Affordable Rent? How does that work Minister? Updated

Affordable Rent – that’s simple isnt it, it’s 80% or up to of gross market rent, the official guidance in the Affordable Homes Programme framework document tells us that!

Yes, but it is entirely dependent on being able to derive ‘gross market rent’ or GMR.  If you can’t find out what GMR is as a figure then you can’t set 80% of it can you?

GMR the guidance tells us should see landlords using figures supplied by private lettings agencies (PLA) on what is the typical private rent figure in the area (and presumably the broad market rent area or BMRA as its known.)

This week alone we have had today the English Housing Survey which analysed all rents though only covers 2009/10 and so is well out of date for such purposes.  Still it said that average private rent is £153pw in its summary, though it is £156pw at 1.16; £162pw at 1.17 and £149pw at 1.22.  So which is it?

Perhaps we should look to the Rightmove survey released yesterday (see http://blog.findaproperty.com/renting-letting/findapropertycom-rental-index-october/) which is broken down into regions, though of course regions such as the North West contain many BMRAs.  Well hang on it did give a national average rent figure like the English Housing Survey (still with me?) and this was £890 per calendar month.  That equates to £205.40pw.  Yet £205.40 is very different from the EHS figure of £153/£156/£162/£149 – a difference of as much as 38% no less.

But then we have another PLA research today (see http://www.bbc.co.uk/news/business-15384791) saying national average rent – which broadly equates with GMR except the guidance tells us GMR needs to include service charges – of £718pcm or £165.70pw.

Yes I hear you say £165.70 is quite a bit different from £205.40 its a 24% difference.

So imagine you work for a social landlord and are charged with setting the rent level under the Affordable Rent scheme or AR.  Which figure is GMR? Here are your options:

A) You follow the Rightmove figure (after all IDS is fond of quoting their research on HB reform as official figures In Parliament so a safe bet you’d think).  You set the 80% AR level at 80% of £205.40 pw and its £164.32.

or

B) You play more cautious and use the other ‘GMR’ figure of £718pcm / £165.70 and so set the weekly AR at 80% of this so its £132.56.

But

(1) If you choose B) above then you reduce the income to your RSL of the 1500 AR scheme by £31.76 per property per week so that’s £2.5m per year less your FD is not going to be happy !  Your Development Director now advises the entire AR scheme doesnt stack up financially and your employer is £150m down based on the 60-year lifespan of the scheme.  You are not going to be popular are you?

(2) Choose A) above and you get £2.5m a year more so keeping your FD happy.  However, your legal department says that if your GMR figure of £205.40 pw is wrong and its the £165.70 figure, then you have committed your landlord employer into setting an unlawful rent as it is above 80% of GMR. and;

(i) Some tenants are taking legal action to the effect that you have been overcharging them by £31.76pw and a class action is taken by all 1500 AR tenants against your landlord for this £2.5m per year overcharge.

(ii) The legal cost of defending this would be a further seven-figure sum which your landlord hadn’t budgeted for and so can only recover through increasing rents …. not a good option as….

(iii) Your employer is castigated all over the Housing media as they have been robbing their tenants through overcharging….

(iv) The tenants legal challenge reveals the average non-AR rent in social housing is £76.16 and so the AR scheme with a rent level of £164.32 was a 116% increase on ‘normal’ rent level in any case; …. and generally…

(v) The good reputation your landlord has built up over the last 100 years has just been blown out of the water!

(vi) Your colleagues in rent accounting are asking you how they record the situation. Is it an arrear, a write-off? Theres no guidance in RSR for this situation so what do we do?

(vii) Your FD just received a phone call about the debt on the AR scheme, he calls you….

You tell him you’ll go back and have a look at the figures and what do you find…….

UPDATE 24 October 2011

SpeyeJoeJoe Halewood @ @grantshapps @JakeBerryMP – they also have gross market rents at
£205.40 pw + affordable rent £164.32 qv current nat av social rent £76.16

20 OctFavoriteReplyDelete

in reply to ↑@JakeBerryMPJake Berry

@SpeyeJoe @grantshapps I will take a fresh look.

