Localism Bill

Memorandum submitted by the National Federation of ALMOs (L 105)


2.1 The National Federation of ALMOs (NFA) represents the 65 ALMOs operating in 61 local authorities and managing nearly one million council-owned properties – over half the total number of council homes.

2.2 The ALMO sector is localism in action. Central to the ALMO ethos and crucial to their success is the direct involvement of tenants in all decisions. One-third, or more, of every ALMO Board are tenants and many Chairs of these Boards are tenants. There is no better driver to raising standards than having the people who will directly benefit make the decisions instead of having them made for them.

2.3 ALMOs are much more than just housing managers. They seek to improve the lives of tenants through ground-breaking services, supporting work opportunities, contributing to neighbourhood regeneration, tackling anti-social behaviour and promoting community cohesion.


3.0 Chapter 3: clauses 66-70 – Community Right to Challenge

3.1 This gives voluntary groups, charities and social enterprises a right of challenge to run local authority services by submitting an expression of interest (EOI) to their council. The council must then consider the EOI and either accept it, with or without modification, and run a procurement exercise for the service; or reject it.

3.2 The Secretary of State will specify in regulations any services that are excluded from the community right to challenge. DCLG has published a consultation on which services will be excluded, as well as on the procedure to be followed by a body submitting an EOI and a council receiving it.

3.3 The NFA is very interested in the idea that council tenants have the right to challenge local authorities over the running of their housing services and be able to bid to run these for themselves. This would build on the ALMO model through tenants making the decision about the structure of the body they would set up to manage their housing and degree of direct tenant involvement in decision making.

3.4 ALMO staff should be treated as a ‘relevant body’ for the purposes of the Bill in the same way that local authority staff are. Not all tenants would necessarily want to take on the risk and effort of running the service themselves but might be happy for their ALMO to do it on their behalf. There is one ALMO actively working on a mutual co-ownership model at present. This is being done with the council’s active co-operation so a right to challenge is not required for them; but it could be an option for other ALMOs in the future.

3.5 The NFA is seeking an assurance from Ministers that the Community Right to Challenge will be applicable to social housing tenants and ALMO staff who want to manage their council housing.


4.0 Chapter 2: clauses 130-131 – flexible tenancies

4.1 The NFA is committed to security of tenure as offering the best means of ensuring sustainable communities as well as the physical and mental well being of tenants. Evidence has shown that lack of security can have adverse affects on residents’ health, educational achievement and anti-social behaviour.

4.2 We recognise that for a relatively small number of applicants for social housing security is not such an issue and they require support for only a finite period of time. Provided that flexible tenancies are used sparingly and that the circumstances under which they are offered are clearly spelled out and understood after full discussion with local residents then this might be a tool for landlords. However, we believe that the majority of applicants will probably still need a long-term housing solution.

5.0 Chapter 3: clauses 140-147 – housing finance

5.1 The NFA strongly welcomes the measures in the Bill to reform the financing of council housing. This will see the replacement of the unpopular, unfair and opaque Housing Revenue Account Subsidy System with a devolved system that will enable local authorities to retain rental receipts. This will enhance effective local decision-making and ensure that money raised locally is spent locally on the needs of tenants.

5.2 Enabling councils with ALMOs to be self-financing will generate more efficiencies that can be spent on further raising housing standards and regenerating estates, and will facilitate longer-term planning based on predictable income and so improve the opportunities to build new ALMO or council housing.

5.3 ALMOs offer some significant advantages in being able to manage a self-financing HRA:

i. ALMOs have an independent board, drawn from the community which they serve, including at least a third being tenants, often with a tenant chair

ii. ALMOs, as community housing organisations, combine a local community base with a business-like, entrepreneurial attitude

iii. Their size and composition allows for faster decision making and a more dynamic approach to service delivery

iv. They are able to focus on the tasks that fall within the remit of their agreement with the local authority and deliver what their residents really want.

Ring-fence Housing Receipts

5.4 To ensure that the reformed HRA works successfully, it is essential that all rental income receipts are ring-fenced to the landlord account to ensure that funds are solely spent on local housing or otherwise benefiting council tenants.

