Inside Housing | Pay to Stay meetings cancelled as policies face delays

inside-housing-logo

 

11 November 2016

Pay to Stay meetings cancelled as policies face delays

 

Meetings of the Government’s Pay to Stay working group have been cancelled as several key measures in the Housing and Planning Act look set to be delayed.

Inside Housing can exclusively reveal that the Government has cancelled scheduled meetings despite the policy- under which higher earning tenants pay up to market rent- originally being planned for implementation in April next year.

It is not clear why the meetings have been cancelled, but sector figures this week said it suggested a delay. Councils have been urging ministers to put the start date back to give them time to prepare.

The news emerged days after a senior civil servant admitted the Right to Buy (RTB) extension to housing association tenants is set to be delayed as a result of the Brexit vote.

Housing minister Gavin Barwell also said this week that councils “need plenty of time” before implementing the higher value asset levy intended to fund the RTB extension, in response to a question about whether councils would still have to pay the levy in 2017/18 as expected. The government said regulations to implement Pay to Stay and the levy, along with RTB guidance, will be published in ‘due course’.

The Pay to Stay policy requires council tenants to pay up to market rent if they earn over £31,000, or £40,000 in London.

The Government has already taken several steps that water down the effects of the policy. Inside Housing reported last month DCLG was considering exempting council tenants in areas where social rents and market rents are similar and councils will be able to decide how to define market rent locally.

The Higher Value Asset Levy councils would be forced to pay also faces delay. Housing bodies had expected the Levy to be introduced from April next year. However, housing minister Gavin Barwell told the Communities and Local Government committee this week that no implementation date had been decided. He added he is “very aware” the legislation was “quite controversial” and the government will need to give councils “plenty of time” to implement the policy.

The Levy regulations were due to be published before the parliamentary summer recess in July but still have not materialised four months later. Experts said it would now be difficult for the policy to be introduced from next April. Clive Betts, chair of the CLG committee, said most councils are setting their budgets for next year and “haven’t got any idea what figure is going to be placed on them to estimate the high value assets”.

John Bibby, chief executive of the Association of Retained Council Housing, said if the voluntary RTB is delayed- as a civil servant this week said it would be – the higher value asset levy for councils should also be put back. He said ARCH would lobby “very strongly” for the levy to be delayed. He added: “If [the voluntary RTB] is not going to go ahead then there’s no reason to levy the councils.”

John Healey, shadow housing secretary said: “Ministers should recognise that on the Housing and Planning Act they may have won the legislation but they lost the argument. No-one thinks that forcing councils to sell off the best of their homes is an answer to the country’s affordable housing deficit. It can only make the problem worse.”

A DCLG spokesperson said nothing had changed with the higher value asset levy policy. He added: “We are currently considering how best to implement the policy to ensure it is robust and fair to councils. We will make an announcement in due course.”

HoC Library Briefing Paper | How subsidised is social housing?

Earlier today the House of Commons Library published Briefing Paper Number SN06804 on Social Housing: Pay to Stay at Market Rents

The papers contains the following section:

How subsidised is social housing?

The Chancellor’s reference to social housing rent levels being subsidised by ‘other working people’ has drawn comment on the degree to which social housing is actually subsidised, particularly compared to other housing tenures. Councils have been able to charge lower rents because of historic subsidy for the loans to build it. These loans had to be repaid (from rental income) and from 2008 council Housing Revenue Accounts (HRAs) recorded an overall surplus which was, in turn, paid to the Treasury. Local authorities with retained housing stock became ‘self-financing’ on 1 April 2012 – a one-off redistribution of debt took place between local authorities. Some (136) took on more debt while others had their debt levels reduced or became/remained debt free.[01] The extra debt was taken on to reflect the future surpluses authorities would have paid to the Treasury. Thus the abolition of HRA subsidy is arguably the point at which it became questionable to refer to council housing as subsidised housing.[02]

The grant paid to developing social landlords enables them to charge lower rents which, in turn, reduces Government expenditure on Housing Benefit. In Building new social rent homes (2015), a joint report published by the National Federation of ALMOs and SHOUT (Social Housing Under Threat), Government grant is viewed not as a ‘deadweight subsidy’ but a fiscally efficient contribution which produces future welfare savings in addition to a long-term capital asset.

