Housing and Planning Bill
Further written evidence submitted by Councillor Philip Glanville, Cabinet Member for Housing, Hackney Council (HPB 154)
Further to my recent attendance at the Housing and Planning Bill Committee on 10th November, and the Committee’s request that I submit supplementary evidence which I have outlined below. For ease of reference I have included my previous evidence submission.
Hackney Council currently owns and manages 22,382 rented properties and 8,518 leaseholder and freeholder properties within the borough. The council has a waiting list of
11,036 households and over 2,000 homeless households living in temporary accommodation within Hackney, elsewhere in London and in some instances regrettably outside of London.
The Council will be reducing Council rents by 1% a year for the next four years following the Chancellor’s summer budget, and this will result in an estimated cumulative £100m loss after 7 years and £725m over the next 30 years for the Council’s housing revenue account. Resources which could have been spent improving services, undertaking repairs to stock and building new homes.
The proposal to introduce forced Council house sales, is in an environment where the Council is seeing increasing homelessness, increasing temporary accommodation costs, overcrowding with the potential for stock and income reductions, increased rent collection costs (through pay to stay). It is in this context that the Council, is seeking to take forward its housing regeneration programme and is proposing a range of exemptions to the proposed forced Council housing sales regime.
The Council’s submission focuses on six areas contained in the Bill.
1. Secure tenancies and the proposal to phase out of ‘tenancies for life’ (Government amendment)
2. Starter Homes
3. Forced sale of Council homes
4. Housing Association RTB
5. High income social tenants (aka pay to stay)
6. Measures to improve the private rented sector
1. Secure tenancies and the proposal to phase out of ‘tenancies for life’
I would note that the Minister tabled this significant amendment less than two days before the close of evidence submissions to the Housing and Planning Bill Committee.
The Council’s approach towards tenancy length (as outlined in the Council’s tenancy strategy) constitutes an important part of the Council’s framework for ensuring that affordable housing in Hackney continues to meet the needs of current and future residents, and that social housing in the borough continues to play a central role in helping achieve mixed, sustainable and stable communities in the borough. Particularly in a context of increasing economic uncertainty, steeply escalating housing costs and the overall lack of and declining supply of truly affordable housing within the borough.
The Council is very aware of the adverse impact that short and insecure tenancies in the private rented sector has on households and particularly families who are trying to establish a settled and stable residence in the borough. The majority of statutory homeless applications accepted by the council are as a result of households who are living in insecure and short term accommodation within the private rented sector being evicted by their landlord. The council would take a view that the government should be addressing tenancy insecurity (along the lines of the Council’s recommendations with its ‘10 Steps to a better private renting for tenants and landlords’ publication) within the private rented sector and the implications of this insecurity and not be seeking to increase tenancy insecurity within the social sector.
This measure if put in place will fundamentally undermine the Council’s scope to encourage people to move to smaller accommodation. The lack of local authority discretion on this issue with respect to tenancy time periods will significantly undermine individual Councils’ ability to address under occupation among their existing tenants who very often need to be incentivised to move to a smaller properties with a comparable tenancy.
In addition the Government’s proscription that tenants should be advised of the right to buy will effectively further drive right to buy and reduce the available stock and impede the Council’s ability to take advantage of any additional ‘churn’ within the stock that may result.
The Council is also of the view that the implementation of this centrally driven measure will result in an additional cost burden for Councils and would unnecessarily fetter Council policy discretion in managing their overall stock. The practical operation of this policy will increasingly become untenable as the council loses stock through the enhanced right to buy, the forced selling of council homes and the overall decline in new social rented homes being built.
In addition the council would recommend
· The amendment of Section 8 A(1)(b) removing ‘no more than five year’ and replacing this ‘with no more than 10 years’
· A new clause (4) to be inserted within section 81A. Stating ‘the length of a tenancy would be at the discretion of a local authority in instances where an existing secure tenant is part of a regeneration scheme or is under occupying their current property and are moving into a property that is two or more bedrooms smaller than their current property’.