5.5 Although the original Prospectus included draft revised guidelines for the ring-fence, the DCLG policy document entitled ‘Implementing Self-financing’ published on 1st February, states that: "Abolition of the subsidy system does not end the requirement for local authorities to maintain a statutory, ring-fenced Housing Revenue Account." However, it also says ""In line with our emphasis on localism we do not intend to issue new guidance on the operation of the ring-fence. We expect local authorities to take their own decisions, rooted in the principle that ‘who benefits pays’."

5.6 Since the original guidelines have not always been effectively enforced, there is concern that there will be great temptation for some councils, at a time of economic austerity to raid the landlord account to supplement other areas of spending. Given that the existing guidelines were published in 1985, we would like to see the re-issuing of updated guidelines to assist councils and their tenants make decisions in the current housing world.

5.7 It would flout the principle of self-financing if local authorities were able to use the landlord account for non-housing related expenditure and we would like the Government to issue revised guidelines to ensure that this does not happen.

Right to Buy Receipts

5.8 Although the Comprehensive Spending Review announced that the proposal to allow

100% of Right to Buy receipts to be retained locally is to be suspended for the period covered by the CSR, the Localism Bill should establish a default position that the local authority self-financing model will allow local authorities to retain 100% of all rental income as well as sale receipts in the future. The Chartered Institute for Housing has noted that if the Treasury continues to retain 75% of right to buy receipts, this will add to the difficulty of paying the debt local authorities have to take on.

5.9 We welcome the Housing Minister's stated intention that the current arrangement is only for the duration of the 2011/12-2014/15 spending round but we suggest that in order to establish a default position whereby receipts are retained by local authorities but the Treasury has the flexibility to access them in future, any proposal that the Government wishes to take away a proportion of receipts should be subject to scrutiny and Parliamentary approval.

5.10 We would like a provision in the Bill to ensure that local authorities should retain all receipts unless an Order is made to the contrary. We suggest the following draft new clause:

‘All receipts received from the sale of council houses under the Right to Buy should be retained by the local authority unless an order is made to the contrary and a draft of this has been laid before Parliament and approved by a resolution of each House of Parliament.’


6.1 The NFA welcomes the philosophy behind the Bill of giving greater power to local communities. This reflects the whole ethos of the ALMO movement to empower tenants. By rights therefore, tenants should have the final say on the management of their council housing.

The NFA is highly concerned that some councils have acted to bring their ALMOs back in-house without open or comprehensive consultation with their tenants.

6.2 Although DCLG issues guidelines on the consultation process for taking an ALMO back in-house, these are not always being observed. Tenants are not being provided with full and accurate information; instead, they are being misinformed or only given partial information, meaning that even if consulted, they are not necessarily making an informed decision. Some local authorities are preparing reports to fit decisions already taken and tenants are not being consulted at all stages or with the rigour that would ensure a comprehensive reflection of their opinions.

6.3 There is no statutory protection for tenants as there is when there is a proposal for a stock transfer (when tenants have an independent adviser and there has to be a ballot). To ensure that, in the spirit of localism, tenants should have a full and deciding say in the management of their housing, the Localism Bill should give statutory protection for tenants to be fully consulted through a measure stipulating that councils which are proposing to dis-establish their ALMO and bring management back in-house are required to apply the same rigour in gaining support from their tenants for this as they apply to transferring their stock.

6.4 There should be a new clause inserted in the Bill to require local authorities to fully inform and consult tenants on any proposal to dis-establish an ALMO (further details in Annex A).




1.0 Background

1.1 The 2006 guidelines to local authorities ‘Review of Arms Length Organisations’ (DCLG June 2006) states that:

"ALMOs have been very successful in meeting the housing objectives of the Government and the expectations of local people, in particular in achieving the Decent Homes standard, improving services and increasing tenant involvement in decisions.

"The Department believes that it is for local authorities and their ALMOs, in consultation with tenants, to determine the ALMO’s future role and structure. We do however wish to ensure that any decisions on an ALMO’s future take account of the views of all stakeholders, but most importantly those whose homes are managed by the ALMO."

1.2 The Department expected any consultation on a significant change to the local authority’s management arrangements with the ALMO to be "as comprehensive as that undertaken before the setting up of the ALMO". The guidelines also state that "the existing ALMO arrangements should remain in place unless an alternative can be shown to have demonstrable benefits for tenants and that any change in the arrangements should also be the subject of a test of opinion that is no less rigorous than the test undertaken to support the establishment of the ALMO".