As part of the Government’s deficit reduction programme grant funding to build affordable housing has reduced since 2010; social landlords are now expected to develop new housing to let at affordable rents of up to 80% of market rents. The additional rental income can be reinvested in new build housing. This shift is accelerating the rate at which new housing association provided properties can be described as being provided with little or, in some cases, no upfront Government subsidy. The residents of these homes may be entitled to personal subsidy in the form of Housing Benefit but this is no different to residents in privately rented homes.

Commentators have drawn comparisons with the substantial subsidies enjoyed in other tenures; for example, John Perry, policy advisor for the Chartered Institute of Housing, explored the “subsidy question” in a blog on 15 March 2016:

First, taxpayer subsidies are far from confined to tenants in social housing. Was tax relief on mortgages called a taxpayer subsidy when it cost some £8bn annually in the 1990s? It was certainly seen that way when it was finally scrapped in April 2000. So it’s at least arguable that capital gains tax relief, and the lack of any tax on the on-going value of a property (other than council tax) are also taxpayer subsidies. And they now add up to over £10bn and £13bn respectively of tax unpaid by private house owners. Even readers who reject the notion that tax relief is a subsidy would have to accept that lower-income owners do get direct subsidy – through help with mortgage costs when they lose their job, and through shared ownership and other schemes. These currently add up to a modest £800m per year.

Private landlords and tenants also get taxpayer subsidies. The government spends £9bn on private sector housing benefit, which can be seen either as part of income support to tenants or a subsidy to landlords. Either way, the money comes from the taxpayer and ends up in landlords’ pockets. While it’s true that the cost of housing benefit for council and housing association tenants is higher in total (at £15bn), the average cost per tenant is far higher for private tenants (£108 per week) than council (£82) or housing association (£92) tenants, simply because rents in the private sector are higher too.

So how does the government calculate that social tenants each receive £3,500 subsidy from taxpayers every year? The truth is that this is not money paid by the taxpayer at all; it is the difference between the rents actually paid and those that would be charged if the homes were to be let by a private landlord. While this is properly classed as an ‘economic subsidy’, it doesn’t add to people’s tax bills and is a largely meaningless figure given that councils and housing associations are non-profit organisations. In any case, as we have seen, people on much higher incomes than £30,000 are still able to get taxpayer subsidies, as long as they want to be homeowners. For example, a shared ownership applicant can get subsidy if they earn £80,000 per year, the buyer of a Starter Home can get a discount worth up to £45,000 if they earn up to £100,000 per year, and social tenants on any income can get subsidies of up to £104,000 as a Right to Buy discount.Subsidies for private housing don’t end there. Many people assume ‘subsidy’ means government money that helps towards the cost of building houses, not just the cost of living in them. This is true, and the current government has just made a dramatic switch in the way it directs its capital subsidies. Grants to housing associations to build affordable rented homes are planned to fall from nearly £1bn this year to only £130m by 2018.

Altogether, the UK Housing Review shows that while government support for affordable rented housing now totals £18bn, it is dwarfed by support for the private market – mainly for homeownership – which now totals £42bn. By 2020, practically all the government’s capital investment in housing will be aimed at helping homeowners. To take just one example of the different subsidies, some 250,000 people have signed up for a Help to Buy ISA, which will give them up to £3,000 towards a deposit, and is expected to cost taxpayers at least £2.2bn.

Where does this leave the tenants earning more than £30,000 per year who the government says have ‘subsidised lifestyles’, to be targeted through its Pay to Stay scheme for tenants in social housing? Oddly enough, working council tenants who receive no housing benefit have a plausible claim to be the least subsidised of all types of householder. Such tenants are paying the full cost of the housing they use together with any debt which councils hold. How do we know this? Because the coalition government in April 2012 forced councils to make their council housing ‘self-financing’, which means that all costs have to be covered by rents. Not only this, but the Treasury also obliged councils to take on several billions of extra debt as part of the deal. In effect then, each tenant pays extra rent that funds this benefit to the Treasury.

