Communities and Local Government CommitteeWritten evidence submitted by Broadway Homelessness and Support

1. Introduction

1.1 Broadway is a homelessness charity based in London. Broadway helped more than 7,000 people effected by homelessness last year, providing services that include debt and housing advice, street outreach to rough sleepers, specialist hostels and permanent accommodation.

1.2 In 2005, due to the silting up of homelessness hostels and the lack of social housing for people not in priority need, Broadway set up Real Lettings—a social enterprise providing stable private rented accommodation for people who have been, or are at risk of becoming, homeless.

1.3 Broadway supports calls for reform of the private rented sector via longer tenancy agreements with annual, inflation-linked rent increases, regulation of letting agents and registration of landlords. This submission will show how Real Lettings’ model contributes to the case for reform, by demonstrating that it is possible to combine security for tenants with profitability for landlords.

2. The Real Lettings Business Model

2.1 Real Lettings is a specialist not-for-profit letting and management agency helping those who are homeless or living in insecure housing find homes in the private rented sector. Properties are leased from private sector landlords and then let on Assured Shorthold Tenancies. Any surplus from Real Lettings is recycled into Broadway’s work.

2.2 Real Lettings currently supports 160 people in secure tenancies in the private rented sector in London. Tenants come from a variety of situations, including hostels (30% in 2010–12), supported housing (17%), bed & breakfast or temporary accommodation (16%). Others are currently housed but are at risk of eviction and homelessness (23%); some are “hidden homeless”—that is, staying with friends or families because they have nowhere to live—(11%); and in some cases we are able to accept clients who are rough sleeping (two%). Tenants are not required to provide a deposit and are helped to manage their tenancy as they move towards full independence.

2.3 Real Lettings also runs Real Lettings South, in partnership a local hoemlessness charity, Two Saints. Through Two Saints, Real Lettings South is providing a scheme similar to that of Real Lettings in London, and helping homeless people in the Hampshire and West Berkshire areas move into privately rented accommodation.

2.4 Landlords lease properties to Real Lettings for three to five years. Real Lettings guarantees rent for the full period, even if the property is empty between tenancies. At the end of the lease, the property is returned in its original condition. Unlike other letting agents, Real Lettings charges no fees or commission.

2.5 Tenants claim full Local Housing Allowance for each property, which in most cases is paid directly to Real Lettings. Landlords are paid between 82.5% and 85% of Local Housing Allowance for their property, with Real Lettings retaining the difference to cover the scheme’s running costs, void periods, bad debts and maintenance. Approximately 2.5% is recycled into Broadway’s homelessness work as surplus.

2.6 The following table shows the costs to landlords of renting through a typical agent compared with Real Lettings, illustrating how, as well as eliminating risk for landlords, the scheme can lead to similar returns:

Income	Typical Agent	Real Lettings
Average rent per calendar month	£780	£626
Annual rent	£9360	£7513
Costs
Typical 2.5 week void period per year	£450	£0
Agency administration charges	£100	£0
Letting and annual management commission (eight% inc VAT)	£900	£0
Inventory and check-in (inc VAT)	£150	£0
Average annual cost for internal maintenance and in-between tenancy cleaning	£250	£0
Net income
Net monthly income	£626	£626
Net annual income	£7510	£7513

Calculation based on the Local Housing Allowance for a one-bedroom flat in Manor Park, London, E12.

2.7 Real Lettings is registered with the London Landlord Accreditation Scheme, part of the UK Landlord Accreditation Partnership. The scheme attempts to improve standards amongst landlords by delivering training on legislation, structural requirements, tenancy agreements, inventory control, and other aspects of good practice.

2.8 Real Lettings works closely with many local authorities in London who recognise it as a way to address or prevent homelessness locally; most, if not all, referrals are currently made by local authorities. Real Lettings charges local authorities a placement fee to take someone they refer. This is a one off, up-front amount, payable when the tenancy is signed. The placement fee covers the cost of procuring the property, assessing whether the person referred is able to live independently and providing them with resettlement support for six months.

2.9 The referrals from the local authority are determined by local priorities; they are likely to include preventing homelessness, enabling someone to move on from a hostel or supported housing or to provide accommodation for a household in temporary accommodation.

