Thursday, 05 March 2015

Landlords stuck in affordable rents stand-off

Deadlocks between housing associations and councils over rent levels are threatening to derail the £1.8 billion affordable homes programme.

Councils, housing associations and the Homes and Communities Agency were due to meet yesterday in an attempt to avoid a damaging showdown over the issue.

There are now around a dozen councils in London, as well as a small number of authorities elsewhere in southern England, which have raised objections to the rent levels agreed between associations and the HCA in return for development cash.

Under the scheme, which allows landlords to charge up to 80 per cent of market rent on new homes and some re-lets, councils can veto schemes they are unhappy with.

This caveat has led to fears that some associations’ development plans will be scuppered or delayed if councils stick to their guns. The first contracts were due to be signed in July, but to date just five successful bidders have signed on the dotted line.

James Tickell, director at consultancy Campbell Tickell, said landlords were waiting to see ‘who gives way first’ in the stand-offs. He added: ‘Councils have to choose whether they want expensive homes or no homes.’

The G15 group of housing associations was due to use the meeting with the Greater London Authority and London Councils yesterday to express their concern.

Brendan Sarsfield, chief executive of 20,000-home association Family Mosaic, said: ‘The big principle here is that we have agreed something with central government. For a local authority to then change that means we are piggy in the middle.’

Mr Sarsfield said decisions needed to be made quickly as the programmes is already six months in and payment is by results.

Keith Exford, chief executive of Affinity Sutton, said it is ‘impossible’ for associations to change their bids. He said councils are only now engaging with rent levels as they produce new tenancy strategies required under the Localism Bill.

Charlotte Harrison, director of policy and strategy at the Northern Housing Consortium said: ‘Some authorities have told us they felt they did not know what was coming forward.’

Nigel Minto, head of housing for London Councils, said: ‘Councils were only presented with bids in late August and early September. For them to be presented as delaying bids is unfair.’

Hitesh Tailor, cabinet member of housing at Ealing Council, said he is keen to see as many homes built for social rent as possible in the west London borough. Other councils, including Waltham Forest, are restricting rents based on property size.

A spokesperson for the GLA said it is happy to listen to thoughts or concerns about the programme’s delivery.

Readers' comments (16)

  • Ernie Gray

    The problem with this process is that the Councils have been on the outside of the affordable homes programme so whilst general conversations will have taken place between housing assocations and councils, no strategic agreement was ever reached on rent levels. The HCA are always banging on about the partnership with Councils but havenot agreed baord rent levels which can be signed off by executive memebers so hence we now have a mexican stand off in certain areas - ho hum

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  • F451

    Is this the age of localism?

    The local Council wants homes people can afford so that those who can not afford market rents can be housed.
    The developer wants to build homes using government grant so that they can max their profit.
    The Minister for Housing has based grant on the basis he has not a clue what real people can afford.

    So who will win the argument:

    The local people needing housing that they can afford.
    The developer wishing to maximise their profit.
    The Minister wishing to prove that it is all someone elses fault that his hairbrained notions can not work in the real world.

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  • Arthur Brown

    I though the whole point of "the single conversation" was that everybody did what they were told by the HCA?

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  • Gavin Rider

    this whole dispute demonstrates how pointless it is to try and impose a standard value on something (i.e. what is "affordable") while simultaneously relating it to the open market value. You can't do both, it has to be one or the other.

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  • Joe Halewood

    Some detail and natioal average figures may help to explain the situation.

    Gross Market Rent is £164.55pw
    80% of this is £131.64 - the so-called Affordable Rent
    LHA paid to private landlords is £113.78
    HA average HB in-payment is £80.11
    Council housing HB in-payment is £71.14

    AR is higher than LHA paid to PSLs
    From council house to AR is an 85% increase
    From HA rent to AR is a 64% increase

    In all cases whether the AR tenant was previously a council, HA or private tenant the HB bill must increase.

    The AR model is therefore not affordable to any form of tenant or to the country as 80% of gross market rent will ALWAYS increase the cost.

    The GmR figure is based on the £713pcm national average rent without service charges and the definition of GMR in the Affordable Homes Programme Framework document (see 3.13) says this needs to be included on top of this. As such the £164.55pw figure used above is less than the real GMR and so when it includes all service charges it is higher and so is the 80% figure and so is the overall HB bill.

    None of these are affordable to anyone and that is the issue with this proposed model. Shapps believes it will be cost-neutral (see Guardain 31 March 2011) as an AR tenant he claims will be paying more now if a private tenant. The above figures disprove that and evn if all 170,000 of the new AR tenancies were all ex-private tenants paying the 80% the HB bill would increase £118m per year.

    The figures reveal that the AR model simply doesnt stack up financially and is fundamentally flawed.

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  • Alpha One

    So where do me magic the money from to build more social rent?

    The simple fact is that there is not enough cash to be building social rent, where income from them is insufficient to build further housing, thereby meaning HA's either have to find another way to cross finance the builds or they need more grant.

    As there is no more grant that leaves finding alternative finance.

    Councils have to accept that the affordable rent is the only way to provide sub-market rents that can cross finance other building projects.

    This means that Councils must allow affordable rents in order to get other forms of home ownership and rent in their boroughs.

    Quite frankly Ealing's stance, and that of many other Councils, is just childish, it fails to understand reality (i.e. that there is not the money to continue as before) and seems to think that money can just be found from somewhere.

    This is the thing that we ALL have to realise, we've been living on credit for far, far too long, we need to bring down our spending so we can afford the services we use. In the long run it will be better for us as we won't have to pay the interest on the credit we have now, and that means there is more money to be spent on the things that matter. If we kept on the path of borrow and spend, we would be in the same place as Greece, Italy and Spain, teetering on the edge of bankruptcy.

    We needed to bring finances under control and that is what has been done. Sadly this means less money for everyone.

    And before everyone says tax the bankers, make them pay, can I just point out that they are already paying and the more you demand from the more likely they are to find ways to avoid paying.

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  • Janine Jarvis

    The trouble with localism is that some local authorities actually take it seriously and naively think they should be able to make local decisions based on local needs.

    They should realise that localism gives them the absolute freedom and discretion to do locally exactly whatever central government decides they should.

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  • This stand off has been a long time least since the coalition announced their 'affordable' rent programme. The impasse brings into sharp focus the gap between Grant's definition of 'affordable housing' and the council's legal duty to define what is actually affordable. As Joe Halewood identifies there is a gap in the model.

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  • F451

    Alpha - you went through a phase of being so on the ball - have you been grabbed by the Shapps tendency and brainwashed?

    Where could the money come from considering the near bankrupt country the Coalition took over (that's what they told us at the time remember) is now borrowing more and producing less - does that make us bankrupt now? There is not less money for everyone, there is simply less money for the majority - the top 1% have never had it so good Alpha!

    We are currently borrowing hand over fist to pay LHA on inflated private rents because there is not enough affordable housing. The Minister wants to borrow more to fund higher HB on his 'un'affordable rent product. So we are borrowing and borrowing to pay charges, when instead we could be borrowing to provide bricks and mortar assets that we continue to own and that will produce a steady income, just as social housing used to before some Burkist thought it a good idea to sell them off and spend the proceeds on one-off tax giveaways.

    Why anyone in their right mind would want to borrow to make the problem worse rather than borrow to invest and then have the opportunity to pay back the borrowing is unbelievable.

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  • BlokeWithAConscience

    The money for social housing would come from councils borrowing against their existing housing just like HAs do. Then council land is used for council housing at real affordable council rents - simple really!

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