2. Starter Homes
When I gave my evidence to the committee I expressed my acute concern that a presumption in favour of Starter Homes will result in no ‘affordable’ homes being built in Hackney. The DCLG consultation concerning the Proposed Changes to the National
Planning Policy’ have only sought to reinforce the concern I raised with the Committee.
At the outset I would question the overall value for money of the Starter Homes initiative and particularly the Government’s intention to spend £2.3 billion supporting effectively the delivery of only 60,000 starter homes, at an average grant rate of approximately £38,000 per unit.
This is in the context where quite recently registered providers have received on average half of this level of subsidy or in some cases less to build rented accommodation which would be cheaper and available to a wider range of households in Hackney. The Council would take the view that this disproportionate level of subsidy towards Starter Homes is yet another indication of the inconsistency and contradictory nature of the government’s overall housing policy. Aside from this I would raise my concern over the complete lack of Starter Homes eligibility criteria and that the discount is in perpetuity.
I would reiterate the Councils concern that a presumption in favour of Starter Homes and their definition as ‘affordable’, when they clearly they are not in the Hackney and London context. Shelter recently found that the average Starter Home will be unaffordable to families on middle incomes in a majority (58%) of the country by 2020. The figure in Hackney will be nearer the national figure of 98% of households on the National Living Wage (Shelter estimate) who will not be able to afford a Starter Home. A 20% discount would reduce the price of an average flat in hackney to £420,800 not far from the maximum selling price for Starter Homes. However a without a large deposit a household would need an income of over £100,000 pa to secure a mortgage on a Starter Homes at this price. In a context where 95% of households in social housing and 70% across the borough have an income of £30,000 or less Starter Homes are clearly not a viable or appropriate product.
Starter Homes will come at the expense of existing social and affordable rented homes, particularly in the light of the Minister top slicing of £1bn affordable housing underspend. It will mean diverting funding from existing Section 106 affordable housing obligations. At present local authorities can obliging developers to build low-rent homes as part of any large scheme, as the price of planning permission? In future, this subsidy will be diverted to fund Starter Homes instead. Essentially these homes will come at the cost of cutting the supply of truly affordable housing in Hackney and unnecessarily fettering the Councils’ ability to require low-rent homes from developers to meet the needs of Hackney residents. It will have serious and far reaching adverse consequences particularly with respect to the Council complying with its statutory homeless obligations and reducing the number of households (now over 2,200) living in insecure temporary accommodation.
3. Forced sale of Council housing
The forced sale of high value council homes and particularly those homes on newly built regeneration estates could mean that the council will have to sell on the open market, newly built homes which have been designated for social rent and shared ownership as soon or even prior to their completion. These disposals would be in the context where the Council has made long term commitments to tenants to stay in an area whose homes have been previously demolished.
These forced sales would take place in an environment where the number of households in temporary accommodation are, and will be steadily increasing. The Council believes the sale of higher value Council homes will result in steadily increasing homeless temporary accommodation costs, due to a steadily declining number of available lettings (and in the longer term a reduced number of housing association nominations due to housing association tenants exercising their right to buy) available to households residing in temporary accommodation.
Although we do not have key details of how the new policy will operate, based on the limited information available, we currently estimate that nearly 700 ‘higher value’ council homes could be sold in the first five years of the policy being introduced. We further estimate that the cost of the policy in terms of the use of additional use of temporary accommodation could be £17m over ten years in Hackney alone, 69% of which would be paid by DWP though Housing Benefit, and 31% by the Council.
In the longer run, this policy has the potential to wreck the mixed communities in Hackney, which the Council has worked so hard to support, and on which Hackney and the capital’s economic success depends. We are particularly concerned over the resale of forced sales properties to owners who are highly likely to let at market rent and, in particular, the potential for investment from buy-to-let landlords. Properties moving into the market rent sector from RTB would contradict the government’s stated aspiration to achieve greater home ownership and will increase housing benefit cost.
