Friday, 25 July 2014

Reading the reviews

From: Inside edge

Can flexible tenancies really deliver the huge benefits at minimal costs envisaged by the government?

As Inside Housing reports this week, landlords are concerned that the policy could cost them £123m.  The central scenario in a DCLG impact assessment estimates that over 30 years the policy will cost housing associations £63m, local authority landlords £56m and local housing authorities £4m. 

The estimate is based on 26,000 households a year moving out of the social sector following a tenancy review. Costs would include £54m for reviewing tenancies, £27m for providing support and advice, £24m for void costs, £13m for developing and maintaining tenancy policies and £5m for court proceedings.

A higher scenario based on 61,000 households a year moving out of the social sector would cost local authorities and housing associations an estimated £262m.

But will that be the end of it? A close reading of the thinking behind the estimates suggests perhaps not.

Take those tenancy review, for example. The assessment assumes that each review will take two hours to conduct - costing £47 in staff time - but that the true costs will only be half of that because ‘keeping tenancies under review is already part of good tenancy management’.

So one additional hour of staff time to assess how much a tenant is earning? How much any other people in the household are earning? Whether their home is too big for them?

Will that be enough time to produce enough evidence of all that to withstand a possible legal challenge - even if the tenant will only be able to challenge the decision on the basis that the landlord has made an error of law or a material challenge of fact?

Or somehow to use tenancy renewals as a reward for ‘individuals that enter employment or positively contribute to their neighbourhoods’?

If the costs of the policy look uncertain, what about the benefits?

The impact assessment argues that they will ‘facilitate a change in the public perception of social housing so that it provides a springboard into work and self-sufficiency for households in need, rather than encouraging welfare dependency’.

As I noted last week, the assessment makes the remarkable argument that the loss of security of tenure ‘will only have a slight adverse impact’ on social tenants because private tenants do not choose to pay more for longer tenancies.

It also argues that: ‘There is little evidence to show that, in practice, the below-market rents and comparative stability provided by the social sector are providing effective incentives for social tenants to move into employment.’

Little evidence? The assessment references research for Shelter in 2008 without mentioning one its key arguments: that security of tenure improves work incentives for tenants. 

The authors of the assessment might also have asked colleagues at the DWP about research it published in 2008 which concluded that: ‘The vast majority of respondents reported that living in the social rented did not present a barrier or disincentive to work. In addition, there was no evidence that levels of labour market attachment shifted when respondents moved between tenures. Some respondents explicitly referred to social housing bringing them closer to the labour market or making work a more viable option.’

And how many new tenancies will the policy really free up? On the central scenario used,  the assessment estimates that 49% of new social tenancies will be flexible with an average term of five years - and 80% of them will be renewed. 

Eventually, says the assessment,  that would create an additional 18,000 lettings per year - an increase of about 10%. Over the first 10 years of the policy, though, there would only be an extra 2,000 lettings a year.

Readers' comments (1)

  • Sidney Webb

    Could someone work out the total cost of all of the above and then divide by the 2,000 estimated relets it will allow. Although as a true value for money assessment one needs to account for the fact that the properties already existed, were already tenanted, and even though there will be a notional saving from homelessness this needs to be offset against the fact that a number of those vacating will now either be homeless or in need of higher values of housing benefit.

    If a local authority delivered VFM in the same way Pickles would be calling for heads to roll.

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