1.3 The Housing Minister, Grant Shapps MP, in a letter to the NFA Chair on 15th December 2010, confirmed that this guidance still applied.

2.0 ALMO Reviews

2.1 As many ALMOs are now coming to the end of their management agreements and decent homes programme, the NFA expects an increasing number of councils to be shortly engaging in discussions with their tenants on the future of their ALMOs. We have already seen a number of cases where tenants have been effectively excluded from the process and where no substantive consideration of options has taken place, with decisions on the future management of the stock being largely attributable to unsubstantiated, and sometimes biased, opinion.

2.2 While the NFA fully accepts that bringing an ALMO back in house may be legitimate, this should only take place provided the different options have been properly assessed and tenants have been fully engaged in all aspects of the decision. After all, in setting up an ALMO a local authority had to go through rigorous stock option appraisals, have full consultations with tenants and demonstrate tenant support before they were allowed to proceed

3.0 Give Tenants Full Democratic Rights

3.1 Councils that have decided to proceed with stock transfer are required by the 1985 Housing Act to go through certain processes before they go-ahead and transfer the stock to a Registered Provider. The consultation process is laid out in Schedule 3A of the 1985 Act and is supplemented by the Government’s Housing Transfer Manual. A requirement to hold a ballot was added by the Housing and Regeneration Act 2008.

3.2 The result is that councils are obliged to:

i. Carry out an informal consultation with their tenants, such as through holding meetings, setting up a helpline and distributing newsletters.

ii. Appoint an independent tenant adviser who will assist with the above.

iii. Issue a formal consultation document explaining its proposals and inviting tenants’ comments. Amongst other information this must include the reasons for the council pursuing housing transfer and the effect of transfer on tenants’ rights.

iv. Hold a ballot of tenants on the proposal run by an independent body.

v. Inform tenants of the result of the ballot and of their right to contact the Secretary of State regarding the transfer proposal.

3.3 This maps out a rigorous and comprehensive process to ensure that the wishes of tenants are complied with. There is no reason why the same process should not apply for tenants deciding on who should manage their housing.

4.0 The Current Safeguards Are Not Working

4.1 Despite the DCLG guidelines, a number of councils with ALMOs have over recent months sought to take housing management back in-house without, in all cases, full transparency and giving tenants a say. They have decided on what they want to do and then gone-ahead to implement their decision, riding roughshod over the possible views of tenants.

4.2 Case studies of councils that have decided, or are planning, to disband an ALMO and take housing management back under direct provision by the council include:

4.3 Case Study 1

The ALMO was established in 2006 after:

i. a fully costed appraisal of four different options;

ii. an extensive consultation with tenants; and

iii. an independent ballot resulting in 48% turnout and 91% in favour of ALMO

But the ALMO was abolished and housing management went back in-house in 2010 after:

i. A report to cabinet with a loose description of options: none detailed, none costed, heavily biased against the ALMO and claiming (incorrectly) that the last tranche of decent homes funding would be insecure.

ii. The Cabinet determined the only option of interest was to go back in-house.

iii. A consultation with tenants on this option only through a combination of questionnaires and phone calls which was followed by cabinet ratification of intent to bring back in-house early.

After the decision was made, the TSA issued letters to the Council expressing concern at its commitment to, and delivery of, standards including tenant involvement and empowerment.

DCLG guidelines clearly indicate a ballot should have taken place, but the consultation arrangements with tenants were largely copied from another council that had not had a ballot to establish its ALMO.

Although DCLG and HCA called on the Council to review its proposals, there was no formal outcome or enforcement of the guidelines.