Hackney has an excellent track record in achieving housing delivery and is currently undertaking a major programme of redevelopment and regeneration across a number of housing estates and sites in order to improve local residents’ homes and provide additional housing to help meet current and future housing needs.
The Council’s 2,760-home, 18-site programme is already in its fifth year, and has a proven track record of delivery, unmatched by any other authority. So far, 201 new Council homes for social renting have been built, as well as 20 for shared ownership/equity, and 42 for private sale, with an estimated further 300 properties on site on the next twelve months.
In summary the forced sale of Council homes would result in: -
· Increased homeless temporary accommodation costs – due to declining Council voids and in the longer term steadily reducing Housing Association nominations
· Increasingly economically polarised communities and further increasing the 17% of neighbourhoods which were classified as highly deprived In Hackney in 2015.
· Scope for areas of the borough to be severely denuded of social rented housing.
· A reduction in the level of HRA borrowing headroom due to the disposal of stock which could adversely impact on the funding of the councils future housing regeneration program
· An overall reduction in the value of the HRA asset base which could result in increased council risk
· We believe the Bill and the subsequent regulations should be amended to take in to account the following
· Local authorities are exempted from having to dispose of stock where the number of households in temporary accommodation exceeds the number of annual lettings available to a Council.
· Clause 69 of the Bill should be amended to provide scope for local authorities to be exempted from a high value property sales programme where they have a long term, identifiable self-financing housing capital development programme.
· Local authorities are exempted from property sales where their current annual RTB sales exceed 10% of their available annual lettings.
· Local authorities are exempted from a property sales programme when they are located in an area of acute housing stress as defined by overcrowding, homelessness acceptances, high and increasing levels of household in temporary accommodation.
· All local authority new build properties built within the last ten years are exempted and exempted from any high value property formula.
· All current and future local authority voids on designated and proposed regeneration estates are exempted.
· Properties where a compulsory purchase order (CPO) has been agreed or is in the process of being designated or where Demolition Notices are in force are exempted.
· Specific property bed sizes are exempted where the number of households in temporary accommodation requiring that size exceed the number of available lettings in that bed size within a local authority area or the local authority area is expecting acute housing stress.
· Local authorities where an authority’s Strategic Housing Market Assessment (SHMA) defined housing need exceeds projected lettings and new supply
· Local authorities where the affordable housing programme grant funded projected new homes delivery (from housing associations) is less than 50% of the authority’s lettings ov er the period of the grant prog r a mme.
· In addition the Council would recommend that:-
In the context of 68 of the Bill(as defined by explanatory note para 357)Any lost homes must be replaced, like for like (particularly with respect to affordability and location)
4. Housing Association RTB
Hackney Council has a deep, positive and constructive relationship with the over 50 housing associations working in Hackney. We take the view the view that housing associations are significant and long-term partners working with the council not only to address housing need but also a range of other issues such as the support that some housing associations provide to Hackney residents who are workless.
However the Council is extremely disappointed that housing associations working in the Hackney (and elsewhere) were given just over one week and many felt pressurised by the government to commit to the NHF deal on right to buy. This pressure is particularly significant in the context where the ONS very shortly afterwards recommended that housing associations should be redesignated as public bodies.
We believe the statements made by Ministers represent a longer-term aspiration to largely de-regulate housing associations. The council is extremely concerned that the Secretary of
State’s proposed deregulation commitment to the NHF and in response to the Office of National Statistics (ONS) will impact adversely on all Council’s existing rehousing nomination rights to housing associations. Unless mitigation and safeguards are put in place this will of course place further pressure on the Council and undermine a range of Council statutory housing commitments resulting in quite possibly, legal challenge but also investigation by the Ombudsman with respect to the length of time homeless households stay in temporary accommodation prior to receiving an offer of appropriate accommodation.
