 Good morning and welcome to the 23rd meeting in 2022 of the local government housing and planning committee. I would ask all members and witnesses to ensure that their mobile phones are on silent and that all other notifications are turned off during the meeting. The first item on our agenda today is to decide whether to take items 6, 7, 8, 9 and 10 in private. Our members agreed. We are all agreed. Now we turn to agenda item 2, which is to take evidence on the Scottish social housing charter, November 22, from Patrick Harvie, the minister for zero carbon buildings, active travel and tenants rights. Mr Harvie is accompanied today by Michael Boyle of the Scottish Government's social housing charter and regulation team. I welcome Mr Harvie to the meeting and before I open the session to questions from members, if anyone has any, I invite him to make a short opening statement. Thank you very much, convener, and good morning to colleagues. I'm here to provide an update on the actions taken following my attendance on 1 March when the committee considered the revised Scottish social housing charter. In response to the Delegated Powers and Law Reform Committee's query about our consultation with secured creditors of registered social landlords of their representatives, the Accounts Commission for Scotland and the Commission for Equality and Human Rights, I can confirm that we wrote to all eight statutory consultees in the Housing Scotland Act 2010 to ensure that there was no dubiety about the compliance with the duty to consult on the charter. We sought their views on the revised charter and provided the same 12-week response period in line with the original full consultation. We received responses from all statutory consultees, including secured creditors of registered social landlords, UK finance, the Accounts Commission for Scotland, Audit Scotland and the Commission for Equality and Human Rights. The overwhelming response from all the statutory consultees was that they were content with the changes that had been made to the charter. In light of some additional comments that they provided, we made some further minor changes to the version of the charter that the committee considered in March. We have added to the equality outcome the need for landlords to eliminate discrimination and advance equality of opportunity. We have revised the wording of the quality of housing outcome to provide additional clarity. We have changed the value for money outcome from a standard to an outcome and highlighted the legal requirement to consult tenants on rents and service charges in the supporting narrative. I trust that those actions provide the committee, as they have the DPLRC, with assurances of compliance in relation to consultation with statutory consultees in the review of the charter. The charter and the regulators' reports provide an improvement framework for tenants and landlords to assess and compare landlord performance. It is encouraging landlords to deliver improved services for their tenants and other customers. Once again, as I think I did in March, I place on record my thanks to officials who have worked on what has proved to be a highly successful tool for the improvement of services in the social housing sector, as well as to all those in the sector and others who have engaged with the consultations. I hope that the committee is content with the revised charter and that it will recommend that Parliament should approve it. I thank the minister for his opening statement. Do members have any questions? Nobody has any questions. I thank the minister for his evidence today and we now turn to agenda item 3, which is consideration of the motion on the instrument. I invite the minister to move motion S6M-05578 that the local government housing and planning committee recommends that the Scottish social housing charter November 2022 be approved. The question is that motion S6M-05578 in the name of Patrick Harvie be approved. Are we all agreed? We are all agreed. The committee will publish a report setting out its recommendations on the social housing charter in the coming days. I now suspend the meeting briefly to allow a change of witness. The fourth item on our agenda today is to take evidence from the cabinet secretary for social justice, housing and local government on the affordable housing programme, which is part of our pre-budget scrutiny. Shona Robison is joined for this item by Scottish Government officials Alistair D, who is the area manager, and Colin McBean, who is the deputy director from the Moor housing division. Before I open up the session to questions from members, I would like to ask the cabinet secretary to make a short opening statement, if she would like. Thanks very much, convener. It's good to be here and thanks for the opportunity to engage with the committee this morning. I think that there can be no doubt that recent times have been challenging and continue to be challenging, whether it's Covid into the cost crisis, which is pushing millions of people into poverty. The Scottish Government is wholly committed to doing all that we can to tackle those immediate pressures, but our levels of mitigation are constrained and we need the UK Government to take wider action to increase our budgets or grant us greater powers to borrow. We are already having to find £500 million in savings across Government to focus resources towards tackling the cost of living crisis. Those include savings from the areas where we consider there is least impact on public services and individuals, but those choices have not been easy and will have consequences. We are committed to an emergency budget review process to identify funding to cope with inflation-driven cost increases and aim to support those who most need our help during the crisis. That is a harsh reality of a fixed budget and limited powers. Despite that, we have put in place measures worth almost £3 billion this year. In the programme for government announced, we will seek to introduce emergency legislation that gives renters security through a rent freeze until at least March 2023 in both the private and social sectors, and that legislation will also include a moratorium on evictions. We will be presenting a housing bill later this year to improve affordability over the longer term, with new and strengthened rights for tenants and taking action on short-term lets and preventing homelessness. The warmer homes Scotland programme will also support households to install energy efficiency measures, helping to reduce energy costs and usage. All of that support goes hand in hand with delivering more affordable homes. I am proud to say that Scotland has led the way in the delivery of affordable homes across the UK, with 111,750 affordable homes now delivered since 2007, and more than 78,000 of which were for social rent, including 19,339 council homes. £3.6 billion is being made available in this parliamentary term towards the delivery of affordable homes, so we can continue the important work that we started in 2007 of ensuring that everyone in Scotland has a warm, safe, affordable place to live. I was given a timely reminder of the importance of good quality affordable homes as part of my recent summer visits, and speaking to tenants is a great way to understand first hand how important it is that we continue with partners to deliver affordable homes and contribute to the delivery of national outcomes. We know that a smaller number of homes can make a huge difference to rural and island communities, and we are taking forward the development of our remote rural and islands housing action plan to meet the housing needs of those areas and to help retain and attract people to those communities. We recognise the continuing external market conditions