Housing and Planning Bill

Written evidence submitted by Councillor Saima Ashraf, Deputy Leader and Cabinet Member for Housing, Barking and Dagenham Council (HPB 144)

The London Borough of Barking and Dagenham (LBBD) welcomes the opportunity to respond to the Housing & Planning Bill 20 15-16. We do however note th e short timescales for doing so which has inevitably limited the scope of this response.

We have also responded via the East London Housing Partnership (ELHP) and many of the issues raised in this letter mirror those set out by the ELHP.

Background

The LBBD comprises some of the most deprived communities in England with particular housing need, demand and supply challenges. We have a serious shortage of housing. The number of households in LBBD is expected to increase from 70,107 in 2011 to 100,501 in 2031. This represents a 43% growth between 2011 to 2031 and an annual growth of over 1,519 new households each year. This figure will be greater once 35,000 additional homes are built by 2030. At present Over 14,000 households are on our housing waiting list.

As a result of the housing shortage in the borough we are experiencing an increase in demand for homelessness services with over a 50 per cent increase on the previous financial year. This demand is increasing pressure on temporary accommodation.

Measures outlined in the Bill also need to be taken in the context of those policies outlined in the July 2015 Summer Budget and the Welfare Reform and Work Bill (2015/16), the cumulative effect of which will increase pressure on local authority expenditure. As an example, the 1 per cent social rent reduction will result in an estimated cumulative £33.6m loss to the LBBD housing revenue account over the four year period, and considerably greater losses over the 30 year business planning period. These resources could have been spent on building new and improving existing homes and on improving service delivery.

Pay to stay

The LBBD and ELHP notes the DCLG’s objective for the pay to stay policy is to ensure that housing at subsidised rents goes to those people who genuinely need it. We believe however that the policy is a disproportionate response to achieving this objective and will be complex and burdensome to administer. The lack of supply of affordable homes should be addressed through effective house-building programmes. Landlords also have a number of tools at their disposal to manage this increasingly-scare housing resource, including fixed-term tenancies.

This policy risks penalising those who want to improve their circumstances and acts as a disincentive to career progression and aspiration. It is also likely to adversely affect vulnerable and hard-working families. The £40,000 per year household income threshold in London is too low for the application of this policy, and partners contend that households with a combined income of £40,000 per year are not "high income social tenants" (as described in Bill): the combined income of two full-time employed individuals earning the current London Living Wage is just over £38,000 per year.

The LBBD does not consider the current policy equitable, with local authorities being required to return rental uplift to the Exchequer whilst housing associations are able to retain these funds. We believe this is contrary to the principles of Housing Revenue Account (HRA) ring-fencing.

The LBBD supports the ELHP submission and asks that the Bill be amended to recognise these concerns, specifically that:

a) A higher income threshold be implemented. The Mayor of London’s income threshold for eligibility to intermediate housing is recommended (£71,000 per year for 1- and 2-bed properties, and £85,000 per year for larger properties). Tenants eligible for welfare benefits should be exempt from this policy

b) This threshold be uprated in line with CPI each year

c) A taper be introduced that recognises the high degree of variation in rental market between and within local authorities. Tenants should pay no more than 35 per cent of their income on rent

d) Local authorities be permitted to retain any additional income generated through this policy for the benefit of local tenants and residents and to support their capital programmes

e) This policy be applied to new social housing tenancies only.

Forced sale of high value local authority stock

The LBBD notes the intention of this policy measure is to encourage local authorities to utilise their assets to support an increase in home ownership and housing supply (as outlined in paragraph 147 of the Bill’s explanatory notes). The LBBD supports this objective, but has serious concerns that this policy will adversely impact on housing supply and will increase the cost of homelessness.

The LBBD would welcome further clarity on the detailed application of this policy.

The forced sale of local authority stock will place increased pressure on local authorities’ temporary accommodation supply. It is broadly estimated that the cost of this policy in terms of the additional use of temporary accommodation could be £13m in East London in the first five years. This cost would be met both by local authorities and the Department for Work and Pensions.

The LBBD notes an East London dimension to the forced sale of high value local authority stock. The gradual narrowing of the affordable housing pipeline in other areas of London is likely to increase pressure on homes, infrastructure, social care and other services in outer-East London boroughs, particularly the LBBD, which has historically been one of London’s more affordable areas.

The forced sale of local authority stock could lead to increasingly-polarised communities in areas which are already regarded as some of the most deprived in England, as outlined above. The LBBD strongly believes that the social mix of London’s estates should be protected.

The implications this policy would be exacerbated by other policy measures, and notably the extension of right to buy to housing association tenants. Based on National Housing Federation modelling of the number of households who would be eligible for and could afford to exercise the right to buy, up to 800 private register provider homes in the LBBD could be transferred into the private sector. The delivery of replacement homes will take time, and these may not be affordable for all households in housing need. As the supply of genuinely-affordable council and registered provider accommodation declines, local authorities will find the discharge of their homelessness duties increasingly challenging. This could lead to an increase in the number of households in temporary accommodation and further inflate the cost of delivering the homelessness function.

