Housing and Planning Bill Committee

Written evidence submitted by the Northern Housing Consortium (HPB 122)

Overview

1. The Northern Housing Consortium (NHC) welcome the opportunity to submit written evidence to the Housing and Planning Bill Committee particularly as we were concerned that those organisations giving oral evidence had a predominantly Southern or indeed London focus and in our view, it is vitally important that Committee members consider the Bill in the context of different housing markets.

2. In our submission, we have tried to separate out some of the key issues raised by our members however there will be some overlap owing to the nature of the Bill. There are many elements of the Bill which we welcome however our submission focuses on those issues where we feel more consideration should be given.

3. The nature of the Bill as it stands – and as amendments are considered – has led to concerns amongst our members that the lack of detail within the Bill means it is difficult to accurately assess any likely impacts. Many of the new administrative burdens that fall on housing authorities such as the pay to stay/high income social tenant measures cannot be reasonable estimated by housing authorities because there is no detail available.

High Value Asset Sales (HVAS): Local Authorities

4. The voluntary extension of the Right to Buy into the housing association sector will impact on local authorities as the costs related to compensation for housing associations will be generated by sale of high value assets by Local Authorities.

5. The specifics of the formula that will be applied are still not known but the application of this formula – both in terms of threshold of "high value" and the spatial level used will be paramount. Clearly a formula that sits at a Local Authority level will be more precise but we acknowledge there will be significant administration issues with this approach.

6. Conversely, a formula that applies across a significant spatial level will be impacted upon by outliers driving up average values which then in turn may draw stock into the classification of "high value" which when examined at a more precise spatial level this would not be appropriate.

7. We note that the although the Bill does not specify the mechanics behind the formula, prior to the general election a figure of 7% turnover of high value stock was produced. We feel this is unrealistic and would caution Government against using this baseline as an assumption for the funds generated.

8. We would be very concerned if Government, faced with a possible shortfall in the funding it thinks is required to compensate Housing Associations for RTB losses chose to fund that gap by lowering the high value threshold or by increasing the proportion of stock expected to be sold within that threshold. This would, in our view, go against the expected on "high value" stock.

9. Similarly we feel an explicit link should be made between the level of grant provided to Housing Associations and the expectation of contribution from LA sales – i.e that the annual formula will reference cost of compensation to ensure that the sale of High Value Asset Sales does not merge into a wider cross subsidy from Local Authorities to central government.

10. In terms of an absolute baseline no property should be sold as part of HVAS if its value is lower than cost of replacement even if that valuation is in the upper range of a local authority value spectrum.

11. We are concerned that throughout the course of the Bill there has been calls from some London MP’s for London to have a 2 for 1 replacement formula. Whilst we recognise the very real demands on supply in London we do not support any action that would see London take a slice from the national redistribution pot that is effectively at least twice as large ( if not bigger) than slices available to other regions. We believe that this will damage the efficacy of the policy as it will exacerbate regional imbalances in the housing market in England and may mean that the ability to deliver compensation to Housing Associations outside of London would be compromised.

12. A further concern the NHC have is that such a policy may begin distort housing markets. We are concerned that if a local authority is not able to fund replacement a home sold in their area but additional stock is built in a lower cost/value area, this could lead to a reduction of affordable rented homes in one area and a surplus in other areas where there may already be an adequate or indeed a high concentration of affordable rented homes. Such housing market distortion will impact on local economies and infrastructure demands. We will however be working with our Local Authority members to ensure they remove all available barriers to building new homes (for example having a local plan in place and an effective land supply strategy).

13. Finally on High Value Asset Sales, some Local Authority members wish to ensure Bill Committee members are aware that in those markets where sales can take considerable time to take place the Local Authority may incur ongoing costs in terms of sales which should be properly considered when allowing local authorities to deduct appropriate costs associated with sale when paying in advance the formula. The preference of our members would be for the payment of funds made to government is based on actual turnover and sales rather than a projected expectation.

Right to Buy

14. Whilst we welcome the commitment to replace Right to Buy sales on a one for one basis past performance of one for one replacements has not previously

been achieved. Analysis by Shelter has shown that "work has only started on 1 in 10 of the council homes that have been sold since the replacement scheme was introduced" and "960 social rented homes have been sold in Greater Manchester since 2012, when the promise of one-for-one replacements was first made. Yet of those only two have been replaced"..

15. We welcome the Government’s swift decision to begin pilots as announced in the Spending Review. It is clear from the conditions that have been attached to those pilots that Government have acknowledged the potential difficulties that may emerge if demand for RTB take up is extremely strong and the consequential impact this will have on stock levels and the lag with replacement. However, we note that only one of these pilots is in the North of England and have concerns therefore we may not see enough learning around practicalities of the policy in a Northern context. We would encourage the Government, in its next announcement of pilots, to address this balance so that we can better understand the right to buy extension and its impact on the North.