No call as yet 24 October 2011 just another news release from Jake Berry claiming that RTB kept down private rent levels and reduced waiting lists: (http://www.24dash.com/news/housing/2011-10-24-Council-house-sell-off-cut-waiting-lists-and-price-of-private-housing-says-Shapps-aide)

“Between 1980 and 1997 the then-Conservative Government sold 2 million council homes. One would naturally think this would have increased waiting lists for social housing. In fact, it had the opposite effect, waiting lists fell from 1981 to 1997. This low-cost affordable route into home ownership kept the market price of private housing down, enabling more families to realise the dream of owning their own home while at the same time keeping waiting lists falling.”

And then goes on to say:
“David Cameron’s New Right to Buy policy will deliver similar dividends, but this time it will also replace social stock for new affordable rent homes compounding these benefits“

Interesting how this news release which seeks to provide more justification for RTB is (a) being delegated down to Jake Berry; (b) is conflated and fundamentally flawed with no substantiation, and (c) is even more vague on replacements.

(a) is this evidence of Conservatives needing to have the rank and file bolster their political ideas?  Or is this a delegating down to Jake Berry to take the flak for a flawed policy and flawed savings?

(b) Note well that ‘similar dividends’ is not the same as reducing waiting lists and not the same as depressing private rent levels, both of which were the claims for the original RTB.  If Cameron, Shapps and Jake Berry believed that the ‘new RTB’ will depress private rent levels and reduce waiting lists then they would have said so.  Yet they havent said this at all.

(c) I further note that “...but will also replace social stock for new affordable rent homes..” is not the same as the 1 for 1 replacement that Cameron and Shapps both pledged would happen.  Again if 1 for 1 replacements are being pledged why not say this?  The absence of such a pledge or guarantee smacks of this not being the rank and file Jake Berry being used to bolster the policy, but the rank and file Jake Berry being delegated to dilute the pledge of a 1 for 1 replacement (Which in any case could be replacing a 4 bed RTB with a bedsit couldn’t it?)

Of course these affordable homes replacements still have to have a rent level set which they havent and can’t have because of the woolly and vague nature of ‘gross market rents’ and how GMR is assessed or derived.  Rather than address this fundamental issue we have deflection and no response on it.

Can you imagine how social landlords go about financing this programme? Well this is how my FD just put it to me rather haughtily though succinctly…

Landlord:  Mr Financier we request £150m to build 1500 new homes

Mr Financier: And what is your return on these homes?

Landlord: Er…well… we cant be sure!

UPDATE 25 October 2011

You note that the IPPR has just released a research report entitled “Buy Now Pay Later” and in this you find a reference to Alison Seabecks thoughts on this:

“Across England as a whole, 80% of the average weekly market rent for a three-bedroom property is £249, which rises to £350 in London. The comparable social rents are £84.56 across England and £110 in London. Social housing providers are likely to be given greater freedom to choose their tenants and we could see low-income families, the unemployed and vulnerable excluded from new social lettings because they can’t meet the average extra £8,550 a year for a home across England or the average extra £12,480 in the capital.”

http://www.guardian.co.uk/commentisfree/2010/oct/21/cuts-devastating-blow-housing

So where did Alison Seabeck get these figures from as they are not sourced in the article?  You are still therefore none the wiser in determining just what the hell this ethereal ’gross market rent’ figure is?

So you delegate someone else in your department to contact Alison Seabeck to see where these GMR figures for a 3-bed came from hoping these will include the 2-bed and 1-bed rates so you can provide an accurate figure which your FD (and the Financiers) want and have a right to know.

But if Alison Seabecks figures are correct – and she was the Shadow Housing Minister after all – then another problem arises.  The CIH and NHF you recall in discussing the overall benefit cap stated that a family with three children, who would need a 3-bed property, receive on average £317pw in all other benefits and reliefs such as Council Tax relief.  This means that Universal Credit will only have £187pw left out of the £500 overall benefit cap limit to pay for housing.  Yet if the AR is going to be £249pw as Seabeck says then where is the £62pw gap going to come from.

You breathe a sigh of relief that your landlord is not developing this AR scheme in London as that would be a £163pw gap between the ‘affordable rent’ level and the ability of benefit to pay.  You think this is strange and perverse that the make up social tenants in London will have to pay is 148% of the current rent they pay…and this reminds you that you need to get back to the recruitment consultant to say No but thank you I wont be going to that interview you arranged for me this morning after you called.

You realise your position, just like the Affordable Homes programme, is totally f****d!

You turn to your assistant the one you delegated the responsibility to check the Seabeck figures, ask him has he ever fancied being a plumbers mate as you call the FD back and ask who has the maintenance contracts…..