of inflation and supply chain impacts and are committed to continuing to work closely with all our housing partners to help mitigate those pressures where possible through the operation of our flexible grant system. I cannot conclude remarks this morning without acknowledging the struggles being experienced by the people of Ukraine. We have extended a warm Scots welcome to them, and Scotland is currently accommodating almost 20 per cent of the total of Ukrainians in the UK. We recognise existing temporary accommodation challenges and that those might be impacted, but we must and will continue to work hard to reduce the number of all people in temporary accommodation. I look forward to engaging with you this morning on the affordable housing supply programme. I know that there are many challenges facing delivery, but I believe that our strong established partnerships and flexible systems that we have will enable us to continue to make good progress. Thank you very much for that opening statement and setting a range of aspects to the topic out for us this morning. We have a number of questions that can take that conversation a bit deeper. Before I bring in other members, I am going to lead with a theme around targets and meeting needs and placemaking. Something that has come up quite a bit in conversation with stakeholders is the question around the target delivery of 110,000 affordable homes by 2032. The question is how did that target get set and what evidence is it based on? In what way does it relate to local assessments of need and also in relationship to the housing needs demand analysis process, is that fit for purpose for giving us that information? The target was initially formulated as a result of the overarching work undertaken in the development of housing to 2040, which is our long-term housing plan, which initially set out the ambition to deliver 100,000 affordable homes by 2032. In setting the target, we also considered the previous target, housing need and the views of the sector. The programme for government in 2021-22 increased this amount to 110,000 affordable homes across Scotland by 2032. I was keen after having discussions with stakeholders from covering rural Scotland to include a target for rural homes. I thought that it was important to drive that ambition within rural Scotland. We know that there are additional challenges, and I am sure that we will want to talk about some of those, but I felt that having a specific target would help to drive developments within rural Scotland. That emerged from those discussions and, of course, an important part of the Bute House agreement. In terms of the relationship with local government, that is clearly hugely important, given their role as the strategic housing authorities and their best place to make local decisions and reflect the particular nature and characteristics of their local area. That feeds into the national plan and national targets. All of that led to a target that we feel is ambitious but also deliverable. The housing need and demand assessment is undertaken at the local level, allowing for consideration of local information and circumstances that go beyond the national projections and housing numbers. That includes things such as tenure, size and tight location of housing, as well as considerations such as affordability and specialist provision. It is a valuable tool in the process. We need to keep targets under review and we are intended to carry out a review at the midpoint to 2032 to assess whether the current plan should continue unchanged or to be adapted. I hope that answers some of your questions. To some degree, yes. I am still a little bit not that clear on what the evidence target is based on. If we go back to the original £100,000, I really appreciate your additional number of £11,000 in terms of driving rural and island homes, because that is absolutely crucial. In terms of the original £100,000, you mentioned that that was built on a previous sessions target. The previous target was at £50,000, but I am still not clear if we were going to point to evidence. Where would we as a committee look for an understanding of how that number was arrived at? As I have said, it is born out of feeding in from the strategic housing plans from local authorities and the consultations with local authorities and the RSLs to make sure that the target has to be ambitious but has to be deliverable. There is no point in us plucking out a target out of thin air that then is not deliverable. We have had calls to go further, but whatever we do has to be deliverable. That target is stretching—the 110,000, with 10 per cent in rural Scotland, is stretching not least in the current climate of the pressures on costs, but it is important that we have quite a stretching target. Therefore, it is a target that is fit for purpose, but we have to keep it under review, and that midpoint is going to be important to be able to assess the progress towards the target. I should also say that it is not a target that you meet by breaking down to 2032 into individual years and delivering the same in each individual year, because the challenges will change and costs will change. It will be a target that is met in peaks and troughs as we get to 2032. The midpoint is important to see the progress that is being made and whether or not there needs to be changes at that point. In a previous evidence session, the committee heard about the challenges of providing the right homes in the right locations. For example, in previous evidence, Highland Council said that numbers alone should not be the sole determinant, though they are useful target or ambition. Government should be honest enough to question whether a lower but more focused number may be more appropriate. In short, the right homes in the right place, of the right size and the right tenure, at the right time and for the right people, adapted as required for needs, is arguably more appropriate and may lead to a lower total number being more appropriate. I am just interested to hear what your view of that statement is. We need to have homes in the right place, of the right size and quality, but we also need to deliver more homes. All that is a balancing act. I think that the quality of homes that are being delivered by both local authorities and the RSLs is of high quality. It is important that there is good installation and that we have energy-efficient homes. Does all that mean that we need to have fewer? I do not think so. I think that it is a balance of being able to deliver at scale, but being able to deliver quality. We are looking, for example, at the modern methods of construction, of site construction, whatever you want to describe it, as potentially ways forward of being able to get as much out of the investment, not just of £3.6 billion, but of the additional investment that brings of the sector raises to add to that £3.6 billion to make sure that that delivers as much as possible. We are talking to the sector and local authorities about the innovative ways of build, which can be done all year round, for example, so there are economies there. We are also looking at, for example, the number of house types that there are. Do we need 50 different two-bedroom, three-bedroom, four-bedroom types of properties, or can RSLs and local authorities come together to perhaps hone down on a smaller number of house types that then can go through planning more quickly? All of those things are important. We are looking at perhaps operating on a more consortium basis when we are delivering homes. Housing England has done that quite successfully. We should be looking at ways of being able to drive efficiency in the system without compromising on quality. Those are all things that we need to look