Tuesday, 21 October 2014

Housing matters

All posts by Carl Brown

Cast out

Fri, 1 Nov 2013

The ‘cleansing’ of central London of poorer people due to rising living costs, welfare caps and stagnating wages has long been feared by many.

Research published exclusively by Inside Housing today will fuel fears this process is underway with regards to homeless people at least. The findings of the report, compiled by umbrella group London Councils, show London boroughs have more than doubled the number of homeless families they place outside the capital.

London Councils placed more than 15,000 families outside their home boroughs in the 12 months to 31 June 2013, while 259 were placed out of London entirely – an increase of 129 per cent. But what does this show and should we be concerned?

Many councils have been placing homeless families in neighbouring London boroughs for years. This is understandable where there is a shortage of reasonably priced available accommodation in the home borough. Most people do not think of London in terms of borough boundaries and a move down the road in most cases should not cause a problem – as long as the person agrees of course. I don’t think it is fair to expect a council to have to house everyone that is homeless in its home borough, as some councils end up with larger numbers of rough sleepers than others.

The more recent phenomenon of housing people much further away is slightly more problematic. However most councils I’ve spoken to insist they only offer these moves to people who have no connections with the home borough. If a person is happy to move, and has no friends or family connections in the borough, why not? I find it difficult to blame councils, faced with depleting amounts of stock that can be used to house people, for any of this.

But housing large numbers of people outside the capital is problematic because of the message it sends. That London is a place only for the better off and the poorest only fit to be exported to other towns to be someone else’s problem. This is obviously overstating things somewhat and the numbers are small at the moment.

However – if Boris Johnson is serious about preventing ‘Kosovo-style social cleansing’ this needs to be addressed, if not by him then by central government.

Simply warning councils not do this, as Grant Shapps did, is not enough – the government needs to think of measures to ensure there is enough available affordable accommodation to house people as close to the home borough as possible.

Whether that involves government subsidy to reduce the cost of homeless accommodation, rent controls or other interventions I’m not sure – but there needs to at the very least be a willingness from politicians to have a look at the problem.

Dirty laundry

Fri, 13 Sep 2013

‘Never air your dirty laundry in public,’ the old saying goes, usually directed towards feuding couples in danger of revealing things better kept private.

The same line of thinking has so far governed the new social housing regulator’s relationships with housing associations – or at least MPs on the communities and local government committee seem to think so.

To date, the Homes and Communities Agency has not – with the exception of the extreme case of Cosmopolitan -   found a single housing association non-compliant with its viability standards, despite issuing 134 judgements.

The reason for this is that regulatory staff prefer to work with organisations informally to nip problems in the bud before they affect viability. The thinking seems to be that viability issues start with governance failures. The HCA intervenes when governance issues become apparent and works with the provider to try and prevent a viability rating downgrade. This, reasons the regulator, is why there have been several governance rating downgrades but no significant viability downgrades.

The MPs do not see it quite like this. They think the regulator’s approach is too informal and opaque. They accuse the regulator of misleadingly using governance ratings to reflect viability concerns for fear of triggering back book re-pricing of loans.

HCA insiders reject this accusation, and insist the viability ratings are accurate and that the regulator will not hesitate to downgrade viability ratings if it is warranted.

However, the HCA has nevertheless been stung into a response. It is now likely to publish a ‘watch list’ of struggling organisations on its website in a bid to improve transparency.

Organisations deemed at risk of becoming non-compliant with the governance or viability ratings will appear on the list. We do not know the precise criteria, ie, how close to a significant downgrade associations have to be in order to be named and shamed in this way.

One thing that is clear is that the HCA is now facing a dilemma. It is under pressure to be transparent but has to be careful about spooking investors and rating agencies and making the situation even worse for organisations in trouble.

The MPs clearly believe taxpayers have a right to know when a housing association is in trouble and what is being done to resolve difficulties.

And there’s the rub.

This is yet another instance of tensions around housing associations’ public/private status. On the one hand they are not public bodies, so many associations feel they should not be treated to the intense level of public inspection that schools are, for example. Airing the dirty laundry in public risks damaging associations as private businesses as it could affect their relationship with lenders, investors and rating agencies.

But on the other hand, they are not the same as large private profit-making companies either. They do not have shareholder accountability. This, coupled with the fact they receive large levels of public subsidy, leads MPs to conclude there is a lack of accountability among housing associations and it is difficulty to disagree.

Resolving this dilemma is going to be a tricky task for the HCA. In the meantime, many in the sector will be waiting for a glimpse of the first ‘watch list’.

Protocol required

Fri, 6 Sep 2013

It is fair to say social housing regulation supremos Matthew Bailes and Julian Ashby have had a lot on their plates over the last few months. The social housing regulator has been working on plans for a new regulatory framework (and has hastily dropped ringfencing plans due to sector concerns) has been involved in battles with the communities and local government department over resources, has had to deal with the fallout from the near collapse of Cosmopolitan and has been working through a whole raft of regulatory judgements.