16. Many of our members have raised concerns that previous Right to Buy properties have ended up in the private rented sector as the original purchaser finds themselves unable to sustain home ownership. Indeed many members report they have been approached by customers who have exercised the Right to Buy and are then seeking support from the Housing Association (or LA) to purchase the property and return to a rental arrangement. We would urge the Government to consider how to address sustainability of home ownership through the Right to Buy in the pilots.

17. In addition to addressing affordability from the purchasers point of view we would also urge Government to consider the reality of life time costs of RTB properties that fall on the public sector. This will include any grant towards original construction of the property, public sector investment in any decency works, discount for RTB and then if the property does move into the private rented sector there may well be costs associated with Housing Benefit claims plus any resources used by Local Authorities in respect of enforcement actions.

Starter Homes – Rent to Buy

18. NHC welcome the Government’s focus on affordable home ownership but would want Starter Homes to be a source of additional supply rather than displacement based on tenure. We feel it is important that Local Authorities, in undertaking the duty set out in the Bill to promote Starter Homes should also have regard to the strategic housing market conditions in their locality and promote Starter Homes as one of a suite of housing options.

19. Alongside, or perhaps under the "Starter Homes" umbrella we would like to see Government supporting other options to support home ownership. We welcome the funding made available in the Spending Review to support Rent to Buy and we are pleased to provide evidence to the Committee of the Prince Bishop’s model operated by Derwentside Homes. This model can provide an ideal bridge to meeting customers home ownership aspirations by providing them with a high quality rental product which allows them to get "mortgage ready" and provides the means by which to raise the deposit for the property. Further details on this approach are attached as we believe it is an excellent model which can drive housing supply and support home ownership aspirations whilst enabling individuals to ensure they have sustainable financial footing before committing to home ownership.

20. The approach for the North needs to be a prioritisation of ‘more and better homes’ – homes available in a range of tenures such as social, affordable and market rents; options for shared ownership and low-cost home ownership such as Help to Buy which has been good for the North in opening up access to finance and bringing sites into viability – thereby releasing developer capacity.

Pay to Stay & High Income Social Tenants (HISTs)

21. The NHC made a contribution to the Government’s consultation on the pay to stay measures that closed on 20 November 2015. For reference, we have submitted that document along with this evidence as it contains a number of concerns about the pay to stay policy. [1]

22. The concern of our members was not necessarily the principle of HIST policy but rather the costs of application and the threshold set.

23. In some parts of the North, social rent levels are not significantly different from market rents so the ability to charge a differential rent based on income (and with regard to the market rents) are limited. However, housing providers would still need to put in place the administrative processes to enact the policy. An alternative would be an exemption from HIST where social rents sit within a defined percentage of market rents or the qualifying threshold was moved upwards from £30,000 outside of London – our members have proposed a threshold of £50,000. The rationale for raising the threshold was based on not creating a disincentive to take up a higher paid job or increase hours by imposing significant additional rental costs.

24. Our members have raised concerns who had estimated costs of informing tenants of the changes as well as adapting systems to meet the new requirements of data collection. Significant concerns have been expressed about how those tenants with variable or seasonal incomes will be impacted by the measure.

21. Equally, there is deep concern from our local authority members that because the costs of implementing this policy will be met by stock holding local authorities - who do not keep the receipts of higher rents paid by HISTs - it represents another area of local authority budgets facing pressure from measures within the Bill and many Northern Authorities have seen significant cuts to budgets in the previous parliament. In addition, requiring Local Authorities to return HIST income to the centre seems to us to be counter to the direction of travel set out by the Chancellor in his Spending Review which sought to allow Local Authorities to keep receipts from asset sales and the localisation of business rates.

22. There have also been representations made to us by some local authorities that the Government has simply assumed that local authorities – and indeed housing associations – already have the software and staff expertise to collect, monitor and maintain the income of those tenants that fall under the HIST policy. We would urge Government to consider how HMRC can usefully be the administrating body.

23. It remains to be seen how the HIST policy will affect lettings. There is growing concern among the sector that lettings will now have to be advertised at each level of rent applicable to a property which is potentially administratively burdensome and could cause confusion for tenants and prospective tenants more generally.

Deregulatory Measures

24. Following the reclassification of housing associations by the ONS we understand the government is minding to bring forward deregulatory measures for the housing association sector. We understand these will be brought forward at report stage and we will comment on the specifics then. However, we do call upon the Government to ensure that any deregulatory measures brought forward in this Bill or by other measures in the future are properly assessed as to any negative consequence on Local Authorities abilities to meet their statutory duties such as homelessness and its obvious connection into use of nomination rights. We would ask that the Bill requires adequate consultation with Housing Associations, the regulator and the Local government sector.

Conclusion

25. As stated previously there are features of the Bill that we welcome and we have not commented on in this submission. Our concern is to ensure that the policy is enacted in a manner which reflects the varied nature of housing markets across the country and that opportunities for best practice – such as the rent to buy model we have referenced - are built upon to enable both more housing supply and support for home ownership which we recognise are government priorities.

December 2015


[1] Not published.

Prepared 8th December 2015