at to make sure that every pound that we invest in the affordable housing supply programme is going as far as it can to deliver as many good-quality energy-efficient homes in the right places. Thank you very much for that. I will continue the same theme, but I will bring in Annie Wells with a couple of questions. The committee heard from the SFHA on the need to progress with the review housing of varying needs design guide, which has been in place over 20 years. Can you update the committee on progress with the review and comment on how it might help address delivery of homes for those with particular needs? First of all, it was set out in housing to 2040 the importance of the housing for varying needs design guide. The guide, I should say, still provides an excellent standard, so it is not that the current guide is not providing that, but we want to review the guide to help better meet the needs of an ageing population, help people to live in their home for longer, learn lessons from the pandemic by recognising, for example, the importance of outdoor space and space for home working or study. We have really had to take some time in doing that to get it right to ensure that the guide is going to be fit for purpose, so that has taken a bit longer, to be honest, than we would have wanted, but I think it's a balance between time and getting it right. The latest, I can tell the committee, is that we plan to formally consult. There's been a lot of informal consultation with stakeholders. We plan to formally consult on the proposed changes to the guide in the spring of next year, so it is a bit of a delay, and I'm going to be honest about that, but I think it has been worth taking more time to get that formal consultation right. In the meantime, there's nothing wrong with the existing guide, but getting the new guide right has taken a bit longer than perhaps we would have wanted, and I'm happy to keep the committee updated as we move that work forward. That's great. Thank you very much for that. Just one more, convener. Given the emphasis on placemaking in the draft NP4, how are you making sure that the new homes approved through the affordable housing supply programme contribute to those aims? In drafting the national planning framework for, the planning system will shift to be more directive about the quality of places, including by guiding where new development should happen and how those developments can deliver more for new and existing communities. It proposes strengthening planning policy for affordable homes, and it provides a better, more positive, encouraging system for affordable housing, not just in urban Scotland but in rural Scotland as well. I was asked about this at the community housing trust event in Inverness, and planning came up quite a bit in the discussion. What's important for us in Government—we don't always get this right—is that all the policies face in the same direction. We have our very clear ambitions for the affordable housing supply programme, but that's only going to be as good as being able to get the land availability and the planning system right. We need to get a really close eye on the operation and practice of the new framework to make sure that it delivers on making it easier to deliver affordable housing. That doesn't mean that it still has to take into account all the concerns that you would expect, but it should be more proactive in supporting affordable housing. We are now going to move on to theme 2, which is about financial capacity of social landlords and balancing priorities. I would like to bring in Mairi MacMair. Some witnesses of the committee have highlighted the challenge of investing in the important aim of decarbonisation, as both the aims of decarbonising the existence stock and building new homes achievable without compromising tent affordability. We are asking a lot of the sector to do all of those things at the same time, and we need to ensure that we support RSLs in doing that. I should first of all say that the RSL's financial performance remains very good and robust, so we are starting from a good position, but we are asking a lot of our RSLs, and we need to be very cognisant of that. In terms of going forward with decarbonisation of the existing stock and new homes being energy efficient and of a high standard, we need to ensure that that is done in bite-sized pieces. We have asked social landlords to focus on fabric first, while we are getting in place all the important building blocks for taking forward the major investments in decarbonisation. We have also been very clear that tenant affordability in all this is key. We have said that decarbonising the existing stock and building new homes, that we have to do that without compromising tenant affordability so that it cannot be done on the back of tenants' rents. That requires us, and as you will be aware, there has been a lot of work in terms of the task force looking at finance and how we finance all of this in a way that is deliverable and affordable and does not put the onus on tenant rents and being able to deliver all of that. It is a challenge. We have provided some significant funding so far, but we have also said that we know that that will not be enough to do everything that needs to be done, so we will need to work very closely with the sector as we take forward all the changes that are coming over the next few years. We need to support them in doing that. The Association of Local Authority Chief Housing Officers in Evidence emphasised the need to listen to existing tenants before determining priorities. How did the Scottish Government consider the needs and priorities of existing tenants before setting the affordable housing supply targets? We rely on local partners to be consulting with tenants. We are aware that, as a Government, we set the budgets, the targets in collaboration with local partners. I meet tenants organisations directly on a regular basis and hear their views, but we expect some of the detail around the housing plans at the consultation of that to be done at a local level by local authorities and registered social landlords. They do that on rent levels on an annual basis and are required to do that. It is one of the requirements. We expect them to have the reach into communities and local tenants organisations that would be impossible for us to have that reach. On a national level, we expect that local consultation to happen. You are bringing forward the emergency legislation to freeze rents, and that is widely welcomed. Not least with the Scottish Housing Regulations, you are highlighting that a survey of the national panel of tenants showed that seven in 10 were concerned about the future affordability of the rent. You will be aware that the Scottish Federation of Housing Associations has suggested that the freeze will impact on the ability to meet targets for building homes in decarbonisation. What assessment has the Scottish Government made on the impact of freeze on social sector rents might have on affordable housing development plans? What does that mean? I need for increased subsidies to minimise the risk to delivery of the target? There is a lot in there. As you are aware, we have taken what are exceptional measures and exceptional circumstances with this emergency bill. We will lay out the detail to Parliament in short order. We have made it clear that, within the bill, those will be temporary measures to the end of March next year. However, what we have said is that anything beyond that, which is where the social rented sector will have its concerns, for lack of another word, in terms of what happens from 1 April next year in terms of social rented sector rent levels. We will work very closely with social landlords on whether a cap should be