2.10 The issue of tenancy sustainment is very important to Real Lettings given the risk of repeat homelessness for the tenants we work with. Real Lettings has a 97% success rate of keeping people vulnerable to homelessness in their tenancies for at least six months and a 90% success rate for 12 months.1 This is a higher success rate than for equivalent schemes, as evidenced by the “For-Home” study carried out by the University of Sheffield.2

2.11 Maintaining a tenancy is a considerable commitment and Real Lettings’ process for assessing referrals has been developed to ensure only those who are able to live independently in the private sector are offered a flat. It is not our intention to set up anyone to fail in a private rented tenancy. Additionally there is a financial risk to consider as maintenance and dilapidations costs are taken on by Real Lettings as is any rent lost through voids. It is important to be as sure as possible that the incoming tenant is stable, responsible, able (and willing) to look after the property as would be expected by any private sector landlord.

2.12 When assessing if a person is ready for a private rented tenancy, Real Lettings assess the following areas:

Previous housing history—why do they need a Real Lettings flat?

Income and debt—can they afford the rent and to live after paying the rent?

Previous support issues—are they ready for independent living?

2.13 Once a tenant has been accepted on to the scheme and a suitable property identified these are the key components of the resettlement support package:

One point of contact (staff member)

Tenancy sign up (including explanation of rights and responsibilities)

Tenancy set up (utilities, benefits, council tax, grant applications, furniture sourcing)

Six months resettlement support including three home visits

Ongoing “low level” support as and when required

Signposting to external agencies, where appropriate

Monday—Friday tenant helpline (with out of hours service)

Good Neighbour tele-befriending scheme—weekly contact from a trained volunteer

12 monthly tenancy checks to ensure tenant is still managing in tenancy/home.

2.14 The Real Lettings service is “under one roof”, which means other teams within Broadway have contact with tenants and are able to contact Real Lettings if there appears to be a problem. This ensures rapid assistance and prevents minor issues from escalating. For example, Broadway’s maintenance team might visit for a routine matter and be concerned about the state of the flat or the tenant’s demeanour. Internal staff training ensures they recognise this could be due to poor mental health so they alert the Real Lettings team, who will get in touch to check all is well. Broadway’s in-house rents team is responsible for processing payments and liaising with Housing Benefit for Real Lettings’ tenancies. Similarly they are able to respond quickly if there is a problem with a claim or payment; rather than leaving it longer and running a higher risk of eviction.

2.15 Recognising the success of Real Lettings and the continuing need for people affected by homelessness to find secure tenancies in the private rented sector, Broadway has been seeking manageable ways to expand capacity.

2.16 Last year, Broadway launched the Real Lettings Property Fund in partnership with Resonance Ltd (a leading specialist in impact investment) and secured an anchor investment of £10 million from Housing Association L&Q. The Fund aims to achieve a first close in spring 2013 of £15–20 million and to grow further to a target of £45 million. It will use the investment to acquire up to 260 one or two bedroom flats in London that will then be let by Real Lettings, thus enabling more of this vulnerable client group to secure tenancies in the private sector and take further steps towards independence.

2.17 The other opportunity to develop our work comes from moving into areas outside London. We are currently working in partnership with Two Saints to run Real Lettings South, which leases 100 properties. In making a decision about moving into other geographical areas our business plan requires an assessment of:

Average rent and LHA levels in the area.

Amount of PRS stock available and standard of accommodation.

Demographics—is there a high demand for PRS properties, for example, students so landlords have less need to let to clients on benefits? Are there high numbers of young professional who rent (again, less properties available).

Existing contacts with portfolio landlords.

Experienced and existing property services and rent collection teams—we would only work in partnership in a new area.

LA support for using private rented sector to address homelessness and to work with Real Lettings.

3. Conclusions

3.1 Longer, more secure tenancies can prove attractive to landlords as well as beneficial to tenants

With growing calls for reform of the private rented sector by introducing the option of more secure, longer-term tenancies with inflation-linked annual rent increases, the Real Lettings model illustrates how stability for private tenants can coexist with an attractive, profitable deal for landlords. Real Lettings’ experience suggests many landlords see significant benefits in these arrangements, since longer-term tenants have a greater sense of investment in their homes and communities, which can lead to improved upkeep and fewer void periods.

3.2 Regulation of letting agents is essential to improving standards in the sector

As a letting agent and a social enterprise, Real Lettings is able to put the interests of tenants and landlords before profits. However, the current private rented sector provides obvious incentives for letting agents to arrange short-term contracts, and to ensure a high level of “churn” among clients, with tenants moving house frequently. Reforming the sector to make private renting a secure, long-term option for tenants must mean tackling this short-termist culture among agents and setting minimum standards in the industry. Real Lettings’ experience shows many letting agents’ practices are not in the best interests of tenants and landlords, and that the fees they charge may be excessive and unwarranted.

