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Annex B: Partial regulatory impact assessment of proposals for a Housing Bill
1 Title of proposal
The Housing (Scotland) Bill
2 Purpose and intended effect of proposals
2.1 Background
The Housing (Scotland) Bill will:
- remove new social housing from the Right to Buy ( RTB) provisions contained in part III of the Housing (Scotland) Act 1987; and
- modernise the powers and functions of the Scottish Housing Regulator ( SHR).
Following the consultation on the housing discussion document Firm Foundations: The Future of Housing in Scotland, the Cabinet Secretary for Health and Wellbeing confirmed in a statement to Parliament on 25 June 2008 that the Scottish Government would introduce legislation to end the Right to Buy for new social housing and undertake a wider review of Right to Buy policy.
The Cabinet Secretary also announced that the Scottish Government would develop proposals to modernise the powers and duties of the SHR; making it more explicitly focused on protecting and promoting the interests of current and future tenants; reducing the burden of regulation on social landlords; and concentrating its efforts on assessing and improving the value that social landlords provide.
This partial Regulatory Impact Assessment has been prepared to assess the costs and benefits of these proposals, as set out in the draft Housing (Scotland) Bill. The assessment is in two parts. Part 1 addresses the Right to Buy proposals and Part 2 the Scottish Housing Regulator and regulation matters.
Part 1
1 Title of proposal
The Housing (Scotland) Bill (Part 4)
(Amendments to the Right to Buy provisions contained in part 3 of the Housing Scotland) Act 1987, as amended).
2 Purpose and intended effect of proposals
2.1 Objectives
The proposal is to end the Right to Buy ( RTB) on new social housing by adding a new category to the list of exemptions to the RTB provisions. New social housing comprises newly built or acquired housing.
The aims of the proposal are to :
- preserve the supply of social housing for tenants; and
- encourage social landlords, particularly local authorities, to invest in new housing development in the knowledge that this investment will not be lost through RTB sales.
2.2 Background
The Cabinet Secretary for Heath and Wellbeing announced in Parliament in June 2008 that the draft Housing (Scotland) Bill would include a provision to exempt new social housing from the RTB.
She also indicated that a review of RTB would be undertaken to look at further safeguarding social rented accommodation, whilst not removing existing entitlements from tenants. This approach was consistent with the views expressed in responses to Firm Foundations that, while ending RTB for new social housing was welcome, it would have only a limited impact and there was a need for wider RTB reforms.
2.3 Rationale for government intervention
The case for reforming RTB rests on the fact that it has resulted in more properties being lost from social rented stock than have been built in recent times and the view that this ongoing depletion of social housing stock is unsustainable. Such action should safeguard new supply social housing from purchase, thereby gradually increasing social housing stock.
3 Consultation
3.1 Within Government
The RTB review involved early input from key stakeholders ( COSLA, SFHA, Shelter and tenants' groups). The key messages from stakeholders were that further restrictions to RTB were needed and that the possibility of devolving policy decision-making to the local level should be explored in order to be more responsive to local circumstances.
3.2 Public consultation
A proposal to end the RTB on new social housing was included in a major housing consultation Firm Foundations: the Future of Housing in Scotland which was published in October 2007. There was an overwhelmingly positive response to this proposal. Other responses received suggested that there was substantial support for further restriction of RTB.
The publication of the draft Housing (Scotland) Bill and this partial regulatory impact assessment forms part of the ongoing consultation on this proposal.
4 Options
4.1 Option 1 - Do nothing
Under the current arrangements, new social housing can be purchased through RTB. Temporary protection from RTB can be sought through use of existing provisions such as pressured area designations, the suspension until 2012 of some RSL tenants RTB entitlements and the cost floor determination.
4.2 Option 2 - Adopt the proposals for the Housing (Scotland) Bill
Under the proposed arrangements, new supply social housing could not be purchased through RTB other than in exceptional circumstances where a social landlord requires a tenant to move to a new supply property.
5 Costs and benefits
5.1 Sectors and groups affected
The proposal will affect social landlords and tenants.
Social landlords whose tenants have RTB entitlements and who intend to build or acquire new housing in the future will be affected.
Tenants who move voluntarily to new social housing will be affected. Any new or existing tenant moving voluntarily to a new supply property will not have the RTB over that property. But they will still be able to use the time spent in that property towards their RTB qualifying period and discount should they subsequently move to and wish to purchase a non-new supply property under RTB.
5.2 Benefits
- New supply social housing will be retained in the social rented housing stock, which will help social landlords fulfil their housing duties.
- Social landlords (particularly councils) will be encouraged to build more social housing.
- The supply of social rented accommodation will gradually increase.
- The certainty of not losing new supply housing through RTB sales should assist social landlords with planning for future needs.
- Rental income will increase.
- Waiting times for social housing should be reduced.
- Investment in new housing stock should improve the image of the sector.
