Communities and Local Government CommitteeWritten evidence submitted by Blackpool Borough Council

This submission has been prepared by Steve Matthews, Head of Housing and Planning at Blackpool BC, and Andrew Foot, Fylde Coast Housing Strategy Manager.

Steve Matthews is responsible for the delivery of housing and planning services by Blackpool Borough Council, and has worked for local authorities to improve the quality of the private rented sector in coastal towns for many years, first in Morecambe, and for the last five years in Blackpool.

Andrew Foot is responsible for housing strategy and has also worked in the area for five years, after a career working for housing associations and the Audit Commission in housing development and regeneration.

1. Introduction

1.1 Blackpool Council welcomes this opportunity to contribute to the debate on the future of private rented housing which has a profound impact on this area. In Blackpool, private renting has become nearly as prevalent as homes owned by owner occupiers with a mortgage, and it is vital for the future of the town that there is are a wide range of high quality and well managed properties in the sector to meet the requirements of local people.

2. Summary and Recommendations

2.1 The submission sets out the characteristics of private rented housing in Blackpool and the associated challenges for the local authority. The private rented sector is very large but mostly poor quality, with over 80% of private rented tenants receiving Housing Benefit. Our main recommendations for action for the Select Committee to investigate are:

Consideration of the impact of benefits calculations on local housing markets and greater sensitivity to local market conditions.

Provision of financial support to local authorities to empower the facilitation of balanced housing supply in areas with dysfunctional housing markets; especially where to do so it is reasonable to expect longer term reductions in public expenditure and economic growth.

Continuing control of conversions to residential use through the Planning system where required to ensure sustainable development.

The introduction of mandatory codes of practice for lettings agents.

Continuing support for selective licensing.

Ensuring appropriate resources for effective local authority enforcement of standards in the private rented sector.

3. Blackpool Context

3.1 Blackpool has had a population of around 142,000 people for the last 10 years, but there are relatively high numbers of people moving into and out of this coastal resort every year—5 to 7% of the population at any one time has arrived within the last 12 months. This reflects the seasonal nature of some employment in the tourism industry and the attraction of the resort to people moving in from other urban areas, especially those of the North of England and West of Scotland. A large private rented sector facilitates this movement.

3.2 The housing stock has an older profile than average and is especially characterised in the inner parts of the town by former guest houses that have been converted into residential use as the demand for that type of holiday accommodation has declined since the 1970s. Past conversions have tended to be poor quality and to small flats and bedsits that are privately rented.

3.3 The private rented sector in Blackpool is large and is focussed on letting to people reliant on benefits. Census 2011 found that 17,479 households were housed in the private rented sector in Blackpool, up from 12,366 at the time of Census 2001. The private rented sector houses 27% of all households.

3.4 The population of the town is also relatively deprived. Over 30% of all households in the borough—over 20,000 out of over 64,000 households—are currently reliant on Housing Benefit. This is the highest proportion of households on Housing Benefit in the North West of England outside of Liverpool and Manchester. The number of households receiving Housing Benefit in Blackpool increased by 57% in seven years between December 2004 and December 2011—from 12,700 to 20,290. Most of this increase is attributable to new claimants living in the private rented sector. In March 2011, 14,000 private rented sector tenants received Housing Benefit, equivalent to over 80% of all private rented tenants.

3.5 The affordable housing stock owned by the Council and local housing associations is just over 10% of all 70,000 homes in the borough, which is significantly less than the NW regional average. In contrast to most of the rest of the North of England, 70% of households on Housing Benefit find their home in the private rented sector. Private renting is the principal housing option available for households excluded from home ownership, and despite relatively low house prices, this is increasingly the case, given low and insecure incomes.

3.6 Census 2011 showed that 4,976 household spaces were vacant out of a total of 69,343 household spaces in Blackpool—7.2% of all homes. This reflects the predominance of the private rented sector with higher turnover rates than other tenures, generally poor stock condition, low values, and the moribund state of the local housing market.

3.7 The nature of the private rented sector in Blackpool enables people who are economically inactive to come to Blackpool and easily find somewhere to stay. The dominance of poor quality private rented accommodation in inner neighbourhoods leads to intense concentrations of deprivation, and an environment that fosters poor health and a lack of opportunity for residents. Low life expectancy and mental health problems in these areas are amongst the worst in the country, with associated high costs to the public sector. The poor environment and endemic social problems in the inner town have a serious negative effect on tourism, which continues to be the town’s major economic sector. Investment is reduced and skilled individuals who could drive investment in the local economy live elsewhere.