4.4 Case Study 2

The Council published a report which alleged that efficiency savings could be made by disbanding its ALMO. It then commissioned an external consultant to produce a review of housing stock options. This produced:

· No robust analysis of any stock options other than bringing the ALMO back in house

· No analysis of the council’s claimed efficiency savings

· A clear indication that a true appreciation of the council’s financial position will not be known until further detail on self financing is available and yet it recommended one option only despite the lack of this information

· No explanation of how the proposed savings will be made or the impact on service levels

· No cost benefit analysis of the ALMO

· No reference to the tenant involvement and empowerment standard, although it is a legal requirement on landlords to involve tenants on strategic priorities and the formulation of policy

Subsequent to this:

· There was no involvement of tenants prior to the Council reaching a conclusion on a preferred option

· ALMO officers were instructed not to speak to tenants on the proposed option

· The ALMO initially asked to make its own case but when it demonstrated the ability to make more savings than would be generated by going back in-house the report was not presented to councillors or tenants.

From this process it was clear that:

· Decisions were made in advance of full financial information

· There was no involvement with tenants until after the decision was effectively made

· There was no robust financial analysis and no clear benefit to tenants was demonstrated

· There was no transparency; the ALMO was muzzled.

4.5 Case Study 3

This Council is currently consulting tenants on winding up its ALMO. The consultation contains a number of inaccuracies and omissions, for example:

i. The need for savings based on cuts in the Council’s General Fund with no reference to the ring-fenced funds in the HRA

ii. Claims that the Government will make no additional investment in social housing which ignores decent homes programme and self-financing

4.6 From these examples it is clear that:

· Partial, inaccurate or incomplete information to tenants is a common factor in those cases where the council has already made a decision and is simply engaging in a token consultation exercise designed to ensure tenants sign up to the council’s chosen option

· It is abundantly clear that in some cases the DCLG guidelines are being flouted. Decisions are being made behind closed doors with councillors and officers making their minds up in advance and more or less presenting tenants with a ‘fait accompli’.

· Residents are in too many cases being short-changed by their councils.

4.7 Case Study 4: A Model To Follow

· Following completion of its decent homes programme, the Council was ambivalent on retention of its ALMO due to financial cuts and perceptions about the ALMO concept

· It considered a range of options before reducing them to a more detailed analysis of retention and in-house

· The review was carried out in a thorough and balanced manner and the ALMO was allowed to put forward its own evidence

· Tenants attended the Council’s scrutiny commission and were able to comment on the Council’s report before finalisation

· The final decision was made on the balance of evidence of savings and improved performance

· All tenants and leaseholders were sent a questionnaire

· 90% of residents voted in favour of retention

· The Council extended the ALMO contract by 10 years.

5.0 Protection for Tenants

5.1 It should be up to tenants to decide who should manage their properties, including whether they should be involved in the management in a decision-making capacity, as they are with ALMOs. For this to happen it is clear, given the behaviour of some authorities to date, that there needs to be safeguards in place to protect tenants’ rights. These must include ensuring:

i. Fairness – local authorities are in a position to push through what they want regardless of the wishes of tenants. To ensure that this is not the case and that the process is fair, tenants must be fully involved in decisions based on full disclosure of evidence and intent.

ii. Transparency – tenants should be made aware of all the options considered by the council, including any reports prepared by, or for, the council. They should be able to attend meetings where the proposition is being discussed.

iii. Evidence based – all proposals to disband ALMOs and take management back in-house should be based on a cost-benefit analysis and evidence collected by the council that clearly demonstrates that this would be beneficial to tenants.

iv. Tenants are involved at all stages – tenants should be consulted initially on the council’s options before there is a formal proposal which goes for consultation. There should then be a full ballot.

v. Appointment of a tenant adviser - to assist tenants and ensure that they are fully informed and involved, there should be an independent tenant adviser appointed as laid down for when stock transfers are being proposed.

5.2 Statutory measures needed

Given that the current guideline is not proving effective and that this does not anyway offer sufficient provisions to ensure tenants are fully consulted, the NFA believes that there should be a clause in the Bill that will oblige local authorities seeking to dis-establish an ALMO to follow the same process that applies when a stock transfer is being proposed as laid out in the 1985 and 2008 Acts and outlined above. This offers safeguards to ensure that tenants will be able to make an informed decision about the future management of their homes.

5.3 Localism

For the Government to be consistent, it should recognise that localism means that it is tenants who should make the decision about their housing management and that any form of management should give tenants a significant stake in decision-making for the running of their housing. In all cases where ALMOs are disbanded, tenants lose either all direct involvement in management or at least do not have the same degree as they have with an ALMO, where they comprise at least one-third of the Board.

February 2011