5.3 Costs
- Tenants moving voluntarily will not have the right to buy new supply social housing.
- Opportunities for home ownership for lower-income groups will be restricted.
- Income from RTB sales receipts will be reduced, which could affect social landlords' capacity for investment.
6 Small/micro firms impact test
The smallest social landlords with fewer than 100 properties will not be affected by the proposal as their properties are already exempt from RTB.
Social landlords with more than 100 houses will be affected as stated in sections 4 and 5.
All social landlords will still be able to sell properties at market value should they wish to, although in certain circumstances they will require Ministerial consent to do this.
7 Legal aid impact test
Social landlords will be required to notify tenants who intend to transfer voluntarily to new social housing, before the transfer, that they will not be able exercise the RTB while they occupy such a property. As a result, no increased volume of applications for legal aid from tenants is anticipated.
8 'Test run' of business forms
Current application to purchase forms will require to be updated to reflect this proposal. No new forms will be needed.
9 Competition assessment
There should be no competitive advantage to any particular group of social landlords.
10 Enforcement, sanctions and monitoring
A landlord who offers new social housing for let will be obliged to inform the tenant that they will not be able to exercise their RTB entitlement over that property, before the tenant accepts the offer. And, in terms of RTB sales, the Scottish Housing Regulator will expect the landlord to act fairly and efficiently and to follow relevant legislation.
There will be no additional sanctions related to this proposal. Existing procedures include a power to refer the case to the Lands Tribunal for a finding in situations where a landlord has erred in law or is attaching unreasonable conditions.
There will be no additional monitoring regimes required to gauge the impact of this proposal, that is, whether it is safeguarding or increasing the supply of social rented accommodation. Using data from annual returns from social landlords, the Scottish Government and the Scottish Housing Regulator already monitor the number of local authority and RSL properties available for social rent, respectively.
Part 2
1 Title of proposal
The Housing (Scotland) Bill (Parts 1-3)
(Modernising the powers and functions of the Scottish Housing Regulator)
2 Purpose and intended effect of proposals
2.1 Objectives
The proposals will:
- provide for Ministers to prepare, consult upon, and submit to Parliament for its approval, a Scottish Social Housing Charter that would describe the high-level outcomes that social landlords should be achieving for their tenants and for taxpayers' continuing investment in new social housing;
- give the SHR statutory independence as a non-Ministerial Department with its own Board, the objective of promoting the interests of social tenants, and a modernised range of powers to regulate social landlords and their performance against the requirements of the Charter; and
- reduce the burden of regulation and inspection on social landlords.
2.2 Background
The provisions contained in part 3 of the Housing (Scotland) Act 2001 gave Ministers the power to perform the function of Regulator of social landlords. This function was carried out on Ministers' behalf by Communities Scotland, an executive agency with wide ranging responsibilities for housing and regeneration. Communities Scotland was abolished in March 2008 and, with the exception of the regulation function, most of its duties were brought into the core Scottish Government. As an interim means of discharging their regulatory functions in relation to Registered Social Landlords ( RSLs) and local authority landlords, Ministers established an executive agency, the Scottish Housing Regulator.
2.3 Rationale for government intervention
Whilst the Scottish Housing Regulator has operational independence from Ministers, as an agency acting on behalf of Ministers it lacks the full independence that has been granted to most regulatory bodies. Furthermore, the current provisions permit only a limited set of interventions to address poor performance. The new provisions will enable the Scottish Housing Regulator to exercise enhanced powers independently of Ministers; in a more proportionate and targeted way; and with a broader set of intervention options. It will be more explicitly focused on protecting and promoting the interests of current and future tenants; reducing the burden of regulation on social landlords; and concentrating its efforts on assessing and improving the value that social landlords provide.
As proposed in Firm Foundations, the Bill also provides for a clear separation of the roles of standard setting and performance measurement. Central Government will set the strategic direction and standards for social housing and the Regulator will hold landlords to account on compliance or performance against these standards. Where appropriate, the Regulator will set out more detailed operational standards and timescales for compliance.
3 Consultation
3.1 Within Government
The proposals have been developed in consultation with the current Scottish Housing Regulator, Audit Scotland, the Care Commission, the Office of the Scottish Charity Regulator and the Convention of Scottish Local Authorities, and all against the background of Professor Lorne Crerar's Report of the Independent Review of Regulation, Audit, Inspection and Complaints Handling of Public Services in Scotland.
3.2 Public consultation
Outline proposals to modernise regulation were included in Firm Foundations, which was published in October 2007. Responses indicated substantial support for a modernised regulation framework.