applied on social rents from 1 April next year, and if so, what level they should be at. In doing that, we need to take cognisance of the economic circumstances between now and then, and to have regular reviews of that, because it is the circumstances of tenants being able to afford their rents that is driving us to take this action. The wider economic circumstances and challenges that tenants have will be a key factor in what happens from 1 April. Given what happened last Friday and all the impacts on interest rates, inflation, all those factors have to be taken into account. That will have an impact on the social rented sector in terms of its borrowing costs. Those are all factors that we need to take into account, but one thing is absolutely clear. We are going to work very closely with the sector, because anything that we do, we have to be very careful that that does not interrupt the investment plans that the sector has, because those investment plans are what helps to deliver, along with local authority investment plans, the affordable housing supply programme. We have quite a lot of things to balance here and get right, and that is not going to be easy, but we are very aware of the concerns of the RSLs. I have met them on a number of occasions already, as has Patrick Harvie as the minister taking forward the emergency bill. We will continue to work very closely with them to make sure that we support them. You mentioned subsidies. Again, that is something that we will discuss with the sector in terms of shared risk. Who carries the risk? What can Government do to support them? Officials have been meeting with UK Finance because we are very aware that it is not just the social rented sector, but it is its lenders that are important here to have confidence in the sector here in Scotland to want to continue to invest. They will also be affected by some of the decisions by the UK Government last week, and we have to take that into consideration in the round. I cannot tell you here and now what will happen on 1 April, because we cannot predict what the circumstances will be like, but we are going to work very closely with the sector to try and get it as right as possible, taking all those factors into consideration. One thing that came up in the evidence that is driving the cost is Brexit, and Professor Ken Gibb from the University of Glasgow highlighted a concern about the economic change associated with Brexit. He said that Brexit is a contributing factor to the negative impact on labour supply in the cost and shortages of materials. Is this a concern that you share and how is the Scottish Government considering the impact that it is having? Yes. It is an impact alongside a number of other impacts, but it has had a direct impact on labour, supply and materials at a time when those are then exacerbated by global supply issues. We are aware of that in terms of the war in Ukraine and Covid. All of those things have created a very difficult environment. We have been working with the construction sector. Ivan McKee has been leading work around the support to the construction sector. Those are global factors. It is very difficult for the Scottish Government to resolve them ourselves, but what we can do is to look at, for example, the development of local supply chains. The importance of SMEs in Scotland in terms of how we create more local supply chains is not going to happen overnight, but it is important that we look to do that to have more stability in the system that does not then be buffeted in the future by external factors if we can get that stability and resilience in those local supply chains. That comes back to looking at local timber supplies, offsite construction and all of those things that we can perhaps help to be less reliant on global factors, but it is a really challenging time for the construction sector. Having said that, projects are still coming in. In terms of the cost of those projects, around half are coming under Benchmark and half are coming over Benchmark, so there are, but the good news is that projects are still coming in and are still being approved. That means that projects are still getting shovels in the ground to help towards that affordable housing supply programme target. We are now going to move on to rural focused questions and I am going to bring in Miles Briggs. Good morning cabinet secretary, good morning to your officials as well, thanks for joining us. You touched upon the rural housing action plan in your opening statement and I just wondered in terms of the Scottish Government's plan that 10% of 110,000 homes will be located in remote and rural communities. If you could update us currently on where the Government is with that and what percentage has been delivered? First of all, the 30 million rural housing fund is there to help to encourage the development within rural Scotland. It still has access to the affordable housing supply programme and that fund is there to try and encourage development, along with the land fund as well, I should add. That is demand led, so it requires local projects to come in to take forward those projects. In terms of the peaks and troughs that I talked about earlier on, that will be very much guided by projects that come in. What I can say is that there has been around 6,000 homes that have been delivered under rural Scotland previously, but the good news is that over the first year of operation of Parliament of the new target, 1,600 new homes have been delivered in rural Scotland. Bear in mind the caveat of the peaks and troughs. If that was to continue, it would give us quite a lot of confidence that we are seeing an uptick in the delivery of homes in rural Scotland, but the caveat is peaks and troughs, so it will be dependent on those projects coming forward. What is important about that is that there is support. I will go back to my visit in Inverness. The importance of organisations that are supporting local communities to bring forward projects, get them through the feasibility stage and get them to the submission of them. All of those things are quite technically difficult. The role of community housing trusts are quite important. I was speaking to some of them at the event in Inverness where they have developed a toolkit to support local organisations to bring forward projects, some of which had access to the land fund and the rural housing fund in order to get those projects to fruition. It is still taking too long. We need to look at how we shorten some of those timeframes in order to get more of those projects, but some optimism given that 1600 figure. That is helpful. I think that one of the concerns that the committee has heard quite a lot of evidence and I am sure that the cabinet secretary is acutely aware of is the decline in the number of small to medium-sized builders who are often developing and taking forward these projects. You mentioned it being demand led. Where and what can the Scottish Government do to support these smaller developers, especially when they are looking at developing affordable housing, which is often, in many cases, a small scale and just the cost of unit pricing being where it currently is at? First of all, there is no hiding fact that this is a tough time for the construction sector and, particularly, SMEs. It is really, really difficult. Some of the larger organisations, developers and builders clearly have resilience within them because of their size that SMEs don't always have. That is bluntly the case and all the factors that I spoke about earlier really impact on SMEs. However, the work that Ivan McKee has been doing with the construction sector is looking at how we can support SMEs through looking at local supply chains, looking at how SMEs get themselves in pole