For this reason, it is probably not surprising that something has had to give. This week Inside Housing revealed that Sir Bob Kerslake, the head of the civil service, urged the Homes and Communities Agency last December to agree a ‘financial protocol’ with the Communities and Local Government to enable swift responses to organisations in deep trouble. This was very much in the context of the Cosmopolitan crisis, but Sir Bob makes it clear a protocol would help financial decisions in other cases ‘be taken with the minimum of delay.’

The idea is civil servants and HCA regulatory staff would have a codified set of rules ‘off the shelf’ that they could refer to when faced with a case of serious financial failure. This means that if finance is needed to be put in place quickly, there is as little bureaucratic delay as possible.

This protocol will be developed towards the end of a wider project by the regulator to assess how it deals with ‘serious financial failure’, including what happens if a large housing association which is ‘too big to fail’ gets into extreme financial difficulty. The HCA had hoped to have made much more progress on this scheme, but its past resource problems have contributed to the project being slowed down.

Mr Bailes says that the regulator has statutory powers to intervene in problem cases and these are ‘well understood’ by both the regulator and the department. He insists the regulator can act swiftly even without a protocol in place. This obviously raises the question of why the HCA is drawing up a protocol. Either one is needed or it isn’t.

It is perhaps the case a protocol is needed so that future, new teams of civil servants and regulatory staff, who won’t necessarily have had the experience of dealing with a Cosmopolitan-style debacle, understand what is needed in order to respond quickly. The regulator can be forgiven for not completing the work yet given its huge workload, but it is important a protocol is agreed sooner rather than later.

Welfare Party

Fri, 23 Aug 2013

Another set of welfare data was published last week and yet again the numbers of people claiming housing benefit have increased.

An extra 40,000 people were claiming the benefit in May compared to the same month the previous year, the Department for Work and Pensions release shows.

The Conservatives repeatedly accuse Labour of being ‘the welfare party’, yet the numbers of people claiming housing benefit is soaring under a Tory-led coalition government.

Too often the welfare debate is framed around the notion of ‘strivers vs skivers’ or ‘lazy scroungers v hard-working taxpayers’, but an analysis of the data shows it is the increasing numbers of employed people, and particularly employed people who privately rent, who are driving up the claimant count.

Since May 2010, an extra 320,738 people in total have claimed housing benefit. Interestingly, the numbers of employed claimants over the same period is even higher, at 337,056 – suggesting the number of unemployed claimants has actually fallen.

Nearly one in five housing benefit claimants are now in work, up from 13 per cent three years ago, while the number of employed private renters claiming has increased by 200,000 over the same period.

There’s only one conclusion to be drawn from these statistics, and that is the increase in the number of housing benefit claimants is being driven primarily by greater numbers of claimants who are employed and renting privately.

And I would have thought the reasons for this are evident too. According to the Office for National Statistics, wages have plummeted in real terms since the crash and are now at 2003 levels. Meanwhile, rents, particularly in London, are continuing to increase. A report by London Councils in June said some boroughs have seen rent increases of 20 per cent in the last year, despite local housing allowance caps.

Wages falling in real terms and soaring rents are leading to more working people on lower incomes feeling they need to claim housing benefit to help with their living costs. Hard-working people are finding it difficult to make ends meet.  This is not the message that you will read in most mainstream newspapers, many of which prefer to paint a picture of ‘scroungers’ claiming tens of thousands of pounds in social housing.

Pointing all of this out is the easy bit, the more difficult part is what to do about it, beyond simply restricting housing benefit and forcing people into poverty. Ed Miliband is certainly on to something when he talks about building an ‘economy that works for working people.’

Labour has made noises about improving wages by making the living wage a condition of government contracts and has pledged to tackle ‘zero-hour’ contracts and insecure work.  However, what a Labour government would do to tackle the other side of the equation- increasing living costs -  is less certain.

Rent controls, which incidentally are being introduced by the French government, are one option. Although these would be hugely controversial and prompt fears of reduced investment in stock. Longer term, building more affordable homes and measures to create more jobs outside of London’s overheated rental market are a must.

The solution to the rising numbers of people claiming housing benefit is far from clear.

I would just prefer it in the meantime if there were a lot more honesty about the true nature of the problem.

Cough up

Fri, 16 Aug 2013

It’s fair to say the last few years have not been the best time to be a social housing tenant.

The coalition government has launched what many have seen as an all-out assault on the principles of social housing.

Security of tenure has been eroded further, while low rents are becoming a thing of the past for new tenants due to the government’s so-called ‘affordable’ homes programme. The government keeps exalting the virtues of help to buy, right to buy and home ownership, while seeming not to care about traditional social housing.

Similarly social tenants will also be forgiven for thinking the government has little interest in ensuring they can get their voice heard.

The coalition wasted little time in scrapping the short-lived National Tenant Voice and slashing funding for the Tenants’ and Residents’ Organisations of England.