Housing association tenants are not in the same position because many live in houses that have been grant-aided. But these grants have been cut by more than half their value per unit under the present government, and are due to fall further still. Currently, one-fifth of all new affordable rented homes are built with no grant at all, which means effectively that other tenants pay higher rents to fund the costs of their neighbours’ new homes.

So how does the government calculate that social tenants each receive £3,500 subsidy from taxpayers every year? The truth is that this is not money paid by the taxpayer at all; it is the difference between the rents actually paid and those that would be charged if the homes were to be let by a private landlord. While this is properly classed as an ‘economic subsidy’, it doesn’t add to people’s tax bills and is a largely meaningless figure given that councils and housing associations are non-profit organisations. In any case, as we have seen, people on much higher incomes than £30,000 are still able to get taxpayer subsidies, as long as they want to be homeowners. For example, a shared ownership applicant can get subsidy if they earn £80,000 per year, the buyer of a Starter Home can get a discount worth up to £45,000 if they earn up to £100,000 per year, and social tenants on any income can get subsidies of up to £104,000 as a Right to Buy discount.

When questioned on the nature of taxpayer subsidies to council tenants by Baroness Hollis of Heigham during the Bill’s committee stage in the House of Lords, Baroness Williams said:

“the rents are below market rent” [03]

Links:
[01]The debt settlement was intended to allow each council, from rental income, to manage and maintain its stock in a good state of repair for 30 years, or replace it where necessary, with enough left over to meet debt interest and repay the debt over the same period.

[02] See John Perry, Who really gets Government subsidised social housing? [Guardian, 27 January 2012]

[03] House of Lords Debate 14 March 2016 column1627

Baroness Williams of Trafford: As the noble Baroness says, the rents are below the market rent.

Baroness Hollis of Heigham: What the noble Baroness is saying is that every time private landlords’ rents go up, the subsidy to council tenants from the taxpayer is increased. That is Orwellian.

Baroness Williams of Trafford: My Lords, I think that we will have to agree to differ. I recognise that there are different opinions across the Committee on this, but I have made the point because social rents are lower than market rent.

ord Beecham: Market rents are artificial. There is nothing God-given about market rents because they are determined by landlords, largely on the basis of a shortage of affordable housing anyway. In so far as there is a subsidy, surely it is the subsidy that is paid in the form of housing benefit for private tenants, about which the Government propose to do nothing at all.

In addition to that, the noble Baroness referred to the need for consistency across all local authorities. She has not made an argument for that, she has merely stated it as a given. The Government do not take the same view about council tax. They did in a sense when they introduced the poll tax, and they seem to be making the equivalent mistake here with local authority rents. It is an absurd proposition that the same system should apply across all local authorities irrespective, for example, of the value of the housing and average local incomes. Where is the justification for the simple assertion that that must be the basis of the scheme?

Baroness Williams of Trafford: I am sorry, I thought that the noble Lord was going on to make a speech. The fact is that generally social rents are cheaper than market rents, although they have been going up at a higher rate than rents in the private sector. I do not think we can compare this proposal with council tax because different areas have different needs in terms of the services they provide.

 

APSE Direct News | The Housing and Planning Bill – what’s the problem?

APSE Direct News Logo

 March/April 2016

The Housing and Planning Bill – what’s the problem?

Kate Henderson, Chief Executive of the Town and Country Planning Association, and Paul O’Brien, Chief Executive of APSE, comment on the the key issues in the controversial Housing and Planning Bill.

Currently, the Government’s new Housing and Planning Bill 2015-16 is in the second reading stage in the House of Lords. The Bill has been seen as hugely problematic by many, including APSE and the TCPA, because it is still unclear how the actions described in it will help relieve the housing crisis facing the UK, despite the Government claiming their plans will kick-start a ‘national crusade to get 1m homes built by 2020’ and transform ‘generation rent into generation buy’.