Note to Reader

Further updates as and when new GMR figures are revealed…so probably a further three this week…. to be continued ….

AR – £423m HB increase at 70% of GMR

Thursday 20^th October 2011

I have blogged previously on why the Coalition Government’s flagship Affordable Homes programme is wrong and costly.  The cost element to the individual tenant is anything but affordable and that has received much comment elsewhere.  I have focused on the cost to the public purse in previous blogs and exposed the huge extra cost this has for the overall Housing Benefit bill.

This al new blog revises those costs significantly upwards.

Affordable rent is based on up to 80% of gross market rent and this 80% figure I maintain is £164.32 per week and how I arrived at that figure is detailed below under “The Definition of Affordable Rent.”

There has also been a new set of Housing Benefit figures released on 12 October 2011 and these can be found at http://statistics.dwp.gov.uk/asd/index.php?page=hbctb

These latest HB figures reveal the national average in-payment figures per week based on tenure type and show that:-

(a)   Amount paid to council house claimant (full rent) of £71.01

(b)   Amount paid to association claimant (full rent) of £80.19

(c)    Amount paid to regulated private tenant (full rent) of £79.78

(d)   Amount paid to unregulated private tenant (part rent) of £112.95

(e)   Amount paid as average to all private tenants is £110.57

The Housing Minister is on record as saying his Affordable Rent policy won’t cost the public purse any more money in a Q&A article in the Guardian on 31 March 2011.  He was asked:

““Please can you explain what the understanding is between yourself/CLG and Iain Duncan Smith/DWP on how the total housing benefit bill will stack up in the future? Affordable rent will inevitably mean housing benefit payments will rise, and yet IDS seems set on reducing the HB bill. How do you square that circle?

The response from Grant Shapps:

“I appreciate that at first sight your logic seems sensible. Build affordable rent, allow all of the up to 80% rent to be covered by Housing Benefit (HB) and surely the bill must rise. However, this misses out an important factor from the equation. Many of the people likely to move into Affordable Rent homes are living in the Private Rented Sector and may be receiving HB for all of their current higher rent. Therefore in HB terms there isn’t much impact through our Affordable Homes programme.” (My emphasis)

I have emphasised two issues.  The first confirms that affordable rent (AR) levels will be paid in full by Housing Benefit and the second that as Shapps expects PRS tenants to move into AR homes and flowing from that the cost is negligible to the overall public purse.

As my figures above show an AR rent of 80% is £164.32 and average amount paid to PRS tenants is £110.57.  This is a difference of £53.75 per property.

Shapps is seeking and says he will deliver 170,000 new AR homes and more recently he is on record as saying firstly another 100,000 (to make 270,000 new AR) will be developed through the ‘new’ right to buy (RTB) and then perhaps a further 100,000 on top of that to make 370,000 new AR tenancies. Shapps best case scenario and lower cost to the public purse would be if these new AR tenants were currently PRS tenants.  Yet what he states is a negligible cost to the public purse is anything but. If each of these 170,000 new social tenants were PRS tenants previously then the overall HB bill would rise by £477m per year! If it’s 270,000 the increase its £757m per year, if it’s 370,000 then its £1.04 billion per year.

Shapps best outcome is 370,000 new AR properties – the original 170,000 plus a further new 200,000 AR properties from the new RTB.  The cheapest way for this is to move 370,000 PRS tenants into them as he correctly says and so Shapps best political option and most preferred option could cost the public purse an additional £1,037,701,339 per year – over one billion pounds a year more!

His worst case scenario is for all 370,000 to be existing council tenants who would see their benefit bill increase from £71.01 in HB to £164.32 – a mere £93.31 each per week (and a 131% increase!) and would see the HB bill rise by £1.8 billion per year!

These are maximum figures and assume that the maximum 80% of GMR is used as the average AR level.  It also means that 100% of new AR social tenants would receive benefit, whereas the average national figure is about 66% and so revision is needed. Yet even using 70% of GMR not 80% and having 66% of all new AR tenants claiming benefit would see a rise and additional cost to the public purse of £423m per year.