4. Challenges in Improving the Private Rented Sector

(i) Interaction between Housing Benefit and rents

4.1 The dominance of Housing Benefit within the large private rented sector in Blackpool means that it is difficult to establish a market rent when calculating the Local Housing Allowance (LHA), simply because so few properties are let to people paying their own rent without assistance through LHA. Also, the LHA is calculated across a Broad Rental Market Area that covers a wider suburban and rural area of the Fylde Coast that has much lower rates of benefit claimants and higher market values than Blackpool. So the LHA rate applied to Blackpool tends to be higher than might be expected from just looking at the quality of accommodation on offer to benefits claimants in Blackpool itself because it is based on the few best properties that aren’t let to benefits claimants, and market rents in better areas.

4.2 Landlords letting to people on Housing Benefit tend to set their rents at the LHA rate. This means that it is very profitable for landlords to buy and let out accommodation to benefits claimants in Blackpool, demonstrated by the doubling in HB claimants in the private rented sector seen in the last 10 years, from around 7,000 ten years ago to 14,000 now. This trend continues, with most property sales in the inner parts of Blackpool to investors rather than to owner occupiers.

4.3 The artificially high levels of LHA mean that it is far more financially advantageous for property owners to rent to Housing Benefit claimants than to improve their homes to enable sales to owner occupiers. The demand from Housing Benefit claimants is effectively unlimited because of continuing in-migration of people on benefits from other parts of the country.

4.4 This dynamic of in-migration of people reliant on benefits tends to focus on the inner parts of Blackpool where there are most former guest houses, and de-stabilises local neighbourhoods. There is a vicious circle where economically in-active residents in poor privately rented accommodation make neighbourhoods less attractive to people looking to buy a home, and this in turn further entrenches the pattern of property owners in those areas renting to benefits claimants because owner occupiers will not live there.

4.5 Government (DWP) operates nationally consistent benefits policies that take no account of the impact on communities with unusual local housing markets like coastal resort towns. Blackpool Council has in the past sought to persuade DWP to change the way that it calculates the Local Housing Allowance to reduce the incentives for letting to tenants on Housing Benefit, but taking a refined approach to reflect particular local housing markets has been refused. The problems faced in Blackpool are the polar opposite of those faced in higher value markets that have strong demand from working people for homes to rent, where landlords are reluctant to let to people on Housing Benefit because it offers lower returns than the alternatives.

4.6 The move to Universal Credit in October 2013 will make local sensitivity even more difficult to achieve, and is therefore likely to further distort the market, leading to some areas where benefits claimants cannot afford to live (in the suburban/rural parts of housing markets) and further concentrate poor people in urban areas dominated by private renting to people on benefits. If Universal Credit sets benefits to meet housing costs on an even wider basis—for example whole regions—then there will be displacement of people from more affluent areas to poor areas. It is clear that people on benefits will not be able to afford to live in the most expensive parts of the country—for example many areas of London—and there is likely to be a much wider displacement of people on benefits from one part of the country to another.

4.7 The change that took place early in 2012 to only pay LHA Single Room Rate to single people under 35 (instead of under 25) has reinforced demand for houses in multiple occupation (HMOs) in Blackpool. The local authority is working hard to reduce the supply of HMOs and achieve a more balanced housing supply from conversions of former guest houses, but this change works against these key local priorities by bolstering demand for the unacceptable accommodation that we’re seeking to remove. The challenge in Blackpool is that this policy is likely to lead to greater concentrations of people with social and welfare needs being driven into to the town due to insufficient accommodation elsewhere.

4.8 It is recommended that in the introduction of new benefits regimes, there is more consideration of the impact of benefits calculations on local housing markets and communities rather than just focusing on the impacts on individuals. There needs to be willingness by DWP to recognise the wider impacts of their policies on local areas, and support the objectives of CLG in promoting prosperous and sustainable communities. The detail of benefits for housing costs needs to allow sensitivity in calculation to local market conditions, and not pursue an inadvertent, or deliberate, policy of further concentrating the most deprived citizens in already deprived neighbourhoods and towns.

(ii) Improving the range of homes available in the Private Rented Sector

4.9 The private rented housing stock in Blackpool consists predominantly of small flats. Around 60% of all privately rented homes available are bedsits or 1 bedroom flats, with most of these converted, especially from former guest houses, rather than purpose built. There are comparatively few larger properties available to rent privately. Most accommodation seeks to meet the most basic standards to comply with the Housing Act 2004 requirements, but is still very undesirable accommodation.

4.10 The private rented sector is most concentrated in the inner town, which has the smallest homes in the poorest condition. In some inner neighbourhoods, over 50% of homes are privately rented, and given the focus of renting to transient benefits claimants, this makes it difficult to establish functional and self-sustaining communities.

