Local Government, Housing and Planning Committee – Scottish Federation of Housing Associations - 18 August 2021
Introduction
As a member of the Local Government, Housing and Planning Committee, your voice is vital in making sure we fulfil the potential of the social housing sector over the next parliamentary term.
On behalf of the Scottish Federation of Housing Associations (SFHA), the membership body for housing associations and co-operatives in Scotland, I’m pleased to provide this briefing pack ahead of the Committee’s business planning day.
As we look towards the Programme for Government, we expect housing to be a key element of the government’s plans. With a new Affordable Housing Supply Programme, Rented Sector Strategy and Housing Bill all expected within the next parliamentary term, there is much we can shape together. And there is much to do: our research with Shelter Scotland and CIH Scotland found 53,000 affordable homes are required between 2021 and 2021, including 37,100 for social rent.1 To support this, we need to get many other issues right, including appropriate levels of grant investment, action on climate change that avoids pushing tenants into fuel poverty, and a focus on improving existing homes as well as delivering new stock.
I will be delighted to speak to you about these issues, or to help connect you with your local housing associations. Please don’t hesitate to contact me if I can be of any assistance.
Contents
About housing associations and co-operatives
Climate change and the transition to net zero
About SFHA
SFHA is the voice and membership body for housing associations and co-operatives in Scotland.Our ambition is that everyone has a good home in a successful community, with a range of high quality, affordable, safe and accessible homes that meet people’s changing needs and aspirations throughout their lives.
Housing associations and co-operatives are central to achieving this, going way beyond the bricks and mortar with social justice built in and delivering from generation to generation.
SFHA has 136 members, representing the interests of every size and type of housing association, from all areas of Scotland.
About housing associations and co-operatives
There are around 150 housing associations and co-operatives in Scotland providing more than 280,000 homes and over 5,000 places in supported accommodation, plus factoring services for properties in private ownership, and shared equity housing. Around a fifth of Scotland’s population – some 1.2m people – live in social housing. Of those, roughly half live in housing association homes and half in council homes.
Housing associations and co-operatives are often known as RSLs (Registered Social Landlords) and are regulated by the Scottish Housing Regulator.They are independent, not-for-profit social enterprises - mostly charitable companies. They can be large or small; rural or urban; providing for general or very specialised needs. Some focus primarily on providing housing and support to people with particular needs, such as older people.
Housing associations and co-operatives are major Scottish employers, providing 11,000 full-time jobs. They also support apprenticeships in construction and maintenance, often in areas where jobs are needed.
The homes provided by housing associations and co-operatives are typically of high quality, with good energy efficiency standards which help to keep fuel bills low for tenants and meet the Scottish Government’s targets for tackling climate change.
Building new affordable housing relies on investment from the Scottish Government, complemented by associations borrowing from the private sector. Housing associations and co-operatives fund maintenance of existing houses mainly from income from rents, supplemented by borrowing and reserves. Housing association rents are typically low, but the majority of tenants rely on Housing Benefit or, increasingly, Universal Credit housing support to pay these rents.
Many associations generate community initiatives such as combatting isolation, promoting exercise with young and old people, diversion from anti-social behaviour, employment training, gardening and food production schemes or projects to promote wellbeing and good health. Throughout the pandemic, our members embraced new ways of working, helped tenants get online or access health services, and delivered high-quality community-based models of housing with care to keep people safe and well.
Housing to 2040
In March 2021, the Scottish Government released its blueprint for the next 20 years of housing: Housing to 2040. There is much to welcome in this ambitious strategy, and, if it is delivered, the long-term vision could help to ensure that everyone in Scotland has a safe, warm, energy efficient, affordable home in the future.
Housing to 2040 sets out several areas that are relevant to housing associations and co-operatives.
a Rented Sector Strategy, for consultation early in 2022.