However, we have already seen that some new AR properties are to be used for existing housing association tenants and so the very best we can say is that the Affordable Homes programme will deliver an additional yearly public purse cost of £423m. There are some further issues to consider.  For example if you increase a social rent from the council figure of £71.01 or the association figure of £80.19 to £164.32 pw then these 131% / 105% increase in  rent will have a significant increase in ‘worklessness’ by more than doubling the ‘benefit dependency’ of such tenants. Nice new house but far greater chance of affording to work in simple terms.

Affordable rent and affordable homes is nothing of the sort for the tenant or for the public purse.

The Definition of Affordable Rent
Shapps definition of ‘affordable rent’ is found on the CLG website at http://www.communities.gov.uk/statements/housing/1792187.  In the section on ‘Rent’ issued on 9 December 2010 he states:

“Housing associations will be able to let an Affordable Rent property (whether a converted void or new build) at up to 80 per cent of market rent for an equivalent property for that size and location. The association’s calculation of the market rent would need to be based on a residential lettings estimate for a property of the appropriate size, condition and area. Valuations should be in
accordance with a RICS recognised method”

I have highlighted the above section which says the HA is responsible for the calculation and it should use a ‘residential lettings estimate’ of the market rent. Earlier in the same news release Shapps says “The Homes and Communities Agency will publish a full framework document early next year that will form the basis for bids from providers who are interested in offering Affordable Rent.”

At 3.3 and 3.4 of that Affordable Homes Programme Framework document issued in early 2011 it says:

3.3        Affordable Rent is a form of social housing. Homes will be made available at a rent level of up to 80% of gross market rents. Gross market rents are generally expressed inclusive of any service charges. An Affordable Rent, set at up to 80% of the gross market rent, should take account of the service charge for a property (where applicable).

3.4       Providers will be able to let a property at an Affordable Rent (inclusive of service charges, where applicable) of up to 80% of the gross market rent which reflects the property size and location. The maximum rent level for Affordable Rent should be assessed according to the individual characteristics of the property. Landlords are required to assess the gross market rent that the individual property would achieve and set the initial rent (inclusive of service charges) at up to 80% of that level. “

We can see that Shapps use of ‘market rent’ in the first news release is clarified to mean the more specific ‘gross market rent’ rather than the potentially ambiguous and ill-defined ‘market rent.’ The gross market rent is therefore becoming clearer.  It is how much would a residential lettings agency market and expect to achieve for a similar property.

On 19^th October 2011 Rightmove published its latest figures for average market rent and it states:-

“The FindaProperty.com Rental Index is the most up-to-date sample of residential property letting prices. The index monitors changes in letting prices both annually and monthly, providing a comprehensive view on the current state of the property market in England and Wales”

Source: The FindaProperty.com Rental Index – October http://blog.findaproperty.com/renting-letting/findapropertycom-rental-index-october/#ixzz1bJjND6Sw

This comprehensive view states that the asking price which compares to the gross market rent is now at £890 per calendar month on a national average basis.  It is also worth noting that ‘gross market  rent’ (GMR) should also include any service charges and this Rightmove figure is not clear whether it
does include service charges or not.  If it does then £890 pcm is the best estimate we have of GMR, if it doesn’t then GMR will be higher than this (and so increase the overall HB bill.)

So we arrive at a GMR figure of not less than £890 pcm and in weekly terms this definable GMR figure becomes £205.40.

This means the ‘affordable rent’ figure at 80% of GMR is £164.32.

HB cost £7bn over coalition target

Update 18 October 2011

It has been announced today that the RPI figure for September is 5.6% and this may add a further £1.875 billion to the HB bill in April 2012 making the overall HB bill about £7bn above the coalition target of £18 billion. 

Average HB payment to each 4.9m+ HB claimants is currently £87.37 and rent levels for social housing rise by the formula of ((RPI+0.5%) plus or minus £2).  The £87.37 figure would rise to £94.70 if social landlords followed the formula and if private landlords did the same.  Both of these are likely to happen and extrpolated this add £1.875 billion per year to the HB bill.

The comment in non-bold text below is from a previous blog which demonstrated that the overall bill would be £5.2 billion higher than the coalition target by early 2012 and only this bold text here is new.  Though for the full explanation and for new readers it has been included. Given that the whole raft of HB reforms were only expected to save ‘nearly £2 billion’ then the overall bill will be £5 billion higher than target or 28% above coalition target even if those savings are achieved! 