4.11 The Council is seeking to control the on-going conversions of former guest houses to residential accommodation through new Planning policies, and especially the adoption of the New Homes from Old Places policy that imposes higher quality design standards on conversions from former guest houses. It also requires that conversions are to houses rather than flats wherever possible to provide a more balanced range of homes. The policy is proving to be effective where owners apply for planning approval, although can’t deal with the legacy of decades of illegitimate or poor quality conversions. Most converted properties are rented out in the private rented sector.

4.12 The Council’s approach to control the further propagation of poor quality privately rented flats through Planning policy is threatened by Government proposals to de-regulate property conversions to stimulate housing growth. While the Council welcomes initiatives to promote new housing supply, it is not appropriate to enable the development of very poor quality private rented accommodation in areas that already have too much of it. Blackpool Council is seeking to allow the development of additional homes through the conversion of surplus guest houses, but getting the quality of newly converted homes right is vital to the town’s future, and this is reliant on the ability to control conversions through the Planning system.

4.13 The particular proposals that cause most concern are the proposals to allow unrestricted change of use from commercial buildings to residential accommodation. In Blackpool, permitted development rights to allow conversion from retail to poor quality flats would be problematic, and any further extension to allow unrestricted conversion from guest houses to residential use would be catastrophic. The Government has also introduced a permitted development right to allow changes of use from C3 dwelling house use to C4 HMO use. While the Council is pursuing an Article 4 direction to remove this right within the Blackpool area, there is uncertainty on whether this important control measure can be achieved, and it takes resources to put back in place essential controls that were formerly generally available to local authorities.

4.14 It is recommended that Government retains the ability for local planning authorities to control changes of use to residential accommodation where this control is a critical tool in promoting sustainable development and a mix of homes attractive to a range of households in the local private rented sector. The Government must recognise that local areas have diverse conditions and that changes in the regulatory regime that lead to positive outcomes in some areas may not be appropriate in others.

4.15 It is difficult for property owners to fund conversions from former guest houses to high quality residential accommodation. If guest houses are converted to a wider range of homes, rather than just very small flats, the rental yield is less for owners and may not cover the costs of the better quality conversions. Property owners and developers currently struggle to find any development finance from banks, for what are perceived to be high risk investments. Gap funding and loan funding support are required to achieve more extensive conversions from redundant guest houses to high quality accommodation that is essential to Blackpool achieving a more prosperous future.

(iii) Improving standards of management and property condition

4.16 As the private rented sector in Blackpool is predominantly let to people on benefits who have few other choices, there is little consumer pressure to maintain good standards. Some landlords are conscientious and keen to manage and maintain their properties to a good standard, but too many properties are unsatisfactory through deliberate inaction or ignorance. There has been a rise in buy-to-let amateur landlords, investors living away from the area buying cheap properties and struggling to manage them from a distance, and owners of property portfolios deliberately ignoring standards.

4.17 The Council’s enforcement team has struggled to address poor conditions with very limited resources relative to the extent of the problems. This has been exacerbated since the removal of capital funding to address private sector housing conditions that was formerly allocated through regional agencies in the North West.

4.18 Poor conditions and management are closely associated with tenant anti-social behaviour. With the growth in private renting we have seen a pronounced increase in anti-social behaviour and disruption to existing communities.

4.19 The Council has developed an area-based approach that balances action to improve property standards, assistance for landlords to meet their obligations to manage tenants’ poor behaviour, and support services for vulnerable or disruptive tenants. The overall objective is to establish a more stable community and an area that becomes increasingly attractive to a wider market beyond benefits claimants. This “transience strategy” is currently focussed in one small area of inner Blackpool that contains around 850 privately rented properties. It is resource intensive but is cost effective because it identifies and deals with problems rather than just moving them on to other areas. It can only be rolled out to other areas once the problems of the initial area have been substantially addressed, unless additional resources are made available.

4.20 This area-based approach is under-pinned by selective licensing, that gives the ability to undertake a comprehensive inspection programme and identify all landlords and their properties in an area. It is important that Government continues to support the introduction of selective licensing approaches in areas with the worst private rented sector management and conditions. Selective licensing across neighbourhoods and mandatory licensing of HMOs are effective tools. We welcome the Government’s previous decision to delegate final designations approvals for selective licensing, and urge Government to continue to support the licensing of the highest risk elements of the private rented sector.

4.21 Addressing the poor standards and behaviour of some private lettings agencies is essential. A Code of Practice similar to that required for Estate agents or Banks with an independent complaints procedure is necessary. Acceptable standards should be recognised by a kitemark standard which provides a quality and safety certification.

4.22 The Select Committee should take account of the impact of Government cuts on the ability of Councils to undertake their statutory enforcement of housing standards and taking action against unscrupulous and poor landlords. Some of the costs should be recovered from landlords through licensing, but there also has to be better financial protection for Councils to oversee better regulation locally in view of the continuing growth of private renting.

January 2013

Prepared 16th July 2013