position to be able to bid for work on contracts, whether that is a contractor or a subcontractor. It is really, really important. In Highlands and Islands, one of the difficulties is being able to have the capacity to meet some of the demands. Sometimes it is just not possible for some of the SMEs to meet some of that demand, so we have to look at that as well. We will continue to work as a Government to look at how we support our SMEs and help them to be able to take advantage of opportunities. However, some of those global factors and the cost base for SMEs are really, really, really challenging, but we will continue through the work that we are doing. I think that one of the other important aspects that I should have mentioned around the meetings that Ivan McKee and myself have had with the construction sector has been some of their concerns about contracts and the risk-sharing. Costs go up, who meets the costs of that? Is it met purely by the contractor or is it met by the housing association or the local authority in terms of the customer? I think that it has to be a shared risk. We clearly, as a Government, do not get involved in contracts. That is for local partners to resolve. However, what we did do was meet both the RSLs and councils and the construction sector to put out a message about flexibility in order to make sure that contracts and projects continue to come in. There had to be that level of flexibility, and I think that that message has landed with both the construction sector and the customer at the end of the day, which is our RSLs, as we navigate through these challenging times. I want to further pursue a point that Mairi McNeir raised with regard to forecasting and financing for housing associations. Housing associations are quite clear that the impact of the Scottish Government's rent controls will be them having to look again at their 10-year financing and projects, whether or not they will be affordable to come forward. Given that the committee will not see the bill until next week, and the chance to consult with wider stakeholders has not been there, what impact assessment on that has the Scottish Government undertaken to look at whether or not that will potentially pull the plug on many of the vulnerable potential developments? First, I recognise the concerns. I absolutely do. That is why I have spent a lot of time, as has Patrick Harvie, in discussing those issues with the social rented sector, and we are establishing the way that we are going to work with the social rented sector going forward in terms of establishing a joint group between officials and the social rented sector to work through those issues in more detail. First of all, the vast majority of social sector rents were already set until 1 April 2023, because they set them earlier on in the year. The issue that the social rented sector is concerned about is what happens from the 1 April, rather than what happens with the bill in the next few months. It is also worth saying that the rent levels in the social rented sector are considerably lower, as a starting point, compared with the private rented sector. The power that the bill—I am not going to give the important part—sees the bill when it is published. Essentially, the question will be whether the powers and mechanisms within the bill extend beyond the end of March next year. I said earlier on all the factors that we needed to take into account. You have mentioned the issue of rent freeze. I do not underestimate what the social rented sector is saying about that, but it will also be concerned about interest rates going up in terms of their borrowing and the costs of that. It is not just the issue, but all of which means that we have to be very cognisant of their investment plans and reassuring UK finance and the lenders that Scotland continues to be a good place to invest in affordable homes and the social rented sector. The financial stability of the social rented sector is very good in terms of its financial position, so that is a good starting point. As we go forward, we will balance all of that with the sector in terms of their investment plans, but also, importantly, the affordability of tenants, of being able to pay their rent and the economic climate over the next few months. All of those things are things that we will have to balance up with the sector in order to make sure that tenants are supported, the sector continues to deliver on its investment plans and we will talk to them about what the Government's role is within all of that to give confidence. I am sure that we will continue to discuss in some detail, not least once the bill is published, but please be assured that we are spending a lot of time working with the sector through those issues, because we recognise the importance of them. Given what you have said in terms of having to be a timed intervention of six months, we have just passed the charter that provides that framework for rents to be discussed between housing associations and their tenants. Why have the social housing sector been included in this bill? It sounds like this is going to create more problems for them over this six-month period than it needed to. No, I think that it was important for fairness that it applied to both PRS and the social rented sector and also it sets the framework for anything that happens post-march. Yes, we are looking at the six months, but the levers are there in terms of what potentially would happen beyond the six months. It is also important that the social rented sector looks as it has already done and will continue to do of what it can do to support tenants. Every time I have had a meeting with the social rented sector, whether it is individual RSLs or with the SFHA, the thing that strikes me is their absolute determination to support their tenants, so whether that is through minimising any rent increases but also making sure that their tenants are aware and are supported through any rent arrears that they have and avoiding eviction as very much as a last resort. The social rented sector is already doing that and will continue to do that. It is really important that they are. Of course, where Government has taken other action to support the sector and tenants directly through increased support through DHPs and being able to look at not just rent arrears but support for energy costs through that mechanism and the tenant grant fund, which were pivoting towards cost of living and will continue to keep that under review through the emergency budget review. We are looking at how we can support tenants to avoid rent arrears but also to help to tackle rent arrears where they arise. That is not the only action that we are taking. There is a lot of other supports as well. I am just going to come back and scoop up one more rural question, being Hanson Islands MSP, I am particularly keen to get a bit more information on that. It is really clear from what you have been saying that you are aware of the importance of the rural housing enablers and community-led housing to develop new affordable homes in our rural areas. We had Community Land Scotland in earlier giving evidence and at one point during that session they said that there are unnecessary complexities in the funding. I think that they are referring to the rural and island housing fund in the funding and planning processes, which, if addressed, could speed up the process and enable more communities to deliver hyper-local schemes that meet local need. I am just interested to hear what you have to think about that statement and also in what way will the forthcoming rural and remote housing action plan address those issues? I was just about to say that the action plan has to address all of those issues. The key stakeholders have been very