The current proposals have been developed with the assistance of an informal sounding board of key stakeholders, brought together to share their views on the principles for modernising social housing as set out in Firm Foundations and to inform thinking as to how these might be implemented. The Sounding Board comprised representatives from:
- The national network of Registered Tenants Organisations
- Convention of Scottish Local Authorities
- Association of Local Authority Chief Housing Officers
- Council of Mortgage Lenders
- Scottish Federation of Housing Associations
- Chartered Institute of Housing Scotland
- Equalities and Human Rights Commission
- Consumer Focus Scotland.
The publication of the draft Housing (Scotland) Bill and this partial regulatory impact assessment forms part of the ongoing consultation on the proposals. Furthermore, the terms of the Bill require that before Ministers publish their Scottish Social Housing Charter, which will set out the broad standards that social landlords will be expected to meet, they will consult with the Scottish Housing Regulator, social landlords or their representatives and tenants or their representatives.
4 Options
4.1 Option 1 - Do nothing
Under the 'do nothing'` option, the SHR will continue to regulate Registered Social Landlords and inspect the housing and homelessness services provided by local authorities. It will also continue its move towards a more proportionate and risk based approach. The current legislative provisions do not, however, provide for the statutory independence of the Regulator or for the legal separation of the roles of setting standards and measuring performance against them; nor do they give the SHR a clear statutory objective to promote the interests of tenants, or a graduated range of powers to intervene in different situations.
4.2 Option 2 - Adopt the proposals for the Housing (Scotland) Bill
Adopting the proposals contained in the Housing (Scotland) Bill should result in a modernised regime of regulation capable of focusing landlords' efforts on:
- meeting tenants' priorities;
- continually improving performance and value; and
- commanding the confidence of public and private investors in social housing.
.
5 Costs and benefits
5.1 Sectors and groups affected
The proposals will affect tenants and prospective tenants, registered social landlords and local authorities.
5.2 Benefits
Current and future tenants will benefit from the modernised SHR with its objective to promote their interests and its ability to do so through a wider range of intervention powers.
Social landlords that are performing well and delivering good value for their tenants will benefit from the enshrinement in statute of the move away from cyclical inspections of all landlords towards a more risk based and proportionate approach to regulation.
Social landlords and tenants will benefit from the Scottish Social Housing Charter, which will give both parties clarity and certainty over the outcomes that landlords should be achieving for their tenants over the medium term. They will also benefit from the consultation process that Ministers will be obliged to undertake before submitting the Charter to Parliament, as it will enable them to influence the scope and content of the Charter.
5.3 Costs
Registered Social Landlords
Registered Social Landlords currently provide the Scottish Housing Regulator with performance data and the Regulator is already moving towards a more proportionate and risk based regulatory regime. Under the new statutory framework, a broader range of information may be collected by the Regulator to enable it to better assess performance and value for money. In practice, landlords will be collecting such information already as part of their own planning and performance monitoring regime. We expect, therefore, that the modernised regulatory framework will have minimal additional cost implications for RSLs and in any event these are likely to be outweighed, in most cases, by the cost savings linked to the ending of the regime of routine inspections. Where inspections are undertaken, these will generally be with a view to investigating performance concerns, or to examining particular themes.
Local Authorities
Currently, local authorities routinely submit housing performance data to Audit Scotland and they also submit performance data to the SHR as part of their cyclical inspection submissions. Subject to the outcome of the consultation on the draft Bill, local authorities may be required to submit additional performance data to the SHR but, as with Registered Social Landlords, those that are performing their housing and homelessness services well, will benefit from light touch regulation. Every effort will be made to streamline data collection.
Scottish Housing Regulator
In 2008-09, its first year as an executive agency following the abolition of Communities Scotland, total provision for the SHR, including IT support and development costs from the core Scottish Government, was £4.6 million. Total provision for 2009-10 is £4.7 million, including a 2% efficiency saving. Some support services (for example HR and legal advice) are not currently recharged to the SHR. As part of the planning that will be done in preparation for the agency to become a non-Ministerial Department, the SHR's budget will be reviewed and the scope explored for the modernised body to share services and continue to secure efficiency savings. The outcome of that work will inform the Financial Memorandum of the Bill on its introduction.
6 Small/micro firms impact test
Small scale landlords are subject to the current regulatory regime. In keeping with the general approach, small organisations that are performing well will benefit from lighter touch regulation.
7 Legal aid impact test
There should be no impact on legal aid issues under these proposals.
8 'Test run' of business forms
Any forms for the collection of information by the Regulator will be prepared in consultation with landlord organisations or their representative bodies.
9 Competition assessment
As these proposals will impact on all social landlords, there should be no advantage to any particular group.
10 Enforcement, sanctions and monitoring
The current statutory intervention powers that the Regulator exercises on behalf of Ministers are relatively severe and intrusive. In keeping with a more proportionate regulatory framework, the Bill proposes a broader range of enforcement and regulation measures which can be exercised by the Regulator in a graduated and proportionate way.
The proposals will require the Scottish Housing Regulator to report annually to the Scottish Parliament on the performance of social landlords operating in Scotland.
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