Biting back at the watchdog

Conflict and grievance is not uncommon in the social housing sector, whose watchdog body The Scottish Housing Regulator is under unprecedented scrutiny this weekend, following a probe by the Scottish Parliament's infrastructure committee.

Scotland's 180 registered social landlords process an annual £7 billion of public spending on building and maintaining housing stock. Inevitably they have diverse professional backgrounds, complex relationships and fixed ideas about dealing with local circumstances.

The fact that Scottish housing associations (HAs) collectively oversee the housing welfare of 600,000 households - many amongst the least-advantaged Scots - throws up many difficult issues.

Given all that, "A degree of tension" in the SHR's phrase, is inevitable, perhaps desirable between regulator and regulated.

Nevertheless, a letter from the Scottish Parliament's infrastructure committee to the Scottish Housing Regulator last week added to the sense that, with this particular watchdog, "tension" was descending into dysfunction.

The impression is based on some startling evidence to the committee, which is chaired by the SNP MSP Jim Eadie, some of it in written submissions, some in open session, some in off-the-record evidence sessions - "a safer environment" for witnesses to speak out according Alan Stokes from the Scottish Federation of Housing Associations, who noted in his evidence "a reluctance among our members to stick their head above the parapet if they are going to be critical of the SHR".

Judging by the unwillingness of several witnesses to appear or give evidence in person, the regulator's "tension" has become the regulated's "climate of fear", where publicly raising issues about the SHR's methods is a bad career move.

While witnesses acknowledged "genuine good intent on the regulator's part", the phrases used in discussions of the SHR's actions - some of which were quoted in the committee's letter of last week - are among the strongest levelled at an official body in the Scottish Parliament. In some cases they amounted to accusations of abuse bureaucratic power.

Those alleging a "climate of fear" within the sector made reference to the SHR's "unchecked powers", its alleged actions "against natural justice", accused it having "no ground rules" and " no transparency" , of adopting a "heavy-handed approach", of demanding "meetings with associations that have no agenda and are not minuted", having " a mantra about putting nothing in writing", a "lack of proportionality", of "putting a lot of pressure on associations to appoint particular consultants that the regulator favours", and - a shocking accusation for a regulator, treating housing associations as "guilty until proven innocent".

In a session last November, David Bookbinder of the Glasgow and West of Scotland Forum of Housing Associations, spelled out the thrust of the charge:

"The issue is the regulator's manner, approach, style and language, which sometimes seem disproportionate to our members when all that is happening is that an inquiry is being made-something is being looked into. There is a feeling among our members that an assumption is made that something is wrong".

Later on in the same evidence he reported that a "number of members have said to us that they would now think twice about [discussing problems with the regulator]. That says something about a changing relationship, which perhaps was once seen as being a more supportive relationship than it is now."

While the regulator could and did cite examples of successful "engagement" with the sector - satisfied customers, some of whom are quoted in its annual report - the collective impression, spelled out in the committee's, was that a many in the sector from all over Scotland do not trust the SHR to act fairly, proportionately or (in its attention to multi-million pound contractual arrangements) effectively. A response from them is expected, according to convenor, Jim Eadie "within a few weeks", and the possibility of further action will depend on its contents.

The problem for the Scottish Housing Regulator is not lack of affection - an occupational hazard in this world. Far more worrying for the health of the sector in Scotland, is apparent lack of respect.

Not surprisingly the SHR took the opportunity of its own evidence session to refute some of the allegations, insisting that its investigations are "transparent" and risk based, that it does not micromanage. Anne Jarvie, a distinguished former chief nursing officer who sits on the SHR board, claimed that "we are very seldom given evidence to back up the things that we are told about perception or whatever".

" Part of the difficulty is that, although people make statements, they do not always back them up with evidence. That makes it difficult for us to analyse them, and to understand where people are coming from and what we could do to make a difference".

This claim of lack of evidence was challenged by MSPs, one of whom, Joan McAlpine, made the point that the committee had heard "quite a lot of evidence" from the sector, and has since been refuted by individual HAs, some of whom wrote to the committee to contradict the SHR's defense.

The Sunday Herald also has evidence that complaints against the current regulatory regime are far from a new development, suggesting that the "formal lessons-learning exercises" that the SHR claims to undergo after each "engagement" with the sector, are doing little to shift the "climate of mistrust".

In a letter of August 2012 the Scottish Federation of Housing Associations wrote to the SHR chief executive Michael Cameron raising concerns "some of which have been around a while, others which are new."

