to do. We know that it will be a challenge, which is why we are keen to engage.
Thank you for coming to speak to us. We will all be interested to see, further down the line, how the regulator has improved the lives of tenants in social rented housing.
Thank you very much.
I suspend the meeting briefly to allow the witnesses to leave the room.