Sunday, 23 November 2014

London authority is first to defy government development model

Council rebels over government affordable rent plans

Islington Council has told housing associations it will not support bids for development funding under the government’s affordable rent programme.

The authority is the first in London to rule out allowing associations to let homes at up to 80 per cent of the market rent. Instead it expects new housing to be developed without Homes and Communities Agency money and let at traditional social rent levels.

A document from the council seen by Inside Housing states: ‘Islington considers that the affordable rent product is not affordable for households to whom we owe a housing duty.’

The Labour-run council will ask housing associations to develop social rented housing, with the authority granting them land and around £1 million of the £3.7 million it expects to receive under the new homes bonus.

This could be the first big stand-off between a local authority and the HCA and government over policy. Housing associations could get caught in the potential crossfire

Steve Douglas, partner at consultancy Altair

James Murray, cabinet member for housing, said: ‘While we are being outspoken and robust we are making it clear we are going to give something back in return in terms of land and capital. We realise this is a demand outside the main programme.’

Mr Murray said the council had identified enough land to provide 510 homes, with the potential to provide several hundred more.

Several Labour councils in London, including Hackney and Waltham Forest, have indicated they want family-sized homes to be let at significantly less than 80 per cent rents.

Steve Douglas, partner at consultancy Altair, said: ‘This could be the first big stand-off between a local authority and the HCA and government over policy. Housing associations could get caught in the potential crossfire.’

A total of 29 housing associations currently operate in Islington, including Family Mosaic, which has more than 2,000 homes in the borough.

‘We have been aware of their [the council’s] stance, initially I was worried that they were digging their heels in and would end up with no grant’, said Brendan Sarsfield, chief executive of Family Mosaic.

‘But now it seems they have thought it through. If they are coming up with other solutions to help us deliver homes we will be happy to talk.’

Readers' comments (13)

  • Alpha One

    How totally short sighted of the Council. HA's should simply refuse to develop in the borough of Islington unless the Council gives them 100% grant to do so.

    Or HA's could develop there with private financing and still issue AR tenancies, but I feel it would be more effective to stop developing in the borough full stop, the Council would fall soon enough or have to change it's stance as the public express their dismay.

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  • On the contrary, Islington Council's Labour administration is being very far-sighted.

    80% MR tenancies, with the right to acquire at the end of the term, risks introducing potentially non-Labour voters into its electoral farm which has the highest proportion of social rented tenancies, something like 54% of all tenancies, in the whole of the UK.

    It is essential that Labour can recruit grateful clients into this farm from the ranks of the poor, the ethnic minorities and, holy of holies, those on housing benefit.

    Islington is proud to be one of the UK's poorest boroughs. That's the way it is supposed to work. And the way it works is what keeps the Labour party in power here.

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  • Islington Council is absolutely right to do this. 'Affordable rents' are simply not affordable to people on ordinary incomes. What then is the point of them? The Council might as well promote the building of homes for sale on the sites, which will cost on a monthly basis pretty similar to affordable rent (market rent = mortgage + profit; affordable rent = 80% of market rent - more but not that much more and over time, as inflation drives up the rent, buying will become less costly each year for the household) and use its good offices, powers of persuasion and ability to act as a guarantor to help people secure the mortgages they need to secure a place they can call home. Or they could simply build council homes themselves, once HRA is localised. Better to build fewer homes that are genuinely affordable than a few more homes that aren't - and moreover, will be on insecure tenancies.

    This of course won't bother Wreckless Eric and Schnapps. They simply couldn't care less whether homes are built or not, just so long as the insecure, over priced private rented sector grows and the leafy suburbs in Hertfordshire and Essex remain leafy and unsullied by homes. The very fact that there is no new money for traditional affordable social rent and low cost ownership shows how hollow is their collective commitment to resolving Britain's housing crisis.

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  • As I said, Islington has one of the highest proportions of social rented homes as a percentage of total housing provision of any local authority in the UK.

    The national proportion is something like 10%. Islington's is 54%, and up to 70% in some wards in the borough.

    This has such a devastating social impact on the borough that our local Labour MP, Emily Thornberry, is forced to abandon any hope of educating her two children in any secondary school in Islington - since the consequences of the social engineering taking place at housing allocation feeds directly through to the schools - and transport them every day to Conservative-controlled schools in Barnet.

    On the other hand, the consequences of the decision of the housing chair - who is experienced for the job by having spent four years at Ms Thornberry's leaflet distributor - is that nothing will get built by any HA in Islington. That is neat politically. Fighting the good fight publicly while doing something he would rather not be seen doing.

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  • Alpha One

    Gresley, what do you define as an ordinary income? Me I'd suggest the average income, which is, not allowing for London Weighting, around £23k a year.

