Social Landlords in Scotland: Shaping up for improvement

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Social Landlords in Scotland: Shaping up for improvement.much time pursuing a small number of new developments rather thanfocusing on the quality of services and stock for existing tenants.• Landlords need better information about the condition of their houses, costs,and demand to underpin their management and investment decisions.Without this some landlords risk not meeting the Scottish Housing QualityStandard by 2015.• Most landlords have started to use modern procurement approaches andbetter management of supply chains. But this is not yet well established inthe Scottish sector.4. RSL finances• The sector overall is relatively stable financially, and many landlords continueto represent good investment opportunities for lenders and good investmentpartners for public funders.• In the current financial and economic climate, landlords need to focus ondirection, stewardship and financial viability. They need to be extra vigilant inreviewing and stress-testing financial forecasts; assessing their exposure tohousing and finance markets; managing short term liquidity; and monitoringcompliance with financial covenants. For some RSLs, particularly thosedeveloping new build houses, standards of governance, business planningand treasury management must improve.• Total operating costs have been increasing steadily in the sector over the lastten years. This is not sustainable into the future. Landlords must do more tocurb cost growth and to focus on efficiency and value for money.• RSLs have been very successful in securing large amounts of private financeto deliver new houses, invest in existing stock and regenerate communities.Borrowing costs are likely to be higher in future, although they should remainsignificantly cheaper than the deals secured by commercial and unregulatedsectors. Fewer financial institutions are willing and able to lend to the sectorat the terms it has previously enjoyed. Around 70% of the Scottish RSLfinance market lies with three lending institutions. The sector should exploreother sources of debt funding or more strategic approaches to procuringfinance if it is to secure adequate amounts of competitively priced loans infuture.3
Social Landlords in Scotland: Shaping up for improvement.5. RSL governance• More than 2,000 volunteers serve on RSL governing bodies and around 45%are tenants. Some governing bodies are excellent: they have a goodchairperson, a solid understanding of their role, focus on strategic issues andhave independent thinkers who are willing to constructively challenge and actas a critical friend with senior officers. But, overall, we have found that thequality of governance in the sector is variable.• Governing bodies often have a rather light-weight approach to riskmanagement and (along with some senior officers) are struggling tounderstand the financial challenges their organisations are facing.• Determining the right blend of governing body membership will depend on thetype of RSL in question and what it is trying to do. Some RSLs need toconsider whether a governing body made up of a majority or solely of tenantswill deliver the sort of governance they need in less benign times. The sectorcould do more to generate different networks and encourage a more diversepool of potential governing body members for the future.• There is no one governance or ownership structure that automatically offersbest value for tenants or guarantees successful outcomes for residents andcommunities.• RSLs are facing tougher times. Governing bodies will need to make difficultdecisions about their purpose, the sort of business they want or can afford tobe in, and what impact they are aiming to have on an area or community.They will need to consider closely how they should use their resources tomeet a range of competing demands in terms of services, neighbourhoodmanagement, stock quality, regeneration and new development. Some willneed to think beyond themselves and their organisations for the greater goodof the tenants and communities they serve to ask if their RSL is achieving asmuch as it could or should in its current structure and with the resources it islikely to have in future.4
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