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By Dave
16/02/2011

Yeah but, no but …

Vicky Pollard continues the Chief’s west country theme, albeit somewhat stretched, to demonstrate the Con-Dem approach to consultation about their affordable rent tenancy regime (ie what consultation?).   We now have more detail courtesy of the HCA and a brief ministerial statement from Shapps together with a longer press release of the Shapps saves the world type.  In summary, the HCA is giving out £4.5 billion of the £6.5 billion of public funding for housing to affordable rent schemes (if you want a quick recap on these – basically, the schemes enable the landlord to charge 80% of the market rent against fixed term, so-called “flexible” tenancies with special procedures regarding termination at the end of the fixed period:  see HCA, paras 3.14-7). Bidders for this money can include affordable home ownership schemes (ie shared ownership predominantly, but also shared equity, with armed forces personnel particularly marked out as possible consumers of these “products”).  The market rent is assessed in accordance with RICS procedures, on which there is a note from the TSA (see HCA, para 3.5). And it really is 80% – the HCA document says that bidders will have to persuade them that anything less will deliver what they (ie the HCA) want (para 3.11 – localism here being the “yeah but …”).

The idea is that at least 150,000 new-build and re-let properties will be brought into the “social housing” sector in this way but it is to be noted that the HCA scheme applies both to new-builds and re-lets (see HCA para 2.2, 2.13-9) so the 150,000 target needs to be regarded with caution – there’s in-built room to manoeuvre.  The basis for the scheme, as I understand it, is that it moves from the old-fashioned bricks-and-mortar subsidy to personal subsidy of new build (ie new developments will be funded effectively through increased housing benefit receipts).  This assumption that HB will take the strain (which is where the “yeah but, no but” frame is at its most pertinent) is dealt with in the HCA document, where there is a loosely worded pledge in essence not to alter HB rules for PRPs:

Government has already announced its intention to limit Housing Benefit payments to social rented sector tenants who under-occupy their properties, and this policy will therefore also apply to Affordable Rent homes. Other than this, we do not anticipate further changes in the short to medium term. A tenancy where a registered housing association (note that this term includes private Registered Providers) is the landlord is excluded from mainstream Local Housing Allowance rules. (3.6; emphasis added)

Therefore, the maximum rent is not to be fixed by reference to the LHA (para 3.7).

However, landlords will wish to consider the local market context when setting rents, including the relevant Local Housing Allowance for the Broad Rental Market Area in which the property is located. They should also take into account wider benefit policy such as the proposal, subject to the passage of the Welfare Reform Bill, to cap total household benefit payments so that workless families do not receive more in welfare than the median earned income after tax and National Insurance contribution earnings of working families. War widows and households with a member entitled to Disability Living Allowance, Constant Attendance Allowance or Working Tax Credit will be exempt from the cap. (para 3.7)

Equally significant is the intention that the usual players (larger PRPs) will be in competition with smaller players.  This is a point Shapps makes most clearly in the press release, where he “… encouraged not only traditional housebuilders and housing associations to consider building homes through the new scheme, but also smaller developers looking to expand into housebuilding” (all of this being made possible, of course, by the Cave approach to the social housing “domain”).  Whether those smaller developers/builders will be able to survive or bid effectively in the heavily marketised domain, where efficiencies of scale have led to agglommerations of PRPs etc (note the significance of cross-subsidy to the HCA proposals at 2.23-5, “close collaborative working with local authorities”, para 2.36, and VfM, paras 5.4 et seq),  is unclear, but it may point an end to the current identity of social housing.  It is made clear that “social rent” schemes will not be supported unless there is “a strong case to demonstrate why Affordable Rent would not be a viable alternative. All such cases will be considered on their individual merits” (para 4.21 – the last sentence is a particular favourite of mine).

Who is the market for these properties and how will they be allocated/let?  Here, it becomes clear that the primary market, subject to local negotiation, is likely to be low income households in work, allocated through the nomination process, as there is sufficient flexibility in allocations to enable these properties to be marked out for such households.  This, of course, assumes (contra the evidence) that such households stay in work and won’t be caught in the benefit trap as a result of the increased rents.

1 Comment

  1. Robert Latham

    This post reminded me of the following extract from HLPA’s reponse to “Local Decisions: a fairer future for social housing”:
    “We note the Minister’s announcement (9 December 2010) that the Government is investing £4.5bn to deliver “up to 150,000 new affordable homes over the next 4 years” that is a long way from meeting the needs of the “five million people languishing on waiting lists” (same announcement). The Government has cut the budget for new homes from £8.4bn to £4.5bn. In future (after 2015), there will be no direct government grant for new social housing. Housing associations will rather have to borrow from the private money markets, financed by higher rents. The National Housing Federation estimate that in order to finance these 150,000 new homes, housing associations will have to charge all these new tenants the higher rents, together with one in four tenants who move into their existing stock of social housing. The overall effect will be 307,000 less tenants paying social rents. We also note that this is likely to add £1.5bn to the housing benefit bill by the end of the spending review period (See the report of the Building and Social Housing Foundation (Inside Housing, 17 January 2011)”.

    Reply

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