Housing Management Implications of the Localism Bill Evonne Hudson Assistant Director Housing July 2011

The Localism Bill In its Localism Bill, published in December 2010, the Government sets out its proposals for future social housing policy to be enacted into legislation during These proposals include the establishment of a new social housing tenure – Affordable Tenancies, which is closely linked to proposals to significantly change the funding for housing development to be substantially funded through increased rents (as set out in the Affordable Homes Programme prospectus) and reform of the welfare benefit system which will impact on social housing tenants’ ability to pay rent.

What Is Affordable Rent? New Tenure introduced by Localism Bill Dec’ 2010 Fixed term > 2years The HCA allows rents to be charged at “up to” 80% of market rents. However, the HCA prospectus clearly expects rents calculated at 80% market rent (inclusive of service charge) to be the norm rather than the exception. The maximum rent levels that can be charged are the lesser of 80% market rent, Housing Benefit caps and Local Housing Allowances (30th percentile). Local Housing Allowances are not included as a cap on rents in the guidance although in practice LHA’s limit Housing Benefit levels in local areas to this limit. Target rents represent the floor for acceptable rent levels and where used will require justification on affordability or other grounds.

The Universal Benefit cap has not been amended or revised presenting an upper level for total benefit receipt of £18,200 (£350 per week) for single people and £26,000 (£500 per week) for couples or families. Conversion of existing homes to Affordable Rent is only available to landlords signing up to the development framework agreement. The prospectus allows for rents to increase by PRI + 0.5% - similar to the current rent-setting regime for social rent tenancies. At the end of the tenancy period, a re-assessment of 80% of market rent will be determined and the new tenancy re- aligned at the new valuation. Target Rent is lowest Affordable Rent

The Universal Benefit cap may limit families’ ability to pay rent for larger properties and in high value areas. In assessing what rent levels might be affordable to people in these circumstances, Origin has had regard to the benefit allowance that will apply to the typical occupation of different-sized properties, as follows: £400 for a couple (no children) – i.e 1-bed home £310 for couple with 1 child – i.e 2-bed home £265 for couple with 2 children - i.e at least 2-bed home £207 for couple with 3 children - i.e at least 3-bed home £150 for couple with 4 children – i.e 4-bed home £290 for single person – i.e 1-bed home

Organisational considerations One of the main concerns is that rents of up to 80% market rent, in high value areas, would result in very high rents (of up to £650 per week for a family home). This is not conducive to Origin’s core purpose to provide affordable housing, would be beyond the means of many people in housing need, and may act as a deterrent for tenants to get back into work if they are dependent upon Housing Benefit to pay the rent.

Want to be part of the development programme Limit the level of affordable rents that they will charge, so that properties can be afforded by individuals and families that may be affected by the proposed Universal Benefit Cap Will it apply to new build or existing stock Which properties will be relet at the affordable rent – all voids and relets, a percentage, continue to let some homes at target rent. Eg Origin – based on previous years turnover this would represent % of our social lettings and would mainly be 1- 2 bed properties How long would the tenancy be for, what rights does it carry, what obligations does it bring

Housing Management Implications Developing another form of tenure – Assured Shorthold Tenancies with a standard 5 year Term. In some circumstances the affordable tenancy will be for a minimum period of 2 years What is the implication for security of tenure, sustainability, void loss, will tenants commit to the community if 2 year tenancy, will they choose to go to another landlord, will they pay their rent, will they look after their homes. More intensive housing management Set out the processes for ‘matching’ prospective tenants to Affordable, or Assured Tenancies, by undertaking a more comprehensive assessment of need, household income and expenditure, and benefit entitlement in advance of letting.

The review period for these tenancies = tenancy audits With they be offered another type of tenancy or a renewal of the affordable tenancy Impact on current arrears, FTA’s and debt/benefits advice Implications for choice based letting schemes, nominations, transfer agreements Development of new tenancy agreements, policies processes Revision of a wide range of housing management policies, procedures and practises to accommodate affordable tenancies Undertake more detailed market research to have robust analysis of market rents on a localised basis and ensure that we have a reasonable categorisation of our properties to housing markets of broadly similar values.

Develop a set of processes and policies for collecting, keeping and using information about employment status and income levels of our existing and new social rent tenants. Undertake further analysis of benefits, incomes and affordability, using different means of calculations, to ‘test’ that policy approaches are working as intended, particularly when the impact of the benefit changes become clearer Develop a cost-effective Rent Revaluation process Develop more coherent processes for undertaking tenancy audits and reviews across the range of tenure types, to address concerns about affordability, changes in financial circumstances, changes in support or service requirements, sub-letting, tenancy fraud, over-crowding and under- occupation.

Review Housing Management Policies & Procedures Application and Allocation Arrears Management Rent-Setting, Increases Transfers and Exchanges Tenancy Termination, Renewal Succession, Assignment, Mutual exchanges Tenancy Reviews, Audits Tenancy Forms, Records

Information Management New Tenure Type Business Streams: SUN Mixed Tenure; Flexibility Different Rent Structure, Increases Fixed Terms and Renewals Reporting Requirements: TSA, HCA, KPIs Automated Processes

To conclude There are also numerous policy details which will require further analysis, as Government policy and guidance becomes clearer, and in light of 2010/11 outturns, which will mean that organisations will need to refine their outline policy in advance of implementation. There is significant work to be undertaken to prepare for implementation for Affordable Rents, and adequate resources with suitable skills need to be dedicated to achieve this, subject to decisions on timescales.