The social housing regulator also now effectively no longer deals with tenant complaints. Indeed, the new threshold for intervention, ‘serious detriment’, is so high that not a single complaint has so far met it out of around 500. Housing associations are under pressure to use their assets more effectively, and some have responded by collapsing their structures. Some landlords, as we reported recently, are in danger of alienating tenants as a result.

With all of this going on, there arguably never has been a greater need for a properly funded, independent national tenant body.

We do not have that.

The closest thing to it is TAROE, which does a sterling work on a shoestring budget.

As Inside Housing reports this week, TAROE is becoming a charity in a bid to raise the money it desperately needs to survive. Around £150,000 a year is needed to enable it to continue its work visiting tenants up and down the country to represent their interests.

Although TAROE is often, by its very nature some might say, critical of social landlords, one would hope councils and associations appreciate the valuable job it carries out in trying to give tenants a voice. I would also hope that housing associations can find money to donate – £150,000 is peanuts to the sector, but could make all the difference. Tenants deserve to have a proper representative body during these tough times.

False economy

Fri, 9 Aug 2013

Eric Pickles was singled out for praise by the chancellor of the exchequer in the spending review announcement in June. Mr Osborne expressed his delight at the communities secretary’s slashing of his department by 60 per cent, including the abolition of 12 quangos.

A ‘model of lean government’ said Mr Osborne, treading the obvious path of making puns about Mr Pickles weight.’ Mr Pickles was also one of the first ministers to agree funding cuts to his department in 2010, joining the ‘star chamber’ which ruled on departments who cannot agree cut.

So Mr Pickles, at least when it comes to spending, is the chancellor’s pet. At times it seems as though he loves cutting, and being seen to be the enemy of unnecessary waste.

This mind-set was evident this week in his department’s refusal to sign off a request from the social housing regulator to spend a small amount of money, believed to be little more than £10,000, on an independent review of the Cosmopolitan saga.

Inside Housing understands the only reason for the refusal provided by the CLG was that it would cost too much.

This will strike many in the sector as bizarre. The Cosmopolitan saga very nearly led to the collapse of a housing association, which would have had huge ramifications for lending across the sector.

In a riskier operating environment, with low grant and pressure to diversify, landlords need to learn the lessons of what went wrong at Cosmopolitan.

The Homes and Communities Agency has now gone back to the drawing board and is looking at whether it is possible to procure the work in another way. Maybe housing associations themselves can fund the work? It should only take around £10 from each of England’s 1,500 housing associations to cover it.

An almost laughable ‘whip round’ of this nature though should not be necessary. Mr Pickles is taking his penny-pinching to new extremes. He should realise the importance of the Cosmopolitan review to the sector. If lessons are not learned and an association collapses, it will cost the taxpayer far, far more than £10,000 in the long run.

Cloak and dagger

Fri, 26 Jul 2013

‘Transparency and accountability is central,’ according to the Homes and Communities Agency’s principles of co-regulation.

The social housing regulator makes it very clear that it expects openness from organisations, yet it has come under fire in recent weeks for its own lack of transparency.

Julian Ashby, the chair of the HCA regulation committee, had a torrid time in front of a select committee last week over the regulator’s approach to viability ratings. MPs, led by Clive Betts, criticised the regulator for not downgrading associations’ viability ratings when it has concerns.

The HCA’s approach is to work with the provider first and only downgrade if problems persist. MPs felt this is not transparent as it means there could be landlords in serious difficulty that the public are not made aware of.

The HCA has a tricky balancing act in this respect. The last thing it wants is to put out a public rating or statement that could spark re-pricing of debt, or damage the perceived creditworthiness of the sector more widely. I am not sure providing a running commentary on every problem a provider has is in the best interests of the sector.

The comments do however, raise a wider point about the transparency of the regulator, particularly when compared to its predecessor the Tenant Services Authority.

The new regulator, unlike the TSA, does not hold board meetings in public. Whereas the public, could attend part of TSA board meetings and hear broad debates about strategy, the new regulation committee meets behind closed doors. Julian Ashby told Inside Housing this is because the committee does not run an entire organisation in the same way the TSA board did.

He did however promise the HCA would regularly publish minutes and agendas from its regulation committee meetings.

This promise has not quite been fulfilled in the way one would expect. The HCA is not regularly publishing minutes, and when it does, they are certainly not up to date.

The most recent minutes, heavily redacted, are from March, and it usually takes a few phone calls from Inside Housing to prompt them to publish minutes which then turn out to be several months old. On top of this, since January the HCA no longer even publishes the dates of committee meetings.

The regulator deserves some sympathy over its attempts to protect landlords from re-pricing and reputational damage, but its policy of meeting behind closed doors and being reluctant to reveal what is going on, is not making it easy on itself to resist accusations of non-transparency.

Sting in the tail

Fri, 28 Jun 2013

It has been a hectic week to say the least for housing journalists. The annual Chartered Institute of Housing shindig and the spending review have kept us all very busy.