Housing Benefit reforms were first outlined very soon after this coalition took office in May 2010. The extract below from the July 2010 Housing Benefit Digest issued by the DWP explains:

The Chancellor announced a package of Housing Benefit (HB) reforms in his Budget statement on 22 June. It is the most significant and comprehensive reform programme for HB since the scheme was introduced in the 1980s. The background is the budget deficit and the reductions in public expenditure that the Government is making to tackle it. Ministers are clear that the overall cost of HB, forecast to be around £20 billion this financial year, must be controlled and reduced. The package of reforms will save nearly £2 billion by 2014/2015. There are also important policy considerations around fairness and work
incentives that lie behind the reforms”

http://www.dwp.gov.uk/docs/issue-103-july-2010.pdf

I’ll leave aside the socio-political policy considerations around fairness and work incentives, not because they are not important or as important, and many believe they are more important as I do, but because the financial savings claimed are simply not going to materialise. Instead I address the statement that: -

“Ministers are clear that the overall cost of HB, forecast to be around £20 billion this financial year, must be controlled and reduced. The package of reforms will save nearly £2 billion by 2014/2015.”

The definite use of ‘will’ as in the “…package of reforms will save nearly £2 billion by 2014/2015” is very assertive but highly unrealistic I argue using the latest statistics and figures. (http://research.dwp.gov.uk/asd/index.php?page=hbctb)

The £20 billion or so forecast with nearly £2bn saving sets the coalition aim of the overall HB cost to be circa £18 billion per year – an ambitious and I argue an unattainable target

At the time of the announcement of these reforms in May 2010 the coalition were working on the basis of the February 2010 HB figure which was £20.48bn and the “…forecast to be around £20 billion this financial year” quoted concurs with this. Or simply if it is a forecast for 2009/2010 financial year then the latest figures didn’t include March 2010 and so must be February 2010 figure.

The latest (June 2011) overall figure is £22.345 billion and so has already risen by £1.87 billion. As such the “…nearly £2 billion by 2014/2015” aim or target needs to find £4.345 billion pounds of savings to meet the target HB figure.

HB costs have risen by approximately £120m per calendar month in that time and the first reforms don’t come into effect until January 2012 (and even then with a phased implementation) and based on current trends the overall HB bill will increase by a further £840 million or £0.84 billion to reach £23.2 billion and this is £5.2bn above the target figure. The HB reforms will therefore start from a position of being £5.2 billion and 29% above the target figure.

As I blogged late yesterday http://wp.me/p1vuvL-1y in an update to the original article there is deep hypocrisy and duplicity in the inactions of the Housing Minister Grant Shapps to regulate private tenancies, and if he did then the figures show we pay £2.7bn more for unregulated private tenancies than we do for regulated ones. Yet in June 2010 when he announced the HB reforms Shapps ruled out any regulation of private landlords – see http://www.guardian.co.uk/money/2010/jun/10/landlord-regulation-proposals-scrapped and one can only assume this was a political decision and the economic
rationale is simply not there as the official SBHE figures prove.

UPDATE 20
September 2011 – The venerable Mr Shapps has been tweeting today that John Prescott’s plan to regionalise fire services wasted £496m and thereby cost every tax paying family £20 a year. Ergo his failure to regulate PSLs that costs £2.7bn per year at the test figures and rising must cost the average tax payer £110 per year!!

Rather Shapps has developed the contrived and ineptly named “Affordable Rent” model of social housing which will see social housing rents increase from £76.17 per week as a national average to £130.16 http://wp.me/p1vuvL-2l an increase of 71%. So much for ‘affordable!’ As a further update as at today 16 September 2011 a report (see http://www.bbc.co.uk/news/business-14934316) states that the national average ‘gross market rents’ have increased yet again meaning the 80% AR figure for social lets will be £131.64 and an increase of 73% on national average social rents.

Finally, it is time for the social housing lobby to stop making argument about the impact of the HB cuts. Yes they are offensive and will have a life-changing impact, but such arguments as to social impact are not working. As is ever the case undermining the bottom-line financial argument made by government is a stronger argument in my view. And as some of my earlier blogs reveal we currently spend £3.27 billion more on private tenancies than we do for the same number of council tenancies. Joe Public is horrified with the 10 cases (yes thats all and this is 0.00002% of all cases!) out of 4.9m claimants getting over £100k per annum in HB as this amount to over £1 million per year, I’m sure they will be just as angry at the £9 million PER DAY excess their taxes pay to one type of landlord over another, and especially when they provide a lower quality product and service.