Keen to gauge how others working in local government felt about the proposed changes, APSE teamed up with the TCPA to create and distribute a survey to local authorities across the country. This generated some very interesting, and some rather concerning, results. However, before we look at those in depth, it would help to first contextualise the Housing Bill and look and the problems it raises.

The Housing and Planning Bill 2015-16 aims to speed up the current planning permission process, working on the premise that less bureaucracy means more housing can be delivered quickly. This, the Government expects, will encourage people to self/custom build their housing, as well as giving developers some extra opportunities to build more commercial housing. This is welcome news as it gives authorities, private firms and the general public more freedom to build the houses they require. However, many believe this has come too late; though the permission is there, we will struggle to meet the country’s demand of 250,00 homes each year due to a shortage of workers and supplies.

Alongside this, the Government intend to build more Starter Homes for first-time buyers, namely people under the age of 40 who have not previously owned a home. Offering 200,000 homes by 2020, the Government has said there must be a discount of at least 20% to the buyer. These homes, which should be targeting teachers, police officers, nurses and other professional roles, will have a discounted price of no more than £250k outside London and £450k in London, making these properties unaffordable for most of the target workers. These are the kind of people that starter homes should be accommodating, yet they are the ones who will be unable to afford them.

In terms of social housing, the Bill details a Pay to Stay scheme, in which social tenants with incomes of over £30k – over £40k in London – will have to pay market rent on their properties rather than their current social rent. For local authorities, the money this generates must be given to the Government, whilst Housing Associations are able to keep the extra rent money. Moreover, it is considered unviable by many councils who see this as adding to the ongoing problems of a poor private rented market – so forcing people on affordability terms from secure council tenancies into the private rented sector – will do little to alleviate local problems.

As well as this, the Right to Buy scheme is being extended to housing association tenants. This move is deeply worrying as it will lead to a decrease in the amount of social homes available for those in most need. Despite allowing these properties to be sold off, the Government have no plans to give local authorities the funds needed to build more and replace them. This is a major concern for the already-sahky future of social housing.

So what did the APSE and TCPA survey tell us? Well the headline news is that others share our concerns.

We found that 93% of councils do not think that Starter Homes will address affordable housing need.

Moreover, almost 80% of local councils do not think that Starter Homes should be classified as affordable housing, and only 7% of councils think they will address the need for affordable housing in their local authority areas.

We also found that over two thirds of respondents anticipate that they will be building less social and affordable housing as a result of the Government’s plans to reduce social rents by 1% a year for the next 4 years.

This is against a backdrop of 96% of councils describing their need for affordable housing as ‘ severe or moderate’.

Moreover, nine out of 10  councils are concerned that the extension of the Right to Buy to housing association tenants will mean that there will be well socially-rented homes available.

Most starkly for the Government, 53 of respondents are from Conservative-controlled councils – this clearly shows a huge difference of opinion between Conservative Councils, charged with delivering more homes at a local level, and central Government policy.

So with the House of Lords scrutinising key measures in the Housing and Planning Bill, and pressure to deliver the Bill, is there room for concessions?

The answer has to be yes – there is a growing cross-party consensus for a series of amendments to be tabled which may yet ‘gut’ the worst excesses within the Bill.

APSE and the TCPA hopes that with cross-party working, more sensible approaches can be taken to delivering the homes our communities desperately need. It is time now for the Government to listen to local councils; they are best placed to really know and appreciate the impact of housing policy within their communities.

More details can be found at www.apse.org.uk and www.tcpa.org.uk.

LGA First | Making sense of housing policy

LGA-first-mastheadbc540x304w

No. 597 | March 2016

Features | Making sense of housing policy

Cllr Peter Box

Councils are keen to build more homes and the LGA is working hard to ensure proposed housing reforms don’t make that job more difficult.

Councils share the Government’s ambition to increase house building and enable home ownership.

