THE 'bedroom tax' will be monitored by a watchdog as a "top risk" to the ability of housing associations to deliver services.

MSPs have been told an increase in rent arrears, since the under-occupancy charge came into force in April this year, is a threat to the income of social landlords and could affect the viability of the overall businesses.

The Scottish Parliament's Welfare Reform Committee heard from the Scottish Housing Regulator on the dangers to landlords.

Michael Cameron, the Scottish Housing Regulator Chief Executive, said the ongoing impact would be looked at closer in the next survey.

Kevin Stewart, SNP MSP, asked Mr Cameron if welfare reform posed a risk.

He asked: "Even in the good times we have seen struggles of housing associations. Will you be paying closer attention in future because of welfare reform?"

Mr Cameron said: "We are a risk-based regulator. We will assess the risks to delivering for tenants.

"With registered Social Landlords we will consider their financial health.

"Welfare reform and its impact on revenue is one of the top risks we focus on. It is right up there."

The Regulator produced a report into the first three months of the 'bedroom tax' and found arrears increased across the sector by more than three quarters of a million pounds in just three months.

The report stated: "We estimate that there was an increase of approximately £789,000 in rent arrears between March and June 2013 across all RSLs for which we have complete data."

The survey, which 85% of social landlords responded to, showed two-thirds (68%) of landlords estimated that up to around 5% of current arrears were attributable to the 'bedroom tax'.

A further 19% estimated the approximate percentage was double, at around 10% of arrears.

Mr Cameron said reduced income had potential for a knock-on effect.

He added: "We will want to understand the impact not just on rent arrears but on landlords' capacity to deliver given the potential risk to their cash flow, the impact on maintenance and other services.

"We will be monitoring closely over the period."

He said landlords were aware of the longer term impact of legislative change.

He added: "Many are giving consideration to longer term business plan."

The committee also heard from council officials how Discretionary Housing Payment (DHP) applications rose by 900% in the last year.