    I know for a FACT that that is more than enough to afford market rents, even in London (maybe not in Kensingto and Chelsea, but hey we all have to start somewhere), so 80% rents will give a bit of head room for anyone.

    Even on minimum wage you could afford a property in some of the less savoury boroughs on an open market rent. So, what ordinary salary are you talking about!

    I accept that the AR will probably not be managed properly and rents set too high in many areas, that's down to the local authorities though, they need to get real and work out what is affordable. AR ALLOWS rents up to 80%, it doesn't require it, it can be less. Unless of course you are using HCA grant funding, then you'll need to charge 80% to qualify!

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  • An ordinary income is about £25,500 per annum (median income - in work). Which equates, gross, to £2,125 a month. Now deduct tax etc and we are left with an income of £1,650 roughly a month. If we assume, as most people do, that accommodation costs should take up 25% of income, then that gives a monthly allowance for rent/mortgage of £412.50. Where in London can someone rent a self contained flat for that? That is possible in parts of the Midlands and much of the north but from my own, admittedly somewhat cursory, Googling of rentals in London, I haven't found anywhere yet, even south of the river or out east towards Dagenham and Romford.

    It may be possible for people to boost that income by claiming HB or having two incomes in the household but whichever way you cut it, accommodation costs are too expensive, especially in the capital and the south east. Indeed, across much of the Midlands now, private sector rented homes for a family will be averaging out at £700/£750 a month so affordability is an issue spreading across the land.

    The real iniquity is that for between £500 and £550 a month, a householder on £25,500 could secure a mortgage of £102,000 at an interest rate of 4-5%. That is just £100 more than private rent for a property they could actually own and, of course, mortgage repayments do not go up with inflation as rents do and, one day, there is no more to pay. It is possible to build a flat for £100,000 (less the land). We would be far better off socially and economically, as a country, subsidising through capital the building of houses for social rent at an affordable rent or homes to buy at an affordable mortage. This would be far more helpful than allowing the private sector to set exorbitant rents, that can never represent long term value for households and moreover subsidising such a system through LHA, which with HB has risen in cost in real terms for quicker than the cost of capital subsidy has fallen.

    The arguments against 'affordable rent' are that, bluntly, it isn't affordable, it shifts more of the subsidy onto HB/LHA and away from capital and it marks the end of any notion of providing homes that are affordable and secure for those who, through no fault of their own other than to be working for an average income (or not having inherited money ) simply can't afford a home of their own.

    We are supposed to have a bargain in society. We work for society and society is organised to work for our greater benefit, allowing us to have for a fair day's work a fair day's pay that will; buy the basic things a family needs in a fair society - of which a home they can call their own without constant fear of arbitrary eviction or ever rising costs is as fundamental as affordable food. The 'affordable rents' policy, in all its glory, represents a clear breaking of that compact. Indeed, if only for that reason, it should be opposed at every turn.

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  • Alpha One

    I don't know what 'most people' you hang around, but the 'most people' I know would be pleased if 50% of their income was the limit of their accommodation costs.

    Those of us who live in the real world have to live on a salary from one month to the next, and more often than not you end up asking the question "Can I really afford to go out tonight?" You pay what you have to for rent, you pay your bills and whatever if left at the end you might use to eat.

    Affordability, it appears, is relative to the individual. I would deem rents of up to £750 a month affordable on an income of £20k plus, you just have to find ways to save elsewhere. To you Gresley you find a salary of £25k hard to live on.

    In the end though its down to the individual, and shouldn't they really be offered that choice? Why should some stalinist council, occupied by overpaid bureaucrats on a power trip, determine that affordable rents aren't affordable so no one can have them.

    AR fills a gap in the market, between social and open, but Islington won't have any of that, no they demand one or the other. What about the forgotten middle, those who could probably rent on the open market but would be looking at using a sizeable chunk of their income on rent, why should they be allowed 80% rents?

    I'm not saying that AR is perfect, it isn't, it should be a tool in the belt for housing departments everywhere, to provide more affordable homes to a greater proportion of the population, not used simply because there isn't enough money in the coffers otherwise. And the fact is NOTHING in the legislation REQUIRES councils to set rents at 80%, they CAN set the level much lower if they wanted to.

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  • Ivana Hart

    Michael Read has called it completely right. Islington is a basically a gigantic council estate and that's just the way Islington Labour like it. Any threat to the status quo must be countered so that the red flag remaining flying over the town hall. The statues of Lenin from Margaret Hodge's day may have gone but the politics of one of London's most looney left boroughs remains pretty much the same.

    Islington published some interesting data recently as part of their laughably named "Fairness Commission" propaganda exercise:

    http://www.islington.gov.uk/DownloadableDocuments/CouncilandDemocracy/Pdf/What_is_the_picture.pdf

    We see that “The borough has one of the highest proportions of social tenants in the country” with 44% of Islington residential property being social/council housing set against a London average of 26% and indeed a national average of just 18%. Given this reality, it is difficult to understand why this Council should be advocating the building of yet more of the same. Unless it is to ensure the continuance of that permanent Labour majority of course...