The fact that we now pay more in HB per property to Housing Associations (av. £80.11 per
week) than we do to regulated private landlords at £79.45 per week just exposes the madness of paying £113.74 pw for an unregulated private tenancy.

It’s time for the housing sector to expose the financial duplicity of this coalition and hold the coalition and Shapps in particular to their oft-stated aim of getting value for money with the public purse.

non dulce et decorum est pro optimus frustro vestri patria

Back of a fag packet maths to a back of a fag packet policy

What am I missing?  David Orr head of the National Housing Federation as part of their Welfare Action Week wrote an article for Inside Housing see

http://www.insidehousing.co.uk/tenancies/action-stations/6518295.article

In this he cites some data on the under-occupancy HB reforms:

“This is the harsh reality facing over 670,000 social housing tenants in Britain. The government claims docking housing benefit for anyone deemed to be ‘under occupying’ their homes will help free up bigger properties for families stuck on waiting lists. But the argument is deeply flawed. It assumes there are a large number of smaller homes for people to move into. They (sic) aren’t. An analysis by the Federation found 180,000 social tenants in England were ‘under occupying’ two-bedroom homes, but only 68,230 one bedroom homes became available for letting in 2009-10. Where are they meant to go?”

All good points yet the cost?

The reduction we are informed will be on average £13 per week and on the surface this would equate to a £112m reduction in the HB bill with 180,000 receiving £13 less.  Yet, the simplistic proposal would see all 2 bed social under-occupiers moved to a 1 bed social home in 68,230 cases leaving the other 111,770 moving into 1 bed PRS accommodation.  The differential between 2 bed council HB rates and 1 bed PRS LHA rates is about £30 per week more in the PRS.

Extrapolate the figures sees the potential  £112m per week saving on social housing HB needs to be offset against a £174m increase in LHA.

So the overall HB increase, not saving, from this measure is £62m per year or a 55% increase!

Confused?

The DWP paper on rent in supported housing – it WILL close

The DWP purported consultation paper has a deadline for response this Sunday October 9th 2011 and I have blogged on numerous aspects of this paper individually.

For example the worked figures and comment which shows that “Rent cuts of between 24 and 65%” is the outcome http://wp.me/p1vuvL-P is here, and the numerous papers on the “DWP’s spurious need for reform” are to be found here http://wp.me/p1vuvL-u

The claimed need for reform by DWP is wrong and highly spurious and will see:

1. far greater cuts to services than any of the SP cuts for support services, and
2. will make much of current supported housing provision financially unsustainable
3. current provision will be forced to close out of financial necessity and,
4. new providers, whether social, charitable or even private, will not enter the market and provision will drop significantly.

The only logical response to this consultation is to rip it up and go back to the drawing board.

1. Cuts – The worked examples of actual services reveals that traditional accommodation-based provision such as hostel and refuge will see real cuts in funding of between 24 and 65%.  That needs no further comment or explanation.

2. That alone – the proposed LHA or LHA+’x'% – will make so much current provision financially unsustainable.  When other HB reforms such as not exempting single women fleeing DV from the single room rent and the overall HB caps denying access on financial grounds to refuge as the residual Universal Credit will not cover the refuge rent figure are just some of these factors.

However, the flat-rate payments are the only guarantee.  The paper proposes that local government can decide whether to fund or not the rest of the eligible housing costs (such as furniture etc in hostel and refuge and other emergency access provision.)

Currently this is a qualified right under HB regulations and this paper seeks to remove that qualified right and replace it with local government discretion. That is unacceptable.

No provider in any sector will remain in a market, or will not enter a market if necessary expenditure outlay such as furnishing a refuge or hostel cannot be guaranteed to be recouped.  Yet that is what this paper envisions and if one reason was needed why this set of proposals should be ripped up and started again, it is this.

Asking providers of supported accommodation to take such a huge financial risk would be just cause for them to flee the market at the best of times.  Yet in a context of unregulated and unmonitored Supporting People cuts and lack of exemptions from other HB reforms such as those above it is financial suicide for supported housing providers.

The DWP paper naively is seeking increased choice and increased simplicity for service users as part of the Personalisation Agenda in proposing a flat-rate payment.  That is an admirable aim.  Yet by focusing purely on the demand side of the equation the DWP totally ignores the supply side of the equation.  In doing so and in implementing these proposals for flat-rate LHA or LHA+ it will reduce choice massively as providers rightly and out of necessity flee the market.