Now, we are back in the office and have had time to catch our breath and reflect a bit on the government’s announcements.

So, how positive were chancellor George Osborne’s announcements this week?

A lot depends on whether you are a glass half full or glass half empty kind of person.

Many housing figures over the last couple of weeks have been gloomily predicting little if any grant post 2015, while most associations have been modelling their business plans on an assumption that rents will not be able to be increase above inflation.

Therefore on one level £3.3 billion and a CPI plus 1 per cent increase is a lot, lot better than many predicted and the immediate reaction from many of the conference delegates was relief and surprise.

Now though, sector figures are beginning to think about some of the potential pitfalls and some of the initial optimism has begun to fade.

Although CPI plus 1 per cent sounds very similar to RPI plus 0.5 per cent, the spending review document shows a saving to the Treasury through the measure of £540 million a year by 2017/18 - suggesting landlords’ incomes will be cut. The implementation of a cap on the amount of government welfare spending could also have an impact on landlords’ incomes, particularly as more and more properties are let at ‘affordable’ rent.

Beyond the total amount of funding and the rent settlement though, more worrying is the government’s overall direction of travel and what it means for social housing.

Housing minister Mark Prisk has made it clear he expects landlords to in future consider all relets for conversion to the affordable rent tenure. This is the clearest indication yet that the government is trying to accelerate the demise of social rented housing, pushing tenants into less affordable properties, while on the other hand seeking to restrict the welfare which will underpin the rental income on many of these properties.

The settlement was better than many expected, but it also signifies there are huge challenges for landlords in the years ahead.

Tenant Disempowerment

Fri, 21 Jun 2013

We are now 14 months into the reign of the new social housing regulator and it has had a frantic time.

The near collapse of Cosmopolitan and the changes to its regulatory framework have taken up most of the new regulator’s time and resources.

What is clear from figures obtained by Inside Housing this week though is that the regulator is not so far putting significant resources into intervening on tenant complaints.

Out of nearly 500 complaints to date, none have met the new higher threshold for regulatory intervention, the vaguely defined ‘serious detriment’ test. 

It is becoming clear that the regulator no longer has any serious role to play in consumer regulation, apart from in exceptional circumstances.

One of the interesting things about the latest Homes and Communities Agency figures is that they come at a time when the regulator is considering charging fees for regulation.

A number of landlords have already pointed out to me that any fees would ultimately be paid for out of tenants’ rent money.

Therefore, they argue, tenants would be paying for a regulatory service that will no longer help them when they have a complaint.

Of course, better resourced regulation will ultimately help tenants if it ensures organisations are running their businesses more effectively.

But the risk is that many tenants, when they hear how their money is being used for a service which is no use to them when they have a complaint, will understandably not see it that way.

Watching the watchdog

Fri, 14 Jun 2013

Friends of mine who work in universities tell me there has been a noticeable change in the relationship between students and their tutors since the coalition government allowed fees of up to £9,000 from last year.

When I was at university in 2000, nobody paid more than £1,000 a year. And those of us from lower-income families didn’t pay anything at all. The result of this was many of us were not always too concerned if the quality of tuition was a bit ropey, or if the lecturer was a bit worse for wear in afternoon seminars after having a liquid lunch.

However, students are now forking out up to £27,000 for their degree tuition – a serious investment. Because of that, I am told, they expect a lot more quality for their money and are more ready to complain if they feel the service is not up to scratch.

I was reminded of all this earlier in the week when it emerged that the issue of regulatory fees for housing associations is back on the agenda.

The cash-strapped Homes and Communities Agency regulation committee is scratching its head and working out how on earth it can regulate a rapidly changing sector with scant resources. As Inside Housing reveals today, the committee is now drawing up proposals for a system of fees. This is to enable it to regulate more effectively with more independence from the Communities and Local Government department.

Early indications are that most housing associations would welcome this if the fee system is fair on smaller providers and if there is a guarantee the income will be genuinely an extra resource for the regulator.

However, a number have said they would expect higher quality in return. Under a fee system, associations would be more likely to seek assurance they are getting their money’s worth, a bit like today’s students and their university courses.

An additional consequence of the fees idea is that the regulator itself could come under more scrutiny from associations – and that can only be a good thing.

Risky business

Fri, 7 Jun 2013

When the Homes and Communities Agency launched its discussion paper in April, its regulation committee chair Julian Ashby said he looked forward to ‘an intensive dialogue’ about the proposals.

It is now becoming clear that housing associations are very much up for talking about the regulator’s plans, and not all of it is complimentary.

Over the last fortnight both the National Housing Federation, and now Placeshapers have voiced concerns over the regulator’s approach, with the harshest criticism reserved for its ring-fencing ideas.

Under ‘ring-fencing’ providers will be expected to carry out social housing activity in a specific body with its non-social housing activity limited to a percentage of turnover. There would also be limits placed on using social housing assets as loan security.