3.3 Registration of landlords helps encourage good practice in the sector

Real Lettings is registered with the London Landlord Accreditation Scheme, part of the UK Landlord Accreditation Partnership, which aims to promote good practice in the industry. Most landlords in the UK are not professional investors, with the result that many lack awareness of their legal responsibilities, do not have realistic long-term business models and fail to understand how best to manage tenancies. Real Lettings’ experience shows the benefits of landlord registration schemes in encouraging good practice in the sector. However, it is also important that accreditation/licensing schemes are themselves monitored in respect of the fees they charge to subscribe. High costs per property license may result in landlords withdrawing from letting properties, particularly affordable properties, since the rent they would be able to get through letting to a benefit tenant is perhaps not enough to warrant paying for the license.

3.4 Changes to the benefits system have put the most vulnerable private rented sector tenants at risk of hardship and eviction

Real Lettings was set up to counteract the shortage of housing for homeless people and works with the most vulnerable tenants in the private rented sector—those who have been, or are at risk of being, homeless. But despite the extra support Real Lettings is able to provide, changes to the benefits system have led to a number of tenancies being ended because landlords could not accept the significantly reduced rent. In total, Real Lettings has been forced to end the tenancies of 49 previously settled, responsible tenants.

The reduction of Local Housing Allowance to the 30th percentile of local rents led to 25 tenants being evicted from their homes.

The 2011 housing benefit cap led to eight tenants being evicted from their homes.

Restrictions on the rate of housing benefit for those under 35 led to 16 tenants being evicted from their homes.

3.5 The introduction of Universal Credit could lead to further problems for vulnerable tenants in the private rented sector

In most cases Real Lettings arranges to be paid Local Housing Allowance on behalf of tenants. The introduction of Universal Credit, which will see tenants paid directly in a monthly lump sum, could lead to major problems for clients with a history of homelessness, some of whom have had problems managing their finances. In addition, Real Lettings is concerned that making the Universal Credit system online-only could lead to access problems for some of its clients and that the total cap on benefits could make further evictions necessary. These changes are likely to increase landlords’ reluctance to lease homes to tenants in receipt of housing benefit, shrinking the pool of available properties. The adverse effects of changes to the benefits system are of particular concern now local authorities are able to discharge their homelessness duty by referring tenants to the private rented sector, which will mean more vulnerable people renting privately.

January 2013

WORKING WITH REAL LETTINGS—CASE STUDIES

The Tenant

Before being referred to Real Lettings by the council, Joanna was struggling to find a place to live with her two-year-old daughter. Joanna works full time as a cleaner in the City and was staying with friends whilst trying to find a private rented flat.

Joanna went to see a flat through an agency, paid a holding fee, and moved out of her friend’s place ready to move in. But she didn’t fully understand the system and moved out of her friend’s house before she had signed a tenancy agreement or paid a full deposit. When she failed the credit checks run by the agency (because she didn’t have a permanent address and would be claiming some element of Housing Benefit in addition to her wages) the process fell apart. She lost her holding fee and her friend said she was unable to move back in as there wasn’t space for a long term stay. Joanna’s council moved her into bed & breakfast. Every day she and her daughter had to get up at dawn and travel across London so her daughter could be looked after while she worked.

Joanna and her daughter were referred to Real Lettings by the council in June last year. By the end of September, Joanna was living in the ground floor flat Real Lettings offered her. Joanna is delighted with the extra space and the fact that her daughter finally has her own bedroom. There’s a small outside space and local parks and shops are a 10 minute walk away.

Now that she has a settled base, Joanna has been able to place her daughter in childcare closer to work, so their life has become a bit easier. Joanna is looking forward to making this flat her home.

The Landlord

Mohamed found out about Real Lettings after approaching his local council. Mohamed was looking for a way to let his property on a long-term basis and get a guaranteed rent. He was advised to approach Real Lettings.

After his initial contact, Real Lettings quickly arranged for Mohamed’s property to be visited by a negotiator who advised him on a few minor maintenance works. Within a few weeks the property was ready, contracts were signed and 14 days later Mohammed started receiving his rent.

Mohamed said:

“I have been with Real Lettings for a couple of years now and everything has run smoothly to date. I’ve been really pleased with the team’s professional service and would certainly recommend them to other landlords.”