The risks we will focus on - November 2024

We are also continuing to see systemic issues in the homelessness system. Homelessness numbers are continuing to rise and in some areas demands on local homelessness services exceed the capacity in the system to respond. For some councils, the increase in capacity that is needed goes beyond what they can deliver alone. This is what we mean when we describe some councils as being impacted by systemic failure.  And as things stand, there is a real risk of councils failing to meet their statutory duties and that becoming endemic in some council areas. 

At the same time there has also been a continued slowdown in the number of new homes being built.  We also know that social landlords are having to consider how best to manage the increasing and often competing demands on their resources to ensure that they continue to deliver warm, safe, dry homes for their tenants and which their tenants can afford. 

We take account of this context in our assessment of risk and say more about the current challenges and broader risk landscape in Appendix A. 

The broad areas we will consider are as follows: 

• Homelessness – How councils deliver services for people who are threatened with, or experiencing, homelessness. This includes providing people who need it with suitable temporary accommodation.  

• Performance in delivering services – How councils and RSLs deliver services for their tenants and other service users, and meet the standards and outcomes from the Scottish Government’s Social Housing Charter. This will also include how landlords that provide Gypsy/Travellers sites ensure they achieve the Scottish Government’s minimum site standards and fire safety requirements for Gypsy/Traveller sites.  

• Development – How RSLs manage the impact on their finances of any plans for building new homes.  

• Quality of homes – How councils and RSLs ensure that the homes they provide to tenants meet the Scottish Housing Quality Standard (SHQS), and whether they have a good understanding of the condition of those homes.  

• Tenant and resident safety – How councils and RSLs meet their statutory obligations on tenant and resident safety.  

• Financial health of RSLs – How financially healthy RSLs are and how well they manage their money with a focus on financial planning and compliance with Regulatory Standard 3.  

• Good governance of RSLs – How well RSLs are run with a focus on compliance with Regulatory Standards.  

Our approach and priorities within these areas will be informed by the current challenges and risk landscape described in Appendix A.  For example, we will pay particular attention to councils’ compliance with the statutory obligation to provide temporary accommodation, increasing risk in the building of new homes, and compliance with tenant and resident safety obligations.   

We have a clear focus on monitoring, assessing and reporting on social landlords’ performance on discharging their statutory duties to people who are experiencing or have experienced homelessness. 

The key areas we focus on are: 

We will engage with all councils to aid our understanding of their performance in delivering effective and efficient homelessness services.  The focus for these ‘structured conversations’ will be temporary accommodation.  

The structured conversations will help us in our risk assessment by providing qualitative intelligence on how landlords are performing. These conversations will enrich the quantitative element of our assessment.  The quantitative element is based on Scottish Government official homelessness statistics which uses data it collects directly from councils.  The data element will consider our four key areas.  See Appendix B further below for details on the indicators we will use.   

We will consider again which councils we engage with because of systemic failure or being at heightened risk of systemic failure. We will make this determination based on whether, and the extent to which, councils are complying with their statutory obligation to provide suitable temporary accommodation.   

Based on the current projections, the rate at which landlords are building new social homes has fallen and is projected to remain at a lower level for the next five years.  RSLs forecast building or buying 22,577 homes over the five-year period to March 2029; this is 13% down on the total forecast figure of 26,082 in the 2023 RSL Five Year Financial Projections, which itself was down by 17% on the previous year’s projections. Last year RSLs built or bought 5,022 new homes. This compares to a forecast of 6,109, meaning that they achieved just over 82% of their forecast new homes.   

In the current context, it is an entirely understandable and reasonable business decision for a social landlord to halt or reduce its plans for growth. And social landlords have no statutory obligation to build new homes; but they do have duties to maintain existing homes to statutory standards. So, prioritisation of resources to invest in existing homes is likely to be reality for many social landlords in the coming years.  

So, with a likely drop-off in the number of new homes being built and the potential for more existing homes to become obsolete – as it becomes more difficult for older homes to maintained or improved to expected standards – it’s not beyond the realms of possibility that we may enter a period when we start to see a risk of net loss in the overall supply of social housing.  

Net zero planning 

Until we see the outcome from the Scottish Government’s consultation on new Net Zero Housing Standard for social landlords it remains difficult for landlords to understand what is expected of them and to factor this into their plans. This certainly adds to the challenge for social landlords’ budgeting and planning, in the short and longer terms.  

For 2024, a total of 31 RSLs have indicated that they have considered de-carbonisation as part of their business planning process representing 22% of RSLs. This compares to 26 RSLs in the previous year which was 19% of the total. The majority of landlords told us that they are waiting for the policy framework to be put in place and more definite costings to be available before they will include anything.   

As things stand, and given what we know about the proposed standard, and the current level of resources in social housing in Scotland, it is likely that the costs to social landlords to meet proposed standards on energy efficiency and clean heating will be unaffordable without either significant levels of government subsidy or rent increases that would seriously compromise affordability for most tenants, or significant reductions in other areas of expenditure.  

Rent affordability 

Cost of living challenges persist for many tenants and other service users.  This is why in our risk assessment we continue to pay close attention to planned rent increases, affordability and levels of arrears. It is also why landlords must ensure that rents remain affordable.  In reviewing rent affordability landlords should consider Regulatory Standard 3 on rent affordability and financial sustainability when completing their AAS. And consideration should be given to what will be required to ensure future compliance with Standard 3. 