Clauses 62 to 68 of the Bill outline a requirement for local authorities to make an annual payment to the Secretary of State by reference to the market value of high value vacant housing owned by the authority. We note that this constitutes a tax on high value assets. Given the implications that this has for capital delivery programmes, we are keen to engage further with the DCLG on the process for establishing this determination.

Clause 67 of the Bill provides the Secretary of State with the power to reduce by arrangement the amount that a local authority is required to pay under this policy, for example in order that the authority can deliver new housing. Whilst this flexibility is welcomed, we note with concern paragraph 357 of the Bill’s explanatory notes, which states that the Government expects "fiscal neutrality" between the forced sale of local authority assets and the right to buy extension. The effect of coupling these policies would significantly limit the flexibility outlined in Clause 67 of the Bill.

The LBBD supports the ELHP’s proposed amendments to the Bill in recognition of the concerns raised above, and specifically that:

a) The implementation of this policy be postponed until the Government has engaged further with the local authority sector on how to deliver its objective of additional housing supply whilst minimising the risk of adverse impacts on development and homelessness

b) Local authorities be exempted from the forced sale of ‘high value’ homes where it can demonstrate that the level of housing need exceeds housing supply (e.g. where the number of households in temporary accommodation exceeds the number of lettings available to that authority each year)

c) The forced sale ‘high value’ local authority homes should be financially decoupled from the right to buy extension measure such that fiscal neutrality between the two policies is not required.

d) Government issue a public consultation on the parameters for determining the annual high value asset payment to the Secretary of State

e) Government engage with the sector to identify the range of properties that should be exempted from the high value asset payment in order to minimise adverse impacts on housing delivery. Exemptions should include:

i. Homes delivered within the last 15 years, to reduce the disincentive to invest in new supply

ii. Current and future voids on designated and proposed regeneration estates

iii. Section 106 units, which have been delivered on the grounds of remaining affordable in perpetuity

f) Specific properties that are difficult to replace or where it can be demonstrated that the need for that type of accommodation exceeds supply

Starter homes

Partners note that the Government intends to ensure that Starter Homes become a common feature of new residential developments across England (Clause 4 of the Bill). The LBBD recognises that a range of tenure types are required to meet housing need, and supports access to home ownership. However, Starter Homes will not be an alternative to affordable homes in the borough and should not reduce the provision of genuinely-affordable homes.

The LBBD notes inconsistency in Government definition such that "high income" social housing tenants (defined in Clause 75 of the Bill as households with an income of £40,000 or more in London) could not afford a "low-cost" Starter Home in East London (as described in the Bill’s Impact Assessment, and based on homes being offered at 80 per cent of market rate).

Current guidance allows for Starter Homes to be sold at their open market value after five years [1] . The LBBD believes that this will compound pressures on affordable housing and amounts to poor use of subsidy.

As local authorities may not seek section 106 affordable housing contributions from Starter Home developments, the LBBD has significant concerns that this measure will reduce the number of affordable homes for rent or shared ownership that can be secured by authorities. Homes delivered through such negotiations make a significant contribution to the borough’s affordable housing pipeline.

The LBBD has serious concerns that the reduction in the supply of affordable homes as a result of this policy will exacerbate issues of affordability and increase pressure on temporary accommodation and the Housing Benefit bill.

The LBBD proposes amendment to the Bill in recognition of the concerns raised above, and specifically that:

a) Local affordable housing priorities be devolved to local authorities in order that the right mix of tenures are attained and the cost of homelessness does not increase.

b) Starter Homes remain discounted in-perpetuity.

Other comments on the Housing & Planning Bill

As outlined in earlier, the LBBD is facing a perfect storm of homelessness pressures: increasing demand, decreasing supply of affordable self-contained properties and increasing temporary accommodation costs. This is taking place in the context of considerable pressures on local authority spending.

The Homelessness Prevention Grant is vital to our efforts to prevent and mitigate homelessness. However, the formula for allocating this grant is not transparent and we contend is inequitable. East London accepted 4,850 households as owed a main homelessness duty in 2014/15, which equates to 9 per cent of acceptances in England or 28 per cent of acceptances in London. However, the sub-region received only 7 per cent of the HPG awarded in England in 2015/16, or 16 per cent of the London award. Partners believe that, if this vital grant was awarded fairly, East London would have received an additional £4.5m in 2015/16.

In the five years to April 2015, East London local authorities sold 2,601 properties through right to buy. Whilst the LBBD supports access to home ownership, we are finding viable replacement programmes challenging given that a significant percentage of the sale value must be returned to the Treasury and that only a maximum of 30 percent of the cost of replacement may be met from the receipt.

The LBBD supports the ELHP and proposes that the scope of the Bill be expanded such that:

a) The Government commit to a review of temporary accommodation subsidy levels to ensure that authorities can continue to meet their statutory homelessness duties

b) The Government commit to a public review of the HPG allocation formula

c) Local authorities be allowed to fully retain and flexibly use council right to buy receipts, and that constraints around the reinvestment of receipts be removed to allow for the delivery of more homes.

December 2015


[1]

Prepared 14th December 2015