Southwark Council agrees to first self-financing TMO
A tenant management organisation in London is set to become the first to keep its rental receipts following council self-financing reforms.
In a groundbreaking move, Southwark Council has agreed proposals that will allow Leathermarket Joint Management Board to keep rental income from the properties it manages. This would be a permanent arrangement.
If approved by communities secretary Eric Pickles, Leathermarket JMB will become the first self-financing TMO in the country. TMOs do not usually keep rental income but negotiate an allowance with councils every year.
The change mirrors the £29 billion reforms of the housing revenue account, which saw councils take control of their rental income for the first time this year.
Under the Southwark proposal, Leathermarket JMB, which manages 1,451 homes on behalf of the council, will forego its allowance for 2013/14 of £2.4 million but instead be able to keep £6.6 million of rental income. In return it will have to pay £4.2 million to service debt associated with the properties, cover depreciation costs and pay for council services.
Initially, this will leave the TMO no better off financially, but it will benefit in the short to medium term as rent income rises faster than costs, the council said. The proposal is being implemented in ‘shadow’ form in 2012/13, before being rolled out in full from April 2013.
It will give the TMO greater certainty over income, rather than relying on a negotiated allowance subject to change, and means it can put together a 30-year business plan, according to John Paul Maytum, chair of Leathermarket JMB.
Mr Maytum added: ‘Residents want a TMO to manage stock in a different way from the council and this will give us more freedom to do things.’
Trevor Bell, co-ordinator at the National Federation of TMOs, said other TMOs would be watching with interest. ‘It is another option in terms of finding independence,’ he said.
Mr Bell said the idea would appeal to tenants’ groups that want more freedom to manage stock but want to remain council tenants. There are 230 TMOs managing 85,000 homes. The council report said discussions with the Communities and Local Government department had been encouraging and the authority expects the CLG to support the proposals.
A CLG spokesperson said: ‘The government supports councils in giving greater say to residents on how they manage their housing services.’