However, landlords themselves have permanently higher costs to access the materials, services and expertise that they need to carry out landlord functions and, more broadly, to meet their business plan commitments and other statutory obligations.  Reconciling these twin challenges remains a challenge for landlords.  

Tenant and resident safety 

The number and proportion of homes that meet SHQS in 2023/24 is still lower than in 2020/21.  The reduction in homes meeting SHQS since 2020/21 has largely been because of failures to meet the requirement to install interlinked smoke and heat detectors and to complete electrical safety inspections. 

This has meant there has been a backlog of outstanding inspections and installations which some landlords are continuing to address, and we are engaging with these landlords about this. By the end of 2023/24, there were more homes failing because of outstanding electrical safety inspections rather than smoke and heat detector installations. Landlords told us about difficulties gaining access to some tenants’ homes to meet these requirements. 

Although many landlords now have up to date EICRs in all of their tenants’ homes, some landlords have told us that some EICRs were carried out more than five years after the last one. It is essential that landlords have effective and robust policies, procedures and systems in place to ensure that they meet their tenant and resident safety duties – including electrical safety – on time.  This is particularly the case for many councils where there are high levels of non-compliance.   

It remains important that landlords are communicating directly with their tenants to reassure them that if RAAC is found, there is no immediate risk, or that the required action is taken where there is. All landlords with RAAC must have an action plan in place to manage it.   

It remains important that landlords take timely and effective action on damp and mould when found in tenants’ homes.  Landlords should have systems in place to ensure their tenants’ homes are not affected by damp and mould and that they have appropriate, proactive systems to identify and deal with any reported cases timeously and effectively.  

Following the Grenfell Tower Fire in 2017, legislation to ban combustible cladding on high-risk buildings, and the highest risk metal composite cladding material from all buildings, was passed by the Scottish Parliament on 22 April 2022.  It remains important that landlords have a full understanding of their stock including whether any homes or buildings have combustible cladding.  If and where identified the landlord should take immediate action to ensure the safety of tenants and residents. 

Lets and voids 

For the five years to the end of March 2020 the number of homes that became empty was consistently around 50,000 each year. In 2020/21, the year the pandemic first impacted, the number of homes becoming empty dropped by 17% to just under 42,000, before rising to just over 47,000 in 2021/22. However, the number of homes becoming empty dropped in each of the next two years.  

Lower turnover means that social landlords have significantly fewer homes available to let to people in need, including those who are experiencing homelessness, than they had ten years ago. 

Homes were, on average, empty for 57 days in 2023/24, marginally up on the previous year and significantly up on 32 days in 2019/20. The time taken by councils to re-let empty homes increased to 73 days in 2023/24 from 67 in 2022/23. RSLs reduced the time taken to re-let empty homes to 39 days in 2023/24; this is down from 44 days in 2022/23, but not yet back to the low of 26 days in 2019/20. Social landlords lost £40.9m in 2023/24 rent from homes being empty in 2023/24, marginally up on the year before. 

Social landlords have told us about a range of challenges they are experiencing that are negatively impacting on how quickly they can bring empty homes back in to use. These include availability of labour and materials, contractor difficulties and problems with getting utility companies to move quickly on installing or updating gas and electricity meters. Landlords have also told us about a growing problem of homes being left in a poor condition by departing tenants, and so requiring more work to bring them back to a lettable standard; many landlords attribute this emerging problem to increasing levels of vulnerability amongst tenants.   

We say more about this an analysis of the ARC data for 2023/24 that social landlords submitted on empty homes and lettings, as well as data submitted by RSLs on their plans to build new homes. 

Data accuracy 

Landlords must have complete and accurate information about the homes they provide to tenants including stock condition, their performance and their finances to comply with regulatory standards and the Scottish Social Housing Charter. Landlords should seek to assure themselves that their decisions are based on good quality data and that they are providing complete and accurate information to the Regulator.  This is particularly the case for issues relating to tenant and resident safety where some landlords have reported not having a full understanding of whether and the extent to which they comply or otherwise with their statutory obligations.  

Cyber security 

It is important that landlords consider what security they need to put in place to protect their digital systems, including the personal data of tenants, other service users and their staff. 

Gypsy/Traveller sites and homes 

Landlords who manage sites told us that the condition of their site is the main driver for satisfaction levels, and that higher dissatisfaction was mainly because work to upgrade sites was either ongoing, delayed or was required. Conversely, landlords who had recently upgraded sites reported high levels of satisfaction.  Furthermore, there remains longstanding and fundamental issues with the quality of accommodation.  For example, the minimum site standards are indeed only minimum at some sites even after upgrades.  Most sites also remain in locations that are neither close to local services nor have good transport links.  Landlords who manage sites must ensure that there is on-going compliance with site standards and fire safety requirements.  

We also know from our Tenant and Gypsy/Traveller Participation thematic that Gypsy/Travellers at some sites do not always feel that their views are sought and properly taken account of.  There also remains a fundamental issue of trust between some Gypsy/Travellers and their landlord for longstanding and complex reasons.   These issues are also likely to be drivers of lower satisfaction levels.  It is important that landlords understand the barriers to involving Gypsy/Travellers in participation and landlords should identify and implement a range of accessible options and solutions to address these barriers.   

Landlords who manage sites must ensure that they meet all 16 standards and outcomes in the Scottish Government’s Social Housing Charter with regards Gypsy/Travellers and their homes.    

Information and indicators we use to assess risk in relation to homelessness  

Service Quality Indicators – all landlords 

Development Risk Indicators – RSLs only 

Governance Indicators – RSLs only