The NHF has raised concerns that the ring-fencing measures could be unduly restrictive, while Placeshapers this week called on the regulator to scrap them entirely.

Placeshapers argues the need to comply will be costly and could lead to re-pricing of loans by lender. It also says the real threat to organisations assets comes from social housing activity itself.

With this, they definitely have a point. Welfare reforms are likely to weaken organisations’ income streams, which could damage businesses if not managed correctly.

More importantly though is the simple fact that reduced grant funding is pushing organisations to borrow more and more money to fund development, which could in itself lead to risks further down the line. Inside Housing’s revelation this week that the Treasury could look to limit rental income for non-developing landlords would also send a message that the government expects landlords to take risks.

With all this uncertainty relating to social housing itself, it is difficult to see how ring-fencing would help, and I suspect the measures are intended to help regulate for-profit providers and providers with unregistered parents as opposed to ‘traditional’ associations.

Placeshapers suggests the ring-fencing should be scrapped in favour of tougher recovery planning requirements, and perhaps a support fund. Under the fund idea, landlords would be required to put some money (perhaps £1 per property) into a HCA-run fund. This would then be used to ensure stricken landlords can cover their revenue costs until they can be rescued. It is an idea worth looking at.

A better idea though, could be to simply charge for regulation. Fees for regulation, assuming the money is spent on resources, could enable the regulator to increase its staffing, thereby helping it cope with the new operating environment and complex structures made possible by previous Labour government’s reforms.

The HCA will now look at the responses and spend the next few months working out what proposals to consult on later in the year – providers will be waiting interestedly to see what form of ‘ring-fencing’, if any, makes it to the final document.

Time to reconsider

Fri, 24 May 2013

Tenants affected by the bedroom tax have been given a fair amount of advice of ways to avoid or cope with the average £14-a-week penalty.

Take a job (if you can find one), take in a lodger (if you can stomach a stranger in your house), downsize (if your landlord happens to have a spare, smaller property) or alternatively apply for money from the hopelessly oversubscribed discretionary housing payment pot. The other option is to move into private renting and pay higher rent.

None of these options are particularly attractive and in some cases won’t be viable for those affected.

So instead, landlords are looking at what they can do in terms of helping tenants into work and budgeting advice.

One option floated initially and then dismissed was the reclassification of properties. Under the bedroom tax regulations, it is left to landlords to describe the number of rooms a property has in line with the rent charged. This means landlords can re-designate properties as having fewer bedrooms to avoid the charge.

The downside of this is that it hits rental income and could give landlords problems with their lenders where properties are used as security on loans. For this reason, most landlords have until now shunned this idea. A National Housing Federation survey of 220 landlords published earlier this year showed just 10 per cent are considering it.

However, comments from Professor Steve Wilcox last week may just make landlords think again. The respected academic believes the hit on rental income will be ‘very limited’ and would be worth taking, given the hassle and hardship caused by the bedroom tax. He said the rental income hit could be as small as 0.2 per cent if a landlord has one in 10 properties affected by the under-occupation penalty.

Professor Wilcox’s used a complicated formula to come to this conclusion, and in truth the viability of reclassification depends on loan agreements.

But as applications for DHPs rocket and tenants struggle to pay the bedroom tax the professor’s words might just be enough to make landlords take a second look at the reclassification option.

Rocky road

Fri, 17 May 2013

After months of debate and speculation the first real impacts of the policy widely known as the bedroom tax are beginning to be felt.

As Inside Housing has revealed over the last fortnight, two widely predicted impacts of the policy appear to be already happening.

Applications for the government’s £150 million discretionary housing payment pot have gone through the roof as affected households find they can no longer cover their rent

And the first indications from large housing associations about arrears show that those affected have struggled to pay their rent since the under-occupation charge came into effect on 1 April. Most worrying is the high numbers of people who have not paid anything at all to cover the shortfall (up to half of affected tenants in some cases).

So what does this all mean?

Many of the landlords I spoke to this week stressed that it is early days to draw any firm conclusions. There are inevitably some tenants, despite all the media attention on the policy and attempts by landlords to raise awareness, who were taken by surprise by the deduction in their benefit.

Others will have been slow setting up direct debits. The consensus seems to be that the numbers of non-payers will reduce as the policy settles down and therefore the appropriate time to judge the impact will be in a few months time.

Nevertheless, the figures are worrying and suggest landlords have some difficult choices to make in future about how to best protect their income stream. How much extra resources should they devote to income collection? Should they take a firmer line on arrears and use the ‘nuclear’ option of a ground 8 possession order?

The fact that the Department for Work and Pensions this week announced an extension of direct payment demonstration projects suggests that it too is concerned. Although the DWP’s press statement did not mention the bedroom tax, Lee Sugden, executive director of resources at Wakefield and District Housing, said the impact of the bedroom tax and other welfare reforms was the reason for the extension.

We are a long way from knowing whether ‘can’t pay, won’t pay’, the slogan of anti-bedroom tax protestors, will come to fruition – but the bedroom tax has undoubtedly had a rocky start.