A new Housing Bill early in the new Parliament
A comprehensive audit of current housing and homelessness legislation beginning in 2021 pertaining to the right to an adequate home
Implementation of legislation to establish the Local Heat and Energy Efficiency Strategy (LHEES) on a statutory basis so that they are in place for all local authority areas by the end of 2023.
A new Housing Standard – with legislation finalising the standard in 2024/25 following a period of consultation on drafts beginning in 2021.
This briefing picks out some of the key areas relating to Housing to 2040, as well as exploring the broader impact of Covid on housing associations and co-operatives. You may also be interested in our longer series of briefings on various elements of this programme, ranging from rents and affordabilityand new housing supply to climate change and housing standards.
Impact of Covid
As the crisis continues to affect our ways of life, there has been increasing pressure on the social housing sector, with more people living in temporary accommodation and more tenants struggling to pay their rent.
Data collectedby various sources including SFHA, the Scottish Housing Regulator and Housemark since April 2020, shows that the sector experienced an increase in arrears and losses due to homes not being let during lockdowns, and that investment plans were significantly delayed.2
Looking forward, SFHA wants the Scottish Government to create a new long-term fund, building on the Supporting Communities and Empowering Communities Funds, which will enable social landlords and communities to work together to improve collective and individual outcomes as we transition out of the pandemic.
There has been discussion about a feared increase in evictions, as the eviction ban introduced as a result of Covid comes to an end. This is an extremely important issue, and we are keen to be clear about the situation to avoid causing unnecessary fear and anxiety among tenants.
Social landlords never have – and never will – evict a tenant who is struggling to pay their rent but is trying to do so and has agreed to a payment plan. Housing associations and co-operatives work directly with tenants and signpost them to other organisations, to help them to claim the benefits they’re due and to manage their finances. Many steps are taken prior to serving a notice of proceedings, and this will only happen when all other measures have been exhausted. Any tenant who is struggling to pay their rent should get in touch as soon as possible with their social landlord, who can and willhelp them.
However, evictions remain a crucial action of last resort for housing associations and co-operatives in cases of anti-social or criminal behaviour, or when a tenant will not respond to their social landlord and agree a payment plan. This enables social landlords to protect other tenants and the local community and to keep delivering affordable homes and vital services, including repairs and maintenance.
Recently, SFHA, together with Association of Local Authority Chief Housing Officers, Glasgow and West of Scotland Forum of Housing Associations, and the Convention of Scottish Local Authorities, signed a Scottish Government statementthat reaffirmed our longstanding position that evictions will only ever be a last resort action.
Housing Supply
TheScottish Government’s Housing to 2040 strategy commits to delivering 100,000 additional affordable homes over the next decade, with at least 70% of these to be available for social rent. This will follow the completion of the previous 50,000 affordable homes target, delayed due to Covid-19, over 2021/22.
The Affordable Housing Supply Programme has had a positive economic and social impact across Scotland. Scottish Government statistics show it has supported around 10,000–12,000 jobs in the construction and related industries as well as leveraging economic output of £1.4 billion per year.
However, to ensure the quality and sustainability of the new supply programme, the level of grant investment must increase and be reviewed annually. SFHA is concerned that cost increases have not been fully reflected in arecent process to review grant benchmark levels, which could mean development for some associations is not viable. In addition to the cost increases that this review identified, supply chain issues and subsequent cost increases in construction materials will put further pressure on the supply programme. Our research earlier this year found that the cost of new build increased over the life of the last parliament, with the average works cost per unit increasing from £114,000 in 2016/17 to £134–138,000 in 2020/21.We estimate that an increase of £13-18k per property depending on region is required.3
Rented Sector Strategy
The Scottish Government is expected to consult on a new Rented Sector Strategy in 2022, setting out proposals to address availability, affordability and standards in the private and social rented sectors.The strategy will provide:
greater protections for tenants from unreasonable rent increases across all tenures
greater access to rented housing, including a review of the approach to identifying housing need and determining housing allocations in the social rented sector
greater protection from unfair evictions and improving the rights of those experiencing domestic abuse
The strategy will develop a shared understanding of affordability, which will assist our members during rent-setting cycles. This is linked to the work referenced above on reviewing grant investment benchmarks, which is long overdue to address the issue of current tenants having to pay higher rents to fund the development of new homes. This is due to the many unfunded requirements of social landlords, such as increasing quality and space standards, which can only be paid for through rents.
