Michael Cameron - CIH Housing Festival - 8 March 2023


08 March 2023


08 March 2023

Michael Cameron - CIH Housing Festival - 8 March 2023

So, I was given the brief to suggest what the sector will look like in a year.

If the last few years have taught us anything, it is that it is incredibly difficult – almost impossible – to accurately predict the future, and to identify the specific risks that could materialise.  I suspect that only a few years ago a global pandemic, the UK out of the EU, war in Europe, political turmoil in the UK, soaring inflation, and rent controls were not in many of our risk registers.

So, incredibly difficult to be clear on what the sector will look like a year from now.  It is perhaps easier to say that the context for the year ahead is likely to remain unpredictable, volatile and difficult.

I think that you will all be only too aware of the range of challenges ahead.  So, I won’t go through those in any detail.  Suffice to say that the context for the year ahead can be summarised as one of continuing cost inflation – with inflation for social landlords running well above the headline rate of CPI – higher interest rates, increasing requirements on quality of homes – including on energy efficiency and zero-emissions heating – combined with huge demand for support from tenants who are facing genuine financial hardship.  Alongside all of that, there will be continuing pressure to keep rents as low as possible.

On costs, last week we reported that in 2021/22, RSLs’ operating costs increased by nearly 10%, and that was well above both inflation and average rent increases during that period.  That increase was principally due to significant increases of around 20% in costs for planned and reactive maintenance. And, of course that predates the height of the current cost crisis.

Landlords are also having to work with a lot of uncertainty around the policy context: we’re still awaiting the outcome of the Scottish Government’s review of the Energy Efficiency Standard for Social Housing, and the conclusions from its work on a common understanding of affordability.  There are housing bills in the pipeline, and the current political situation in Scotland may result in shifts in Scottish Government policy.

And we have seen higher levels of government intervention in social housing recently, both from Holyrood and from Westminster.  Rent controls, legislation on damp and mould, and mandatory qualifications for housing managers, to name a few. 

We know that there are also plans to develop and introduce a new Passivhaus equivalent standard for new homes in Scotland, and we are facing a real need for a response to the risk of systemic failure in homelessness services. 

In recent conversations with a range of landlords, we are hearing real concerns about strains on organisations and people, and a call for a period of certainty and stability to help landlords to regroup and recover from everything that the last few years have thrown at them.   

So, in addition to the challenges around costs, we also have to recognise the challenges around the sector’s capacity and confidence.

Do our organisations have the capacity, the “bandwidth”, to address all of the new and competing demands; do we have the full range of  knowledge and skills to operate in an increasingly complex policy and technical environment.  And what about the capacity of others that social landlords depend on?  Contractors, suppliers, partner organisations and other public services.

All of this, and an evident unease at the risk of further systemic shocks, is undoubtedly having an impact on landlords’ confidence levels.  For example, we know that the number of landlords that are planning on building new homes next year is down, and that the number of new homes that are planned is also down.

And we’re starting to see different responses to this context and these challenges. 

Some landlords are starting to think that now is not right time for growth, that it may be better to endure, hunker down and get through the coming period.  

Others are determined to keep growing, building new homes.  Indeed some might even be seeing opportunities to contribute more amongst all the challenges.

And others are unsure about the best strategy to adopt in the current climate.

We are also aware that conversations are happening amongst landlords about different ways to work together, and possibly to join together, to help them keep delivering for their communities in an increasingly difficult environment.

Now, having said all of that, and in spite of current context, we are seeing a continuing confidence in investment in social housing from lenders and other investors.  The growing prominence of ESG in lending decisions suggests that social landlords will be seen as even more attractive to lenders and investors.

And of course, social landlords in Scotland have weathered many storms over the years, and have continued to adapt and evolve to keep building homes and sustaining communities, so that’s a track record we should take comfort from.

That ability to adapt and evolve, to be resilient in the face of changes and challenges, has never been more important, not least to protect the legacy social landlords have created in the last fifty years or so.