Thursday, 28 August 2014

Councils fear increased debts will make it hard to maintain their stock

HRA reform prompts wave of stock transfers

Housing revenue account reform is prompting councils to sell off homes in a new wave of stock transfers.

From the end of this month, local authorities will be able to retain rental income in return for taking on a combined £30 billion of debt from central government as part of a 30-year business plan.

But some councils say they are concerned by the level of debt they are taking on and fear rental income will not be enough to cover maintenance costs to their stock.

Speaking at the Tenant Services Authority board meeting last Wednesday, Anthony Mayer, the regulator’s chair, flagged up the prospect of more stock transfers as an ‘orange light’ for the new Homes and Communities regulatory committee as it must ensure decisions to transfer do not affect organisations’ viability.

Jonathan Walters, deputy directory of regulatory operations at the TSA, said there was ‘anecdotal evidence’ that HRA reform was causing authorities to consider stock transfer.

The watchdog last week approved the registration of South Lakes Housing - formerly an arm’s-length management organisation - as a housing association to receive 3,155 homes from South Lakeland Council, in Cumbria.

South Lakeland will take on £69 million of debt from 1 April under the HRA reform and says the debt means it will be unable to deliver improvements and maintain homes without delays to work.

Similarly, Northampton Council, which will take on £193 million of debt under the new system, agreed last week to put £1 million of funding into examining whether to transfer some or all of the council’s 12,000 homes to a housing association. Also, Rochdale Council is expected to transfer its stock to its ALMO, Rochdale Boroughwide Housing, by the end of March on the back of HRA reform.

Readers' comments (11)

  • michael barratt

    Since Thatcher's time the political classes have been 'hell bent' on destroying the institution of council housing because it has been successful in bettering the lot of the low paid especially in terms of conditions and security of tenure since the 1920s. Collectively the political establishment presently seek to introduce 'flexible' or insecure tenancies and make the housing of former council tenants a profit centre activity in the private sector along with the privatisation by stealth of health, education and 'social' services.

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  • Rick Campbell

    11 properties (bungalows) have just been transferred to my landlord (100% YES BALLOT) from another landlord. These properties are in my landlord's gegraphical area rather than the original landlord's area.

    My landlord is spending a vast amount of money (without breaching any confidentiallity) -- well in excess of £20k per property to bring them up to our standards.

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  • Chris

    The 'problems', as seen by our ruling elite, of the 1960's and 70's was that with so many working class people in secure accomodation that they could afford they got all uppity and argued for better pay and conditions, and were confident in their struggle and prepared to strike, sure in the knowledge that they were not risking their homes.

    In short - working people were empowered to demand a fair return from their labour, or withdraw it if the return was not fair. The removal of that power has already been achieved, but like all psycopathic driven behaviour the Tories will not rest until all traces of social housing have been exterminated. It is their final solution!

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  • HRA changes should not induce transfer. All the business plans are based on rents, with convergence within the next four years between municipal and housing associaiton levels, sustaining a certain amount of debt. Privatisation via LSVT means that the new owner has to clear all that debt as government says there will no longer be any 'dowries' to cover shortfalls between receipt and debt.

    Therefore, how is it that a given rental stream is seen as being unable to support, to use an example, £193m of HRA public sector debt but can support £193m of non-HRA private sector debt? I appreciate that housing associaitons are not bound by PSBR-supported rules on borrowing, but no borrowing is free. By leaving the public sector, they can indeed borrow more but so the rents they chargewill need to reflect the cost of that borrowing. I smell a rat here. A rat called ALMO CEOs and senior managers seeing a chance to movce away from being accountable public sector landlords and to avoid the termination of ALMOs and housing management being returned to an 'in-house' service.

    ALMOs were an answer to a question that in a sane world would not have been asked - there was never any logical or empirical reason why local authorities could not have been allowed to invest in their stock. The ALMO model was arguably seen as a stepping stone to privatisation for those areas where tenants, residents and many officers and elected Members did not wish to lose democractically accountable, efficient public sector housing.

    The raison d'etre for ALMOs is over. We no longer need the excess management costs of CEOs, HR teams, finanance officers etc. Councils could retain the ALMO boards as the basis for new style housing committees if they wish to introduce people outside of the council into stratergic direction. That can easily be done without the panapoly of the arguably unnecessary and expensive management structure that prevails in ALMOs. The new style committees simply instruct the directly employed council workers to deliver theservices they feel are right for tenants and communities. The staff could of course be multi skilled and flexibly deployed (a la Birmingham with housing and library officers flexing across services to meet demand - an option that is not easily possible with an ALMO) which wouldmnake it easier to create neighbourhood based service structures and save costs across the public sector. How many local authority CEOs are paid as much as ALMO or housing association CEOs forexample? Not as many as we may think I suspect...

    For anyone in the municipal sector living or working with an ALMO, who values the opportunities HRA chanegs give to develop efficient management and posisbilites like new Council homes (an ALMO CEO and senior management team can easily soak up the cost of between five or ten new homes a year, depending on area) on guard!

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  • Rick Campbell

    Municipal housing is not always the best --- neither is housing association housing.

    Dogma driven councillors cost tenants a lot.

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  • May be a bit of a yawn but when people fall asleep the world is changed around them. The concept of now free debt is sadly not one that is explored enough. The private sector does not give money away. There is always a price to pay. £1 of rent can only pay £1 or debt and service charges. Surely increasing thecost of that debt is not the best way to provide a service? And efficiencies are not confined to the private sector. I know. Worked in both secotrs.

    There are goodand bad councils and the same for housing associaitons. However, the differencewith councils is that you can change things. How does a tenant or a member of a community change a housing association board? They can't take their businesselsewhere in many cases. So where's the accountability?

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  • Rick Campbell

    Members of the housing association ("the company") can exercise their right at an AGM or EGM to vote on a motion of no confidence and change the Board -- can't do that with a council!

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  • Hi Rick C,
    No they can not, there are no effective members of a HA they are normally puppets appointed, like the Board, undemocratically by the council that effects the Transfer. your right, council or HA control are not allways effect and like Almo's they are all undemocratic.
    Which is why tenants should be pressing, to be offered the alternative of a fully democratic Housing Co-operative. no they are not perfect but they are vastly better than all the other options.
    Give the tenants the real choice of collectivly owning and manageing their own properties.

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  • Rick Campbell

    Perhaps we're just that bit different here, as our company members are not appointees, (although they are pproved) they ask to be members and to the best of my knowledge all that have applied are members.

    The members that I know (and I know most of them) are more stroppy than I am.

    If there are other HAs with puppet members then even they can turn on the Board.

    I agree JB, Co-ops should be offered as part of the choices as landlotd. Co-op tenants who I know recommend the Co-op model unreservedly.

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  • Sorry Gresley, you've misunderstood the situation. The transfer in South Lakeland (3155 houses) avoids the debt of £69 million. Without transfer the Council will have a debt of £83.5 Million to be serviced and repaid from rents. After the transfer (which took place last Monday) South Lakes Housing has a debt of £20 million to service and repay. There are various costs of transfer, including a government levy, but ultimately the tenants have saved just over £60 million.

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