Aside from the above the Council is acutely concerned that recent statements by the Mayor of London and the recent proposed amendment (to clause 67, page 28, line 7 tabled on 3rd November 2015) of the Housing & Planning Bill by Mr Zac Goldsmith MP, will result in only shared ownership homes being built by housing associations under the direction of the Mayor of London as replacement homes for those which are sold by Housing Associations under right to buy and that these homes will be built almost exclusively in outer London areas. This will result in a narrowing of the housing association ‘offer’ to prospective tenants as well as increasing pressure on housing associations to shift the location of council nomination rights (which are previously exclusively within the London Borough of Hackney) to out of area properties in other parts of London.
5. High income social tenants (aka pay to stay)
Hackney is the 11th the most deprived local authority area (source, ONS) in the country, whilst 70% of all households have an income of £30,000 or less (source, Hackney Council Housing Needs survey 2014). This figure increases to 95% for social housing tenants (source, Hackney Council Housing Needs survey 2014). This is in a context where house prices in Hackney have risen by over 60% over the past five years.
Hackney Council’s ambition is that no one is left behind in a borough that is comprised of mixed and varied communities. We support tenants aspiring to home ownership through the provision of shared ownership, with priority given to social housing tenants.
Through initiatives such as our Ways into Work scheme, the promotion of apprenticeships and traineeships, and our ‘Hackney 100’ scheme we are working to build capacity in individuals and families to support them and help them take advantage of education and skills training opportunities, and to help them find jobs.
However, we have concerns over the way the pay to stay proposals are structured and the criteria for defining a ‘higher income’. We firmly believe that pay to stay will act as a significant disincentive to work and aspiration. The policy is therefore contradictory in terms of the Government’s wider objectives. It is also based on removing what is referred to as rental ‘subsidy’ from so called high earners, but it is likely that the tenants affected are more likely in turn to exercise the RTB, which will entitle them to a significantly higher ‘subsidy’ in the form of a RTB discount at the taxpayers’ expense which could be over £103,000.
In addition to acting as a significant disincentive to work and aspiration we believe pay to stay would also result in significant additional housing benefit costs for the government. Far from being an income generator, it will actually cost the DWP to introduce the scheme and in this context we would give the following examples:
Example 1: Is of a couple of pensionable age in receipt of pension credit living in a 2 bed council property with their non-dependent son who works full time for the local authority. The couple’s income is £226.00 per week and the son’s Income is £565.00 per week. The rent for the property is £101.15 per week. The son’s assessed contribution to the rent is £93.80 per week, and on this basis the Housing Benefit top up received would be £6.35 a week.
After the introduction of pay to stay as proposed, the overall household income would be assessed as £41,132 per annum, with the result under trailed policy proposals that a full market rent could be applied to the property, resulting in the rent being increased to
£412.13 per week. On the basis that the couple’s income remains at £226.00 per week and the son’s income at £565.00 per week, with the son’s assessed contribution to the rent at £93.80 per week (the maximum) the Housing Benefit top up per week would increase from £6.35 week to £298.50 a week.
Example 2: If the son’s parents passed away and the son gained a promotion at work, increasing his income to £788 per week (just above the £40,000 threshold), and the rent could increase up to the market level of £412.13 a week - but the Housing Benefit entitlement would be nil. The son would therefore be £187 a week worse off as a consequence of work promotion.
From the above examples, it is clear that under pay to stay as proposed a significant proportion of the 7,439 Hackney tenants who are not currently in receipt of Housing Benefit will become eligible to claim it, resulting in a massive increase in the top line Housing Benefit Bill for the country and with little additional income generated to the public purse. The Council believes that this represents yet another contradictory aspect of the policy.
