Challenging Times Update Nov 2015

July 2015 Budget Key Points The Chancellor George Osborne announced a raft of measures to lower the annual welfare budget. The cuts will be phased over 3 years with the aim of achieving an annual saving of £12billion by Social Housing rents to be cut by 1% a year for 4 years from April HCA Regulatory Guidance Benefit cap cut to £20,000 outside London and £23,000 in London – Part of Welfare Reform & Work Bill Young people aged making a new claim for universal credit will no longer be entitled to the housing element, although there will be some exemptions to this policy – Part of Welfare Reform & work Bill.

Budget Key Points The rates of most working age benefits and tax credits will be frozen for 4 years from April 2016 Part of Welfare Reform & Work Bill. The level of earnings at which household tax credits and Universal credit award starts to be withdrawn will be reduced – proposals withdrawn as part of the Autumn Financial Statement Child credits and the child elements of universal credit will be restricted to 2 children for new claims and children born after April 2017 Part of Welfare Reform & Work Bill Parents including loan parents claiming universal credit will be expected to prepare for work when their youngest child turns 2 and to look for work when the youngest child reaches 3 Part of Welfare Reform & Work Bill. HB claims will be backdated for a maximum of 4 weeks Part of Welfare Reform & Work Bill.* Bill at final committee stage in the house of Lords 2/12/2015 one further reading then Royal Assent.

1% Rent Reduction impact on CHISEL

What can CHISEL do to mitigate the impact Increase income – developing more shared housing or income from pay to stay. Reducing expenditure – as CHISEL is a fairly lean organisation savings not huge in most areas of expenditure. 3 main cost centres:– - Loan repayments on properties - Staffing Costs - Maintenance Costs

Pay to Stay Tenants earning more than £40,000 per annum in London and £30,000 outside of London will have to pay rents of up to market rent level Proposal is that those earning between £40 - £50k in London will pay 80% market rent and those above £50k will pay full market rent and increase will be immediate from April Household income is based on top 2 earners in the household and includes income from benefits Legislation will be introduced requiring tenants to declare income. Government Consultation paper issued in October, consultation closed 20 th November. Govt aim is that this will Introduced from April 2017

Impact of Pay to stay It is estimated that 27,000 HA tenants will be affected by this in London 60% of affected households in London will neither be able to afford market rent or be able to buy their house under RTB Govt have recognised that Pay to Stay may increase the HB costs, so yesterday in the autumn financial statement introduced a cap on HA rent levels eligible for HB at the same level as the local Housing Allowance which currently operates across the private rented sector.

National Housing Federation ( NHF) Response  Pay to Stay should remain voluntary for HA’s ( legislation has been in place since 2012 for HA’s to charge market rents for households with incomes over £60k but few associations have done this).  Design of the scheme needs to ensure that people are not worse off for increasing their earnings  HA’s should have option of using income thresholds and taper system set by Govt or determine their own levels based on their own policy  HA’s should have control over how they assess market rents.  Pay to stay should not apply where a household is entitled to income related benefits

CHISEL’s Response to Consultation Requested that self builders be exempt from this legislation Will also run piece on CHISEL website encouraging residents to lobby their own councillors and MP’s and suggest residents sign up to a petition to Brendan Lewis on 38degrees website to increase the threshold to £60k and £70k in London the-threshold-for-pay-to-stay

Current Market Rent Examples 1 bed flat in Brighton £170 per week 2 bed flat SE28 (Thamesmead) £277 per week 2 bed flat Musgrove Road SE14 £335 per week 2 bed flat Shardeloes Road SE14 £265 per week 2 Bed flat SE20 Penge £255 per week 1 bed flat SE23 Stanstead Road £254 per week 2 bed flat Brockley Park £369 per week 2 bed flat One Tree Close SE23 £381 per week 2 bed terraced hse Catford (Laleham Rd) £277pw 3 bed ex council hse Bellingham £323 pw

Extension of Right to Buy (RTB) to HA Tenants Announced in the July budget and was due to be introduced as legislation within the new Housing & Planning Bill. NHF did a deal with the Govt to keep it out of statutory legislation by agreeing that the HA sector would introduce it voluntarily. This deal was agreed on 7 th October and now not part of the proposed new Housing & Planning Bill. However the forced sale of high value council housing is to fund the discounts offered by the scheme is still part of the proposed legislation.

RTB cont. The launch of the RTB pilot scheme was announced yesterday in 5 HA’s before being rolled out across the sector. The 5 associations involved are L&Q, Sovereign, Riverside, Saffron Housing & Thames Valley Housing. The HA scheme will mirror the current eligibility criteria and discount rules for current RTB scheme for council tenants:-  Need to be a social housing tenant for min of 3 years  Discounts dependent on length of tenancy, the max discount available is 70% of the purchase price but capped at a monetary value of £103,900 in London and £77,900 elsewhere.

Impact of the Right to Buy NHF estimates that approx. 221,000 HA households will be eligible for the new proposal and could afford a mortgage. If all of these take up the scheme it will cost £11.6billion in discount Discount to be funded through the sale of high value council homes when they become vacant. The voluntary deal allows associations to determine what property it sells The voluntary deal is based on the promise that associations will receive the full market value of the property. HA’s expected to provide replacement homes for those sold under RTB within 3 years of the property being sold or loose the money. The replacement home will be funded 70% upfront with the remaining 30% being received on the completion of the new home.

RTB Issues for CHISEL We estimate we could loose between 16 – 20 properties which are more likely to be houses than flats Staff resources and costs associated with processing sales Legal issues around the sale of properties particularly where there are communal grounds and carparks CHISEL’s ability to replace the homes that are sold because the Govt’s preference is for associations to build new homes and we are not currently a developing association. Staffing resources & skills needed to manage leasehold properties – service charge accounts 7 maintenance arrangements etc.

RTB issues for CHISEL Tenant’s Property values & affordability of servicing a mortgage Ability to get a mortgage One off Buying costs Ongoing maintenance costs May need to consider other options such as Shared ownership or Help to Buy but these will mean buying a home elsewhere not the property they currently live in.

Property Values 2 bed House SE28 -£260,000 2 bed Flat Brockley Park SE23 - £329,000 3 bed House Segal Close SE23 - £552,000 1 bed Flat Deptford High Street - £261,000 3 bed House Drakefell Road SE14 - £670,000 2 bed Flat Kingswood Ave SE20 - £372,000 2 bed House, Silvermere Road SE6 -£379,000 1 bed Flat, Eglinton Hill SE18 - £225,000

Where to get further advice