In light of the pandemic, our members find themselves and their tenants in a different financial position from what would otherwise have been expected. As a result, many associations plan to limit increases – or even freeze rents – for the coming financial year. Our recent briefing paper on rent-setting and affordability explores these issues in more detail.4
Climate change and the transition to net zero
Social housing has a huge role to play in the climate change emergency and the transition to net zero. The social housing sector has the most energy efficient homes in Scotland, and the Scottish Government’s energy efficiency standards have helped to drive this. Good quality, warm, energy efficient homes are essential in helping to tackle climate change and fuel poverty, and our members are working hard to try and combat these issues and to meet the government’s targets.
For social landlords and their tenants, Housing to 2040 and the draft Heat in Buildings Strategy confirms that the path to net zero will require significant improvements in energy efficiency of existing homes combined with accelerated deployment of zero or low emissions heating systems, such as heat pumps and heat networks. Social landlords will also need to achieve zero emissions in new homes by 2026, ahead of the proposed regulations. However, this will require significant investment and it is crucial that this transition is aligned with Scotland’s ambition to eradicate fuel poverty and ensure statutory targets are achieved in a fair and just way.
Earlier this year, SFHA commissioned Changeworks to survey SFHA’s members about their experiences of the Scottish Government’s energy efficiency standards. The Energy Efficiency Standard for Social Housing 2 (EESSH2) aims to tackle fuel poverty by requiring all social housing to meet Energy Performance Certificate (EPC) band B, or to be as energy efficient as practicably possible, within the limits of cost, technology and necessary consent, by December 2032. EESSH2 is a follow up to EESSH, which was created to help remove poor energy efficiency as a driver for fuel poverty and to contribute to achieving the Scottish Government’s climate change emissions reduction targets.
Our research found that meeting EESSH2 would cost housing associations an estimated £2 billion but only reduce the total percentage of households in fuel poverty from 38% to 29%.5
To date, over 90% of the investment required to meet the initial EESSH milestone has come from landlords’ own resources. Looking ahead to EESSH2 and the transition to net zero, for the majority of our members the greatest challenge will be funding the upgrades required. Indeed, almost 80% of respondents to our survey found sourcing funding and the capital investment for measures either ‘very challenging’ or ‘extremely challenging’. The majority of housing association income derives from rents, so meeting further cost commitments may result in rent increases for tenants which in turn can affect affordability. The alternative is increasing private finance: but rental income is also what funds repayments.
It’s clear that considerable challenges stand in the way of our members meeting the EESSH2 target. SFHA is therefore calling for urgent and comprehensive review of EESSH2, in order that social landlords are able to have more certainty over the direction of travel when making investment plans. These issues are explored in the forthcoming Zero Emissions Social Housing Taskforce (ZEST) report, produced by an independent working group co-chaired by SFHA, which aims to provide recommendations from the perspective of the social housing sector on achieving zero emissions homes while maximising wider social and economic opportunities relating to green jobs and warm, quality, sustainable homes.
The Scottish Government has committed to a five year £100m Social Housing Net Zero Heat Fund, and to an additional £10m to support fabric improvements in the 2021/22 programme. However, this represents only a fraction of the funds needed to support the sector. Recent modelling by the Scottish Government indicates a total cost to the social sector of closer to £6bn if only low carbon solutions were to be implemented to meet EESSH2. The current fund represents only around 2% of the total cost. We want to see the Scottish Governmentincrease the level of funding available through the Social Housing Net Zero Heat Fund, ensuring this is flexible and simple to access, in addition to exploring options for longer term grant funding which can be better aligned with social landlord’s capital investment programmes and distributed fairly across the sector.