clear in raising the issues that you have just articulated and others in terms of what needs to be done. They have really been informing the development of the plan. We will make sure that, in going forward, whether it is a bit trying to reduce the timelines that I talked about earlier on of getting projects from initial conception through to speeds in the ground, that we shorten those as much as possible, that the capacity of support to local communities is there, all of the myriad of issues that we know the plan needs to resolve. Having said that, it is reassuring that we are seeing more affordable homes coming through from rural and island communities. That 25 per cent increase delivered in 2021-22 compared to 2020-21 is caused for optimism with all the caveats of peaks and troughs, but it is caused for some optimism that things are improving. However, the plan will help to keep that momentum going. Organisations such as Community Land Scotland are important in listening to what they are saying and making sure that the plan addresses those issues. You will be aware of what we and the committee hear. There is about £110,000 that communities need to come up with before they can even access the money available in the fund. I wonder if that is being considered in the plan and what the timescale is for the plan. The feasibility stage is an issue that is being addressed and raised on a number of occasions. I can tell you, convener, that we expect the full plan to be published in the spring of next year, but prior to that there are some priority strands of the work that I would be able to give an update before then, probably towards the end of this year. I am happy to write to you, convener, with that, if that would be helpful in advance of the full plan being published. That would be very welcome. We are now going to move on to a new theme, the theme of grant subsidy, benchmark levels and progress with delivery. I invite Mark Griffin to lead on those questions. The grant subsidy benchmark system exists. Obviously, there is a flexibility in there for those to apply for amounts beyond the benchmark. I want to know if the Government has given any consideration to increasing benchmark levels in advance of the formal process in April 2023, given the levels of inflation in the construction industry, and to avoid the delays that can happen when applications are subject to that extra level of scrutiny? I think that the first thing to reiterate, and I know that you probably heard me say this before, that benchmarks are not grant rates or grant ceilings and really shouldn't have a role in shaping expectations of grant funding levels for any particular project. They are really a tool for determining the appraisal route for grant applications. As I said earlier, half are coming under benchmark, half are above benchmark in terms of the project approvals coming in. The current set of benchmarks will be adjusted to account for inflation using the differential between the Scottish social housing tender price index for the year to December 2022, which is populated by data received from RSL and council-approved projects. Do you want to come in on any further detail beyond that? The working group took place last October and looked at certain circumstances where they would review the benchmark in advance of the next expected increase. At the moment, the benchmarking system, as the cabinet secretary said, has continued to deliver projects across Scotland, to mean some have been at or below benchmarks, some have been above, and the expectation is that the information that we receive through housing tender returns for every project is actually approved this year, because that's actually given real-time live data that can then feed into the progress and we can compare that against the benchmarks. That will then result in us updating the figures for the first of April 2023. That will then bring it forward to allow a new set of benchmarks to be in place. That work will probably be beginning shortly. I'm not entirely sure of what the timeline on that is, but certainly the plan is to start that work so that it is in place for the start of the new financial year. At the moment, the benchmarking system is allowing projects and has continued to see projects that are moving through. As you pointed out at the beginning, some will have slightly more scrutiny than others. The benchmarking system is a administrative tipping point, that's how I would describe it. For example, in my team, stuff that comes in at a benchmark weekend is just to check the accuracy of what's being discussed and submitted, speak with the RSLs or councils and just move that through almost immediately. Stuff that comes above benchmark we will obviously look at in a bit more detail, which is understandable given the amounts of money that are going into individual projects. We will have dialogue, but this is not causing a massive delay in any way, shape or form. It's just really a case of looking and understanding why the prices are where they are, and then we can just move it through. I'm talking about the south-east area of Scotland, and I manage that. I have not rejected a single approval that is going to come in on that basis. It's just a case of a bit more scrutiny if it's above benchmark. I talked about roughly half of approvals being at or below benchmarking, and roughly half being over it. Is that the proportion that was anticipated at the start of the programme? Is that a sign that the benchmark system is working, or is that generating a higher volume of work than anticipated in those more detailed scrutiny of those applications over benchmark? Given the backdrop of all of the pressures that we've heard about earlier on of the costs, labour costs and supply costs, I'm quite comfortable with those figures. I certainly had a worry for a while when I could see the Brexit Covid global factors all pressing down on costs for projects. I had a worry about whether we would still continue to get projects coming in under benchmark, to be honest. The fact that half are still, there's a bit of a geographical variation to that is perhaps better than I might have envisaged at this point, given all of those pressures. We need to keep an eye on that going forward, but it's not a bad position to be in at this moment in time. The important thing is that we're still getting that flow of projects, which is crucially important as we keep momentum going on the programme. The other issue that I want to touch on in terms of the benchmark is the differential between RSLs and coslin. That has been a sore point for coslin for a long time now. You told us last year at committee that the differential was because of differences in availability of borrowing between RSLs and coslin. Is this ever going to be resolved to council's satisfaction? Is there ever going to be parity in benchmarking? As you've described, it was quite a contentious issue with local authorities very strongly saying one thing and RSLs very strongly saying another. I think that the revised benchmark struck the right balance because it reflects a quite significant closing of the gap between council and RSL baseline benchmarks. However, the differential, as you've pointed out, was because of the different borrowing opportunities still open to councils and between councils and RSLs when delivering the programme. It would mean wrong not to recognise that. That's where we landed in terms of getting that balance. We recognised that there was an argument for closing the gap but that there should still be a differential based on those borrowing. Given the continued pressures around the social rented sector and the RSLs, that was probably the right decision, but we will continue to keep under review and listen to