Tough at the top

Fri, 19 Apr 2013

It is now more than a week since the Homes and Communities Agency published its proposals for regulating a diverse sector.

Housing leaders up and down the country are looking at the array of proposals and trying to work out whether the plans will make it more difficult for them to fund affordable housing.

The proposals seek to protect social housing assets being threatened by risky or unregulated activity.

I’ve tried to summarise the proposals and give a flavour of the early reaction to the regulator’s new approach here.

The regulator’s ideas are not sketched out in any detail - the HCA document is a merely a discussion paper asking for feedback on its broad approach.

However, one aspect is very clear, and has not really been talked about at length so far and that concerns the role of housing association boards.

The HCA makes it clear there will be no hiding place for boards under the new regime. Boards will be required to take responsibility for signing off financial forecast returns, this follows ‘deficiencies in data’ the regulator has received from landlords.  The regulator will also introduce measures to ensure boards are independent and strong enough to enforce intra-group agreements to protect social housing assets. The HCA will look for ‘significantly more assurance’ that boards understand exposures from non-social housing activity.

This focus on boards has been broadly welcomed, although there is a strong argument that boards of well-run organisations should be doing all of this anyway.

But the fact the HCA clearly feels the need to bring in extra requirements to strengthen boards suggests that not all of them are as effective or as strong as they should be.

This therefore could mean we see a move towards more professionalised boards and could even in the long term re-open debates about levels of pay for board members. Bedfordshire Pilgrims Housing Association’s decision to bump up pay for its board by 40 per cent, in contravention of National Housing Federation guidelines, caused outrage in February.

BPHA cited the changes to associations’ operating environment, including deregulation and cuts to government grant, as the reason for increasing board pay. It might just be that BPHA’s decision to increase board pay, presumably as an incentive to force its board to be more professional and effective, might not look quite as outrageous when the regulator’s final plans come into effect.

Lasting legacy

Fri, 12 Apr 2013

It feels a bit late to be writing a piece about Margaret Thatcher, given the huge amount of column inches dedicated to her this week (and rightly so).

When it comes to housing, the rights and wrongs of the right to buy have been much discussed.

More overlooked however was the Housing Act 1988, which allowed associations to more easily raise private finance.

Since then successive governments have overseen a massive drop in grant funding. Before1988, around 90 per cent of the cost of building new affordable homes was met by the public purse. Over time this has been diminished and the government has required associations to meet more of the costs itself through bank debt, bonds or cross-subsidy from commercial activity. 

Many in the sector are expecting little if any grant funding next time around and the government is likely to be more reliant than ever before on associations’ using their own balance sheets to fund new sub-market homes.

Labour’s 2008 Housing and Regeneration Act, which allows for-profit providers and unregistered parent companies, in this context can be seen as an extension of Baroness Thatcher’s policy.

The government is giving providers more tools than ever before to enable them to be more innovative and attract private finance with an understanding that there is little grant around.

This has left the social housing regulator scrabbling around working out how on earth it can protect social housing assets in a sector growing increasingly complex without stifling innovation.

It is ironic that Baroness Thatcher has died in the week when the HCA published its discussion document outlining ideas for a new approach. The big questions and dilemmas raised in the paper have emerged as a direct consequence of Thatcherite policy.

Attacking the poor

Thu, 28 Mar 2013

Well it is almost here.

After months of debate, protests and reports of heart-wrenching case studies, the government’s policy of cutting housing benefit for social tenants with spare rooms is due to come into effect on Monday.

The policy is known by many different terms; ‘size criteria in the social housing sector’, if you are the DWP, ‘the spare room subsidy’ if you are David Cameron, or ’under-occupation penalty’ if you are Lord David Freud. The term ‘bedroom tax’ is still, to my mind, the best term to use because it is effective shorthand to convey the idea that this is in unavoidable charge on existing bedrooms, although I concede that technically it is not a tax.

The government’s welfare reforms are varied and far-reaching and history will judge whether they will bring fairness into the welfare system or will have been simply an attack on the poor.When it comes to major changes aside from the bedroom tax, I have a certain amount of sympathy with what the government is trying to do. The move to simplify benefits through a single universal credit feels like an idea whose time has come, indeed Labour was planning to do it before it was shelved by Gordon Brown.

Making the benefit system more simple to understand and attempting to smooth off the tapers so claimants can see more clearly that it pays to work are commendable aims. Removing the choice from tenants to have their benefit paid direct to landlords also has to be the right policy, regardless of the inconvenience it will cause to the social housing sector. It cannot be right that people do not have to think about their rent. It cannot be right that some people are not even aware of how much their rent is or how much they receive in benefit.

Yes, there will be some who struggle to manage their money, and there needs to be support to help them, but do we really think so little of social housing tenants that we don’t trust them to manage their money like we do everyone else in society? That to me is nothing short of demonization and stereotyping based on tenure. Or is the sector saying that social landlords are so incompetent at collecting rent they need the money to be paid to them directly?