Whilst we understand it is the intention of the Department to introduce a tapering system we would observe for example, to reach a market rent a Council tenant who currently pays £434 a month rent for a two bedroom property will see their rent increase by nearly 300% to £1,700 per month. For a rent of this level to be ‘affordable’ the household would have to be on an income of at least £51,000 pa or more. At the proposed £40,000 threshold the rents would need to be held at £1,100 per month to remain affordable in the context of a third of gross income.
We would also question the evidence base and the rationale behind the £40,000 income trigger point, as well as the rent level for so called higher income households living in social housing. The Government’s impact assessment states that it is seeking to address the
£3,500 ‘subsidy’ social tenants are in receipt of, compared to private sector tenants.
However using the Hackney example above (this would be similar in many parts of inner London) the additional payment a Council tenant would make if they paid a market rent would be £15,192 a year, £11,692 in excess of the so called subsidy higher income tenants are in receipt of.
The Council is also concerned over the impact that pay to stay would have on tenants who might wish to buy their own home, in a borough where the average house price is currently £526,000 (source, Land Registry) and the ratio of lower quartile house prices to lower quartile incomes is 11.7 (source, DCLG live tables). In other words the entry price for first time buyers is nearly 12 times their likely annual income. Pay to stay will make it impossible for higher income tenants to save for a deposit so that they can leave social housing and buy their own home.
The Council would further observe that:
· The scheme as it is currently proposed is highly likely to be complex, costly and bureaucratic to set up and administer, with little tangible gain to the public purse. This administration and enforcement cost will be borne by the Housing Revenue Account, which in Hackney will already see a decline in revenue of £100 million over the next seven years reduction of £725 million over the next 30 years, as a result of the 1% cut to social housing rents.
· All of the additional income from the pay to stay regime should be retained by the Council for investment in new homes covered by Clause 79 (1) of the Housing and Planning Bill. In return, the Council will ensure that this income is used to support the delivery of new homes through the Council’s own housing regeneration programmes. To date, these have delivered over 1,500 new homes, including 916 for social rent and 274 for shared ownership.
· In Hackney, in-work households on low to moderate incomes will be most heavily affected by the policy. These are the same households who are also likely to be most affected by any changes in family tax credits or further reduction in Housing Benefit.
· Pay to stay effectively removes tenants’ or their children’s ability to save for a deposit if they wish to access owner occupation.
· Non-dependent children within households where their income could contribute to the household exceeding the £40,000 income cap are highly likely to be in substantially lower income jobs. If their contribution to the household income means breaching the £40,000 income level, they may be forced to leave home. In such cases, they will find it impossible to access and pay the rent levels that exist in the private rented sector in Hackney nor will are they likely to succeed in accessing social housing given the increasing levels of homelessness in the borough.
· The Council takes the view that the policy is contradictory in terms of the Government’s wider objectives and the basic rationale for charging higher rents. A significant driver for the policy is a view that higher income tenants are receiving a ‘subsidy’ on their rent due to their residence in social housing. However, this is in a context where the Government has increased the right to buy ‘subsidy’ for tenants to over £103,000. We would also point out that the HRA receives no operating subsidy from either local or national taxpayers and indeed if it was the case that it did, it would make the case for retaining any additional income from pay to stay locally even more powerful.
· We believe there are other differential rent models worthy of exploration, such as the
Dolphin Trust / New Era estate example or the ‘Living rents’ approach proposed by the Joseph Rowntree Foundation. We believe councils should have the scope to explore these at a local level and not be directed by nationally set rent figures and tapers, which are blunt instruments that bare little relationship to local incomes or housing costs across Hackney.
· If the Government does proceed with the introduction of a mandatory pay to stay scheme then to avoid creating disincentives to work the income thresholds should be substantially increased in line with the following:
Preferably be raised in line with the Mayor of London’s First Steps homeownership criteria and start at £71,000 per annum (for a one and two bedroom property) or £85,000 for a family sized property (three or more bedrooms);
Be raised to the level prescribed in the current discretionary scheme (£60,000) as set out in the Guidance on Rents for Social Housing (May 2014) in order to avoid penalising hard working low to middle income earners.