From the outset, the LGA has been working privately and publicly to try to mitigate any of the potential negative impacts and unintended consequences of Government housing reforms on behalf of councils and local communities, But it is clear that the Housing and Planning Bill has wide-ranging implications for local communities.

Measures within the Bill – currently being debated in the Lords – risk combining to reduce the number of existing council homes, which local authorities will be forced to sell and then struggle to replace.

This could lead to an increase in the Housing Benefit bill as more people are forced to move into the more expensive private rented sector. This will do nothing to help councils reduce homelessness and the use of temporary accommodation.

The LGA has opposed plans to force councils to sell off homes to fund the Right to Buy extension to social housing, and a mandatory Pay to Stay policy [see below] and the provision of Starter Homes at the expense of affordable homes to rent. Meanwhile, we have been working at real estate services provider, Savills to understand the impact of these housing policies, as part of our effort to make the case for additional flexibilities to Government, Parliament and partners.

Plans for Starter Homes at discounted prices, for example, will help support home ownership in some areas but will nbe out of reach for all people in need of affordable housing in 220 council areas, according to Savills. We have argued that councils must have the flexibilities to shape the number, location, types and quality of Starter Homes to ensure that they meet local need, alongside other affordable homes for rent.

The LGA also strongly opposes the proposal to require councils to charge mandatory market-based rents to higher income tenants, and to take a sum of money from councils based on a national estimate of the additional income from higher rents. Many social housing tenants across the country will be unable to afford market rents or take up the offer to by their council house under this policy.

This Pay to Stay policy needs to be voluntary for councils – as it will be for housing associations to protect social housing tenants, and avoid hard-working families being penalised, people being disincentivised to work and earn more, and key workers, such as nurses, teachers or social workers, having to move out of their local area. Councils must also retain any additional income generated from rents to reinvest in new and existing homes.

The LGA insists the extension of Right to Buy to housing association tenants must not be funded by forcing councils to sell off homes. As a minimum, the LGA forecasts councils would be forced to sell 22,000 ‘high value’ homes in order to fund this extension.

This number could be much higher depending on how the Government chooses to define ‘high value’. Councils should always be free to manage their assets to meet the needs of local communities and must retain 100% of all receipts to reinvest in new and existing housing.

The LGA will continue to firmly make the case – in both private and public – regarding the importance of councils playing a  lead role in house building, reducing homelessness and benefits, and enabling home ownership.

Cllr Peter Box is Chair of the LGA’s Environment, Economy, Housing and Transport Board.

Analysis: Impact of the Housing and Planning Bill

Savills and the LGA project that 66,000 council homes will be sold to tenants under the existing Right to Buy scheme by 2020.

Local authorities could then be forced to sell a further 22,000 ‘high value’ homes by the end of the decade to fund plans to extend the scheme to housing association tenants. This could vary depending on how the Government defines ‘high value’ for different areas.

Required rent reductions, of 1% a year for the next 4 years, take £2.2bn from council housing budgets by 2020 – making building replacements extremely difficult.

There is a risk that of the 88,000 homes sold up to 2020, 80,000 will not be replaced. This will add £210m to the Housing Benefit bill.

Forcing councils to sell off homes to fund the extension of Right to Buy to housing association tenants could cost councils £6bn by 2020, according to Savills. A total of 5,500 homes would be sold each year should ‘high value’ be defined as the top third value of the regional market.

Discounted starter homes will be out of reach for all people in need of affordable housing – defined as those who would have to spend 30% of their household income to buy or rent a home – in 220 council areas [67%], and for more than 90% of people in a further 80 [25%] council areas.

Should the Pay to Stay policy be mandatory for all social tenants, around 50% of tenants deemed high income in the South East, East of England and London would not be able to pay market rents or take up Right to Buy, and would need to move out of the area to find a similar property.

SavsMa_451
The areas of the country that need affordable housing that can afford a Starter Home

FURTHER READING:
LGA Media Release Starter homes will be out of reach for majority of families in need of affordable homes in England  [17 February 2016]