In any case, until the early 1980s, tenants did receive benefit direct and social landlords managed to collect their rent. The overall benefit cap is a little trickier to assess – there probably is a case for a cap, although whether it has been calculated fairly I’m not convinced. Local housing allowance caps however will simply force large numbers of the poor from our cities and are a consequence of a shortage of housing supply more than anything else.

When it comes to the bedroom tax - there can be absolutely no justification for it. The government says it will lead to people downsizing, but in the same breath says it is needed to save money. The government will only get the savings it says it needs if the poor cough up. The government is telling some of the poorest people in the country, two-thirds of which are disabled, that they have to pay extra money if they have a spare room. This is regardless of whether they are able to move .

More important perhaps, is the fact people don’t want to move. Many of the people affected are older people whose children have moved out. These are people’s homes and many would do anything rather than move from places with memories. The case of Margaret Lewis, who is being taxed on a bedroom which once belonged to her son who died at Hillsborough, is just one example of this.

The bedroom tax is simply an attack on poor, disabled people, many of whom will have no choice but to pay. Most will forego other things, such as food or heating to cover the shortfall in their benefits. The danger for the government is that this immoral and unfair policy will overshadow any good its wider welfare reform agenda will do for the nation.

Marching on

Fri, 8 Mar 2013

‘Can’t pay won’t pay!’ is the cry coming from many of the anti-bedroom tax protestors in Merseyside.

Summoning up the spirit of the mass non-payment of the poll tax in the late 1980s, campaign groups and tenants say they will refuse to pay. The similarities with the poll tax do not end there.

The Thatcher government’s policy, which replaced the system of rates with a flat tax on every adult, was dubbed the ‘poll tax’, even though its official name was the ‘community charge.’ The name stuck, partly because it is pithy, brutal sounding and descriptive – people get their idea it is a tax ‘per person’.

Similarly, ministers hate the term ‘bedroom tax’, preferring the bureaucratic ‘social housing size criteria.’ Everyone now knows it as the ‘bedroom tax’ however, and the phrase again is simple and descriptive.

So protestors of a certain age believe there are similarities with Thatcher’s most hated policy.

There are crucial differences as well.

The poll tax was genuinely a tax rather than a reduction in benefit. This means it is technically not possible to refuse to pay the bedroom tax as it will come out of entitlement automatically.

What tenants really mean is they will underpay their rent to make up for the equivalent loss through the bedroom tax.

This is making landlords, who are already fearful for their rental income because of direct payment, even more nervous.

One Vision Housing has gone as far as asking tenants to sign disclaimers accepting they will be hit with legal action if they don’t pay their rent. Most landlords I spoke to at the Chartered Institute of Housing south east conference in Brighton this week said they would considering using ‘fast-track’ evictions under ground 8 of the Housing Act 1988 for tenants not paying their rent in extreme circumstances.

It is too early to tell whether there really will be mass non-payment of rent as a result of the bedroom tax. But landlords are clearly nervous, and the government, which is looking to landlords to use their revenue streams to build much needed housing, should be nervous too.

Overdue overhaul

Fri, 1 Mar 2013

This week’s comments by Moody’s on the creditworthiness of housing associations were momentarily striking but in reality not that important. They certainly should be seen as a comment on the effectiveness of the regulator – and here’s why.

Moody’s downgraded the sector’s credit ratings, along with all other sub-sovereigns, as an inevitable response to the downgrading of the United Kingdom’s rating.

It also threatened to downgrade the sector by ‘multiple notches’ and murmured about a ‘weaker regulatory framework.’

On a superficial level this seems important, but it should not be seen as significant or unexpected.

Moody’s approach to date has been to assume the government, via the regulator, will bail out an association if it gets into trouble. This has never happened, but the implicit assumption that this will happen has always been there.

However, the then Labour government’s Housing and Regeneration Act 2008, which allows for-profit providers and associations to have unregistered parent companies has changed thing somewhat. This legislation was aimed at ultimately getting more innovation into the sector and making it more closely resemble the commercial world.

The upshot of this means that the regulator, cannot necessarily regulate whole groups. The situation would have been the same even if the regulator was still well-resourced and the Tenant Services Authority not been scrapped.

This is why the regulator is now focusing on mechanisms to protect social housing assets, as opposed to protecting the landlords themselves.

Seen in this context it is perfectly understandable that Moody’s is changing its approach. The only puzzling thing is that it has taken so long.  The potential downgrade is a result of Moody’s belatedly realising the sector has changed, it is not because of recent developments in the sector or the new regulator’s approach. It may have taken the Cosmopolitan saga to make Moody’s realise this, but they have nevertheless been slow to cotton on.

Many of the housing figures I’ve spoken to this week seemed pleased Moody’s is doing this. It means it will base ratings more on individual organisations’ governance rather than on a lazy outdated assumption that the government will bail organisations’ out. As Steve Douglas, partner at Altair, said, this is a more ‘mature’ approach by Moody’s.