In addition the Council would recommend:
· The removal of Clause 79 (1) from the Housing and Planning Bill – requiring a local authority to make a payment to the Secretary of State with respect to additional pay to stay income, with a replacement clause to respect to reflect the retention of any additional pay to stay income by the local authority ring-fenced for housing purposes.
· Clause 74 (2) of the Housing and Planning Bill is amended to reflect that rents should not exceed more than 33% of a person’s gross income, which is a common definition of affordability.
There is no evidence to suggest that a significant number of Hackney Council tenant households have incomes greater than £40,000, and therefore the revenue that is likely to be raised from the scheme is likely to be minimal, when set against the administrative burden. Our best available evidence from the Hackney Housing Needs Survey 2014 indicates that the proportion of tenants with higher incomes, on any suggested measure, is very small. This estimated that:
· Just 0.4% of Council tenants and 2.7% of housing association tenants in Hackney have incomes of £40k or more.
· 0.4% equates to around 90 tenants. This could well be an underestimate, but we do not believe it is reasonable to assume that any more than 300 Council tenants could potentially be affected.
6. Measures to improve the private rented sector
In 2014, the Council began a comprehensive assessment of the private rented sector ‘offer’ in the borough, in response to an unprecedented doubling in the size of the sector over the past ten years. An estimated one third of the borough’s households now live in the PRS; a higher proportion than owner-occupiers. We have taken a cross-disciplinary approach to making improvements in the sector that seeks to engage all the key stakeholders.
In February 2015, we held our first ‘PRS awareness month’, which involved:
· The culmination of a major stakeholder engagement project, involving renters, landlords, lettings agents, public and voluntary agencies, businesses and employers. This included a widely publicised online survey, focus groups and interviews.
· A publicity and poster campaign throughout the borough, promoting the rights and responsibilities of renters, landlords and lettings agents.
Amongst the Councils other activities over the past year:
· The publication of a guide for renters
· A regular, well-attended, Landlords’ Forum
· Promotion of the London Landlord Accreditation Scheme and London Rental Standard
· Working with Trading Standards to set up and enforce the lettings agent redress scheme and transparency over agents’ fees
· Regular meetings and liaison with renters’ groups and landlord bodies
· Developing a Council lettings agency
· An investigation and recommendations by the Council’s Scrutiny Commission
In the context of the above the Council would be supportive of the landlord banning orders, the establishment of rogue landlord and lettings agent database, rent payment order and codification of the steps to recover abandoned properties measures contained within the
However I would like to flag up a number of other steps we have raised previously with the Minister and Secretary of State in our ‘10 steps publication to a better private renting for tenants and landlords’ publication, which we believe could provide the basis for a step change to improve outcomes for both tenants and landlords in the PRS.
Specifically, inflation capped rents, which would result in benefits for both tenants and landlords. Inflation capped rents would ensure continuity of income for landlords as well as predictability and stability for tenants, and would involve saving on the DWPs overall housing benefit expenditure. A significant proportion of the local Councillors' case work in Hackney (and indeed across London) is spent advising PRS tenants who have experienced very short notice, steep increases in their rent
The second issue is the importance of changing the existing tenancy regime. Longer tenancies which would give more stability for families particularly those with children living in the private rented sector and the introduction of a national kite mark would help tenants identify the good quality PRS accommodation within the sector and by default help they avoid poorer quality accommodation. And finally, the Council believes it would be beneficial and welcomed by many of the good landlords in the sector if there was further cost transparency, particularly with respect to landlords publishing all of the information with respect to the related costs of property a tenant rents in order that tenants have a better appreciation of the costs related to the property they rent from landlord.
I believe if the government took steps to include the above measures in the secondary regulations that will follow the bill this would be to the benefit to tenants as well as landlords working within the sector.
Cllr Philip Glanville
Cabinet Member for Housing