These included: disproportionate attention to petty governance problems, overreaction that "creates or increases risk where there was little or none", failure to notice glaring problems, peremptory demands for information, "unreasonable" judgements, causing low morale, exclusion of independent observers, "reckless disregard" to problems caused by its interventions, and "long delays in providing answers to questions."

Critics have also pointed to the fact that none of the SHR appear to have had management experience in the regulated housing sector, and therefore keep themselves busy intervening on issues caused by trivial boardroom personality clashes than on facilitating the sectoral bread and butter issues: covenants, access to borrowing, re-pricing by lenders, inability to pay bullet payments at the end of bond periods, securitisation and other technicalities.

Responding to the letter, Iain Muirhead, the SHR's director of strategy and communications said:

"We were naturally concerned to receive the SFHA's letter in August 2012, and we responded at the time as a priority. We met with and wrote to the SFHA and asked for specific evidence to support the concerns made in the letter to enable us to investigate these fully, but we did not receive any."

He may have inadvertently pinpointed the problem. The SHR seems to have taken reluctance to speak up as evidence that the SFHA was not accurately describing the mood within the sector, and taken no action to modify its behaviour in the light of the complaints. But the fact that very similar complaints are continuing to fester two and a half years later suggests that they were wrong to dismiss the concerns.

While the infrastructure committee was careful to note "some positive feedback on the work of the SHR" the emphasis on last week's six page letter to the SHR was clearly a shot across the bows of the quango, focusing on the "[negative] issues raised by its stakeholders".

The letter sought further answers where it felt that the regulator's own defence to the committee last December had proved unsatisfactory, and that the Parliament to which the regulator is solely answerable was determined to eradicate the "culture of mistrust".

Consideration of the evidence seems to have convinced the committee of a widespread perception "that the SHR is not proportionate in its approach", that its interventions "create the sense that the assumption was that the RSL had done something wrong".

Stand out phrases include its suggestion that "allowing some written records of meetings and providing feedback post-investigation could provide clarity on the transparency of SHR decision making." and that "greater transparency around correspondence and decision making where informal processes were being followed could go some way to allay RSLs' concerns regarding transparency and proportionality."

Presented with accusations from witnesses that the SHR actions could be seen as arbitrary and "disproportionate" it also insisted on some principles of natural justice such as the right for HAs and individuals to know of what they were accused, and the right to "an appropriate appeals mechanism", demanding that "this should be developed and introduced at the earliest possible date".

Both during the evidence session last month, and in correspondence with the committee and this newspaper, the SHR has insisted that it has broad support within the sector.

Kay Blair the SHR Chair said: "Protecting the interests of tenants is our number one priority. We are pleased that the Committee and those who gave evidence support an independent and robust regulatory process. We deliver this, as our Annual Report demonstrates.

"We are accountable to the Scottish Parliament, we welcome the Committee's scrutiny and we will respond in detail to its request for additional information.

"We have constructive relationships with many of the bodies we regulate. As a listening organisation we also recognise the need to reinforce understanding of our role. We are strongly committed to doing so, and we are currently engaging with landlord representatives as we develop more detailed information on how we apply our regulatory policies."

The SHR has clearly convinced itself of its qualities, but whether it can convince the committee and the sector at large remains unclear.

A tale of two housing associations.. continued.

The infrastructure committee takes up the issue of the SHR's attitude the "financial governance" of Dumfries and Galloway Housing Partnership (DGHP), where, as the Sunday Herald has established, where the regulator's light touch in relation to the award of a £77m public contract to the failing housebuilder R&D has left a trail of unanswered questions as well as unpaid creditors. the subject of a new local TUC petition to the infrastructure committee calling for an investigation into "the fitness for purpose of the Scottish Housing Regulator". The SHR's role in this debacle is especially open to question given that DGHP was then a "high engagement" client, which meant "meeting the regulator twice a year and sharing with it the business plan we develop internally". Despite the regulator's own standing "Procurement guide for use by registered social landlords" requiring tendering companies to produce appropriate bankers' statements, accounts and turnover for the last two years", the SHR remains silent on why it gave its retrospective blessing to a deal by a regulated body that skipped this standard due diligence, to the detriment of tenants and local tradesmen in Dumfries and Galloway. Critics of the SHR have cited its light touch towards DGHP with its heavy intervention at neighbouring Loreburn Housing Association where it imposed new board members as part of a never specified "governance situation." The new board of Loreburn has since attested to the successful resolution of the alleged governance issues, that required the HA to employ £845 a day consultants for nine months at the direction of the SHR.