all representations. However, I am quite comfortable with where we are at the moment. Finally, convener, I have a question about the social housing tender price index that you mentioned. To ask your views on whether, given everything else that is going on in the world and the UK, particularly with interest rates and inflation, that is a robust enough index that gives you a robust enough data set to really give RSLs and councils the confidence that they will be able to meet the costs to build the homes that we know we need. As I said earlier, on every project that gets approved, it's a new project, we require what's called a housing tender return and that gives absolute live data on what's happening in the sector, whether it's up in the Highlands and Islands or whether it's in East Lothian or wherever. It's as close to being pretty much finger on the pulse of the stuff as we've got. Our grant recipients, the councils or the RSLs, are going in there and working through these contracts and getting the best price that they can get, and that's just applying some very, very detailed information to us, which then goes into the BCIS, which then produces the index. The index is divided up on a geographic basis, so you can see that. In my opinion, it's a system that's been running for many years. It's tried and trusted, it's understood, and the fact that it's got this sort of live data is really, really strong. As the cabinet secretary and others have said clearly, we're in unusual times, but on the basis of a system that's consistent around Scotland and provides a consistent data set, I think it's a strong way of looking at these things. Thanks, Mark. I'm now going to bring in Paul MacLennan. Thank you, convener, and good morning, cabinet secretary. I just wanted to touch on a little bit on affordable housing supply statistics. Show the slight decline in the number of approvals from quarter one 22 to quarter one 21. Really, just to see what your thoughts are on that, if there's any specific reasons, and obviously this, I think you touched on before around trying to get to the 110,000 figure, and will that impact on the budget also? Clearly, Covid had a big impact in terms of the pause of construction and then all of the issues that we've talked about during the course of this session, Brexit, all of that has, you know, did lead to a drop and then an increase again. It's at peaks and troughs. External factors are going to, as we go forward to 2032, are going to continue to impact, I mean, you know, the announcement last Friday and the kind of shock to the markets increase in interest rates, et cetera, will be another impact. We just won't see it for another year until we see the figures. So the peaks and troughs, which is why I talked about that midpoint of review to 2032, to just take stock of where have we got to and whether we would then need to kind of back end to any catch-up that might be required if should we have those impacts. Now there's another bit to your question that I've just forgotten. It's about the budget that we've been in. The budget, yes. Importantly, the budget. So we have the resource planning allocations that we gave the five-year allocations are the allocations of £3.6 billion. It was important to give that certainty over the five years. I know that we don't always, we're not always able to give kind of multi-year allocations for all the difficulties in budgeting that we all understand, but that has made quite a difference to me in able to give that certainty. That is able then to help those plans go forward so that they can generate, through their own borrowing, the added value to that £3.6 billion, and in some cases it's a doubling in projects of the funding of that. Having said that, we're always looking for new, sort of innovative ways of financing the affordable housing supply programme. So we've looked at how we use financial transactions to the best of our ability. And we've used £134 million of financial transactions funding has been allocated to the budget in 2022-23. They're quite complicated, the use of FTs, it's not straightforward, but it is an area where we can helpfully use financial transactions. And we have also allocated £74 million to the charitable bonds scheme in 2022-23 to provide private finance to RSLs and generate charitable donations to help increase the provision of social housing. So we are trying to be imaginative in the way that we make the money go further, if you like. But we have asked officials to establish what's called an innovative finance steering group to really look at whether there's other innovative finance models that perhaps we haven't used in order to try to grow that pot even further, because we're constantly challenging ourselves, let alone the challenge. It comes externally about we want to do more. £3.6 billion is a lot of money over the course of this Parliament, but we need to grow that. And yes, we can grow it through the private finance that RSLs can raise, and the contribution of local authorities. But if there's more that we can do for some additional programmes in that, that's what we're looking at. No, that's absolutely good to hear, because that's something in the committee we've discussed and know from the next question. I'll probably move on to that a little bit more, but that's really hard one to see. The next question I want to ask was running about the outcome of the target review of the capital spending review in May 2022. And obviously it mentioned about a lower expected capital settlement from the UK government of around £750 million. I don't know if you can say if that's going to have any implications on the affordable housing budget in the future, and if so, how would spending be prioritised in that regard? So whether it's capital monies or resource monies, the Scottish budget is constantly under pressure and increasingly so, but the affordable housing supply programme is a key priority for capital spend for the Scottish Government. Therefore, I would be confident of its position in the capital spending review. Having said that, we've got to be innovative to look at other ways of growing that pot, and I've just rehearsed some of that, because just in terms of bang for bucks, all the pressures that we've talked about over the last hour or so can reduce the value of what you get for that £3.6 billion and the £3.6 billion raised by, or the equivalent raised by, RSLs and the local authority contribution. It all shrinks as costs go up, so we have to be front-footed in being able to look at what other finance might we be able to lever in to take account of that. When we've got those kind of troughs and the peaks and troughs that we can perhaps use, some of that innovative thinking, I'm happy to keep the committee updated around the work of that finance group as we go forward. We're trying to get the right expertise around the table to look at what else might we be doing in that space. Now, I'm going to bring in Willie Coffey, who's joining us online with a few more questions. Thanks very much, convener, and good morning, cabinet secretary. I have a couple of questions for you. One of them you partially answered just a moment ago. It was about alternative funding models that might be deployed to assist here. You mentioned the innovative finance team group, which is very welcome. One part of the discussion in the committee's business was the possibility of using pension funds as a possible source of investment. I wanted to ask you what the Government's view of that might be. There was some comment from those giving evidence that that might be risky, particularly if it was index-linked investment requiring a similar return and that impact coming through on rents as well. Could you say something about the Government's