In broad terms housing associations are becoming more like commercial entities and so will be rated more like commercial entities. In the commercial world there is much more fluidity around ratings so we can expect much more of that in the social housing sector too.

Will a downgrade have much of an impact in any event? None of the several housing figures I spoke to this week seemed concerned by it, and the subject was not even mentioned at the National Housing Federation leaders’ forum.  ‘Nobody cares about it,’ one leading consultant said.

That may be going slightly too far. But if credit rating agencies are basing ratings more on the individual landlords’ abilities rather than lazy assumptions that should be a good thing overall.

Shift in thinking

Fri, 22 Feb 2013

‘Social housing is the only sector that does not enable… movement across local authority boundaries,’ according to a paper discussing the possibility of a new national mobility scheme which emerged this week.

The document, published by landlords looking at launching a new home-swap scheme, suggests the restrictive nature of social housing prevents tenants from easily moving to find work or to find cheaper accommodation.

The landlords, which include Circle and Islington Council, believe benefit caps could also create demand as tenants seek cheaper housing. The landlords insist that the scheme is not merely to solve welfare problems, and could help people who want to live in London for work purposes.

The danger nevertheless remains that the scheme is seen as an attempt by London councils to solve their housing problems by persuading tenants to move to other areas of the country.

A number of other stories this week illustrate the strain on some London boroughs. Westminster Council, which increasingly has to place people in bed and breakfast accommodation due to a lack of affordable temporary accommodation, is now looking to build in other boroughs. Its plan to build homes for its homeless households in Tower Hamlets has already incurred the wrath of other landlords. Similarly, the BBC reported this week that Kensington and Chelsea is in talks about building homes for people in Peterborough.

Boroughs are faced with instructions from the Communities and Local Government department not to house people too far away from their boroughs and not to place families in B&Bs. Yet benefit caps are reducing the already dwindling supply of homes for people to be placed in to.

Ultimately the problem is one of an unbalanced economy. The economy, as Nick Clegg rightly said this week, is too focused on London. People flock to London for work, which drives up demand and rents. Wages have not kept pace with the increase in living costs, so the housing benefit bill has increased. The government then caps benefit in the name of fairness, but has effectively removed whole chunks of housing which could have been used by councils to house people.

The National Mobility Scheme is an idea worth looking at –although I suspect it might be too one-sided. Several landlords in lower demand areas have already said they don’t think their tenants will be interested in moving.  However the NMS will only paper over the cracks, we need to rebalance the economy and take some of the heat out of London’s overheated housing market. 

Shooting the messenger

Fri, 15 Feb 2013

‘The landlords will be asked to be the tax collectors,’ warned the prophetic Lord Richard Best in parliament last year.

The crossbench peer, as part of his unsuccessful attempts to halt the bedroom tax last February, stressed the difficulties housing associations and councils would face when they go about the business of getting rent off tenants facing cuts to their benefit.

Nobody likes tax collectors. And many landlords must be worried that angry residents will shoot the messenger rather than targeting the government.

What few people could have predicted is that landlords would be targeted even before the policy came into effect.

The mood against the bedroom tax is particularly strong in the north west, which was always going to be one of the regions hardest hit. The government estimates a sixth of people affected by the measure overall, 110,000, will be in the north west. This is because the area has large numbers of family-sized houses and relatively few smaller homes for people to downsize into. Liverpool Mutual Homes estimates even if all its affected tenants agree to downsize it will take seven years for them to re-house them.

It is not surprising that anger is rising in the region and a series of protests are scheduled over the next few weeks.

Instead of targeting the government which implemented the policy, or the offices of MPs who may have voted for it, protests are taking place outside the offices of housing associations and councils. LMH has already seen a protest at its offices, while One Vision and West Lancashire Council are also being targeted.

Activists accuse associations of not doing enough to help their tenants cope with the average £14 per week reduction, while others accuse them of being ‘complicit’ in the introduction of the penalty by stressing the need of tenants to pay the rent. The Combat Bedroom Tax blogspot accuses associations of coming ‘knocking for this grubby government.’  The response of north west landlords to all this has been interesting. LMH has put out a number of press releases stressing the impact of the bedroom tax on its tenants while Knowsley Housing Trust has decided to reclassify properties – although KHT dubiously claims it would have done this anyway.

Housing associations are now caught between a rock and a hard place. As businesses they need to collect their income, and the shift from capital grant funding has made rent revenue more important than ever for funding the building of homes.

Wide-scale reclassification of properties as smaller homes to help people escape the bedroom tax is not possible. The resulting drop in rental income, and the impact on existing agreements, means this is not really a viable solution. And expecting landlords to simply cover the cost is also not a realistic option financially.

That leads associations and councils in a position where they do indeed have to be the ‘tax collector’.

It is not a position they want to be in – and I can’t help but feel people’s anger should be directed more towards the government.

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