    We also see that “Of the 40,000 children and young people in the borough 45% live in poverty. This equates to 18,000 children and is the second highest rate in the country. Of these, 73% live in lone parent households”. Under the present system of “needs” based social housing allocation (brought in during the 1970’s) it has been noted that one of the only sure fire means for young women to ensure allocation of a social tenancy is to sign on, get pregnant and have a child. Or three. This of course ensures promotion to the “priority” list for housing. Could therefore Islington Council be creating “deprivation” and manufacturing child poverty by having so much social housing so that this becomes the logical and inevitable consequence of the policy?

    From the paper we also see that “there are 140,000 people in Islington of working age. Two thirds are in employment. The number in work has fallen in the last year and is now lower than London average despite there being 1.3 jobs located in the borough for each resident of working age”. Therefore the employment situation in Islington is NOT similar to that of the ex-industrial heartlands of the North. There are, in fact, more jobs in Islington than there are residents of working age. Could there be a connection between the exceedingly high level of social housing (allocated as it is on the basis of so-called “need” and with those in work not being deemed to have enough “need” for an allocation) and the higher than average levels of unemployment, despite the fact that there are more jobs in the borough than there are people?

    Lastly we also read, somewhat worringly, that “Islington has one of the highest rates of reported crime in the country”. Given all of the above, one has to wonder if this too is connected to the disproportionately large amount of social housing in the borough and the nature of the current allocation system. The chances of Islington Labour choosing to acknowledge these connections is, of course, a snowballs in hell. However, to those not in the Party, the solution to “The Two Islingtons” appears to lie in reducing the amount of social housing as a proportion of the borough, so that Islington edges closer to the London average, along with making changes to the social housing allocation system in order to favour those in work; thereby reducing the concentration of “deprivation” in the borough. Such a change has already been made in Hammersmith and Fulham where one third of all social tenancies are now reserved for those in work. But of course H&F is a Tory borough. And such a change could invite potential Tory voters in. Can't have that now. Can we?

    The way Lefties howl and whine about Shirley Porter's designated sales always makes me laugh. They achieve precisely the same aims in their own boroughs by using the weapon of "needs" based social housing allocation to ensure their permanent majorities stay that way. True social engineering in action with the market well and truly removed from the equation. Lefties. Dontcha just love 'em!

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  • The world I live in is one where people have an expectation of a little moreout of life than handing over ever greater chunks of their wages to private landlords. Admittedly here in the Midlands and points north we have a slightly more rational housing market than that which prevails in London. Values are lower although to be fair so are wages. There are however still pockets of real choice - between buying, renting from a decent social lanlord and, for the masochistic or the growing victims of malign housing and financial policy, the private rented sector. Surely what we should be doing is not accepting the scenario you have described, in which people are quite happy to spend more than 50% of their income on accommodation, as being the norm. And certainly not if those payments are going to private landlords or to increasingly private sector minded social landlords. What we should be doing is arguing clearly for a rational balance between income and essential expenditure. And we as a nation, both public and private sectors, can afford it - if we make the choice to support, both with direct resources and policy decisions, individual households and not landlords.

    The more rationale housing market outside of the south-east is arguably because Call-me-Dave and his predecessors have spent thirty happy years closing down most of the economy north of Watford. So its not all good news! We used to make things but clearly we should have been selling dodgy mortgages to each other or gambling on the future value of pork bellies and then we could have gotten a nice fat government bail out.

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  • As someone who lives and works in Islington, I fully support the Council's decision. Far from there being an over-supply of council and social housing there is a chronic lack of it. 13,000 people are currently on the waiting list with many more (myself included) in the private rented sector who'd happily apply for a social let but know availability is so low there's no point in us adding ourselves to the list.

    Gresley makes the point that someone such as myself earning just above the national median could afford an £100k mortgage - the problem for ordinary people in Islington is that you'll need a further £70k or so even to reach the entry level price of a 1 bed flat. This prevents the vast majority of young people - in work and earning 'good' wages - from being able to consider buying unless they have outside help or inherited money. Like the vast majority of my friends I am therefore forced to live in shared private rented accommodation or move way out of the borough.

    I fully support Labour in making this decision, but the fundamentals if the situation - the massive under-supply of affordable housing in the borough - is recognised by those not on the left. Until a year ago the Lib Dems ran the Council are were building new council housing of their own, even if of limited volume.

    Decades of failing to build enough housing - let alone the right mix of housing - are having increasingly severe consequences on areas like mine. The idea that 80% of market rents is in any way affordable for most social tenants is a joke.

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