view of that particular possibility of sourcing new investment for housing? The group is going to be established in the autumn, and we need to give it a bit of latitude to look at all the potential sources of investment. I wouldn't want to rule anything out, but ultimately it's then for us to look at what the work of the group is in terms of recommendations, and we would look at those risk issues. I'm very mindful that anything that is very directly linked on an on-going yearly basis to fluctuations can have an immediate negative impact on rent levels. That would not be a sustainable position for tenants to find themselves in. Anything we do in terms of that innovative finance has to be sustainable and has to give some security of affordability of rent levels for tenants. There is obviously the area of mid-market rents, which provides an important function for those who are able to afford those mid-market rents, but they are still considerably lower than the private rented sector. It meets a particular need for some parts of the population, and it is important that we have seen an expansion of mid-market rents. That will continue to be an important element, and it may be that there are some financing models that can help with that part of the market. As I say, anything that we would look at and apply to recommendations through that lens of affordability and sustainability. I will wind up a question from me. Can you tell us if the Scottish Government has any views yet on the UK Government's levelling up fund and regeneration bill? In particular, it is various missions that relate to housing, which is a devolved responsibility. Has there been any consultation with the Scottish Government on any aspect of that? Has the UK Government signalled its intention to fund any of those policy intentions? There has certainly been no consultation on any elements of housing in relation to the bill, for my interests. Obviously, we have made our position clear on the bill and our concerns about the bill being well rehearsed. Housing policy is entirely devolved, although things that impact on housing, such as housing benefit, mortgage tax relief, levers that will drive inflation and interest rates, all impact on housing. Of course, we do not have any control over those matters, but the delivery of housing and the building of housing and the building regulations that are entirely devolved has allowed us to develop a distinctive Scottish approach to looking at the importance of affordable housing. As a key leaver of tackling poverty, for example, one of the reasons that child poverty levels are lower in Scotland is because of the affordability of housing in Scotland compared to elsewhere. It has allowed us to take a different approach on things such as right to buy, for example, and security of tenure and energy efficiency. We would be very concerned if there was any move in any way to impact on that area of devolved policy. It would be one of many concerns about the kind of mission creep that you like from the UK Government into devolved matters. In mission number 10, as I understand it, it says that all renters will have a secure path to ownership. How is that going to play out in Scotland with Scottish Government policy at the moment? Well, I did note that the tail end of the previous Prime Minister's tenure that he had announced the extension of the right to buy to the social rented sector at housing associations. Obviously, we will be having no truck with that whatsoever. We lost about 50,000 social rented homes when the right to buy council houses was introduced by the Thatcher Government. It has taken us a long time to replace those homes. We are trying through acquisitions and the ability of local authorities and RSLs to purchase off-market to regain some of that territory. The very last thing that we will be doing is to open up the right to buy at all. We would resist any attempts whatsoever of the UK Government to interfere in those matters. As far as I am concerned and the Government is concerned, this is a matter entirely devolved to this Parliament. I do not think that there would be any appetite whatsoever in this Parliament. I would hope anyway to go down the right to buy route. Thanks, cabinet secretary, for all of your responses to our questions. I have a few little follow-on pieces. At the very beginning of your opening statement, you touched on the challenges around the fact that we do not have the powers to borrow. Could you go into that a little bit more? You may have touched on it a bit in response to Paul McClellan and somewhat to Willie, but if you would like to give us a bit more on what would we need to really be able to fulfil the commitment to our affordable housing supply programme? In terms of Scottish Government's powers to borrow, the very limited powers to borrow in the limited scope of borrowing powers that the Scottish Government has does not just affect housing, it affects the whole gambat of ability to respond, whether that is in terms of social security measures borrowing through Covid in terms of supporting households and businesses, which is what every other Government did in terms of its response. We are very constrained and that places huge barriers and restrictions because it means that, in what is largely a fixed budget, we then have to prioritise and increasing spending in one area means reducing spending in another. That is why the fiscal framework needs to be reviewed as a matter of urgency. I know that finance colleagues have been working with the UK Government to try and agree the parameters of that, but borrowing powers clearly have to be a key aspect of any revision of the fiscal framework so that we can operate like any other Government—many devolved Governments and local government have more borrowing powers than the Scottish Government has in truth. That is a critical issue. It would allow us far more flexibility to be able to respond to the peaks and troughs, the challenges of global factors, emergency events that emerge like the cost of living crisis. It would allow us to be able to respond far better than we are able to through a fixed budget scenario that we have at the moment. I want to say thank you so much for offering to update us on the rural remote housing action plan. That would be very much appreciated. I was also interested in hearing about the setting up of the innovative finance steering group and you said that that will be forthcoming in the end of the year. I think that we would appreciate updates on that and understanding the timescale. How long is that group going to be in existence and the kind of remit would also be something that would be useful for us to know is happening? I am happy to write to the committee with some of that detail if that would be helpful. That would be brilliant. Thank you very much. I thank the cabinet secretary and her officials for their evidence today. That was our final pre-budget scrutiny evidence session. We will be writing to her with our findings and recommendations on the affordable housing supply programme after October recess and in advance of the budgets publication. Thank you so much for being with us this morning. Thank you. The final public item on our agenda today is to consider a negative instrument building Scotland amendment, amendment regulations 2022. As this is a negative instrument, there is no requirement for the committee to make any recommendations on it. Do members have any comments on the instrument? Is the committee agreed that we do not wish to make any recommendation in relation to the instrument? Agreed. We agreed at the start of the meeting to take the final items on our agenda in private, so as we have no more public business today, I now close the public part of the meeting.