Supported housing landlords and their managing agents should not simply follow the sought responses to the set questions from the DWP.  After all its pointless choosing the colour schemes of a house built on sand and this set of proposals is that house built of sand on the beach when the tide is out. They should and need to inform the DWP that these proposals will make accommodation based supported housing unworkable and financially non sustainable and will inevitably close for the reasons given above.

The new RTB – buy your council house and get a week in Benidorm

Cameron announces new Right to Buy (RTB) with even bigger discounts is the headline announcement today.  Early reports on this are on the Guardian website and there they restate what Cameron said on the Andrew Marr show this morning. -

“That could build 100,000 homes, 200,000 jobs in our economy. We’re not stopping there, we’re saying let’s bring back the right to buy your council house, with proper discounts that Labour got rid of, and let’s use that money, as people choose to buy their council home, let’s use that money to build homes for rent, for low rents for families that are currently stuck on housing lists.”

He said there were more than 2m council homes still available for purchase.

“This is something that could make a big difference and again that could provide another 100,000 homes, another 200,000 jobs. So taking those two policies together that could provide 200,000 extra homes, 400,000 extra jobs.”

I have emphasised what Cameron said and especially the word could rather than will or shall or some
other more definitive term.  Am I being pedantic here or even cynical in my interpretation?  I don’t think so as I strongly believe that such a policy announcement would have been scripted very carefully from the coalition, yet that’s a minor point.

Let’s assume there is a replacement new build for each council house sold.  Isn’t selling off something,
let alone a national asset, at an increased discount and then replacing it with a new one in need of extra money to bridge that gap?  But if the new land is free then perhaps it can work so that’s not my problem either.

Grant Shapps the Housing Minister has tweeted that each RTB sale WILL be replaced with a new council house at his “affordable rent.” No my beef is not with believing that the Housing Minister would choose to use the more definitive and more politically appealing terminology.  After all that is what one would expect from a Housing Minister discussing a housing issue!

My beef and problem is that Shapps, Cameron, the Coalition and especially Iain Duncan Smith the Welfare Minister still doesn’t get ‘affordable rent.’  The figures show in stark and unambiguous terms that the ‘affordable rent’ model WILL cost so much more (and that is the correct use of ‘will’ unlike Shapps version.)

National average rent for a council house is the same as the national average amount paid to council house HB claimants as HB covers 100% of the rent there.  So with some accuracy we can say the average council house rent is £71.14 per week.  In the 1 for 1 replacement of the new RTB these 100,000 replacement council properties will have their rent set according to the errantly named ‘affordable rent’ model and this currently is £131.64 per week – a whopping £60.50 and 85% increase!!

If all of these new council tenants claim HB the overall increase to the HB bill will be £315m per year, or if this follows the national average and has 69% of council tenants claiming HB it will be £218m more per year. This is because the misnamed ‘affordable rent’ model sets a rent level of up to 80% of the gross market rent which currently stands at £164.55 / £713 per calendar month. So this new RTB will at best produce a net increase of council houses of zero and this will cost the public purse £218m or £315m.

The apparent ‘logic’ of Shapps is that the new 100,000 council tenants will have transferred from higher cost rented properties and especially the private rented sector and so (as Shapps has said before) there
will not be an increase to the public purse. The national average amount paid to claimants from the
national HB statistics in the private rented sector is £111.18 which will be replaced with his ‘affordable rent’ figure of £131.64 which is £20.46pw more.  Multiply this by 100,000 to give the best outcome for Shapps ‘logic’ and we see the additional cost is £107m per year.

In words which Cameron and the coalition will not wish to here this is an additional ‘subsidy’ of over a hundred million pounds a year to the feckless workshy benefit claimants that will further exacerbate their
benefit dependency.

The ex-private rented sector tenant may also decide to give up work as well in these circumstances.
The figures again using the national averages explain the new environment: -

Current situation is a gross market rent of £161.55 of which £111.18 is paid through HB and this approximates to 70% of rent paid for by the public purse with the tenant having to make up the other 30% of £50.37 per week and hence the private tenant has to work or be evicted on arrears.

The new environment is a gross rent of £131.64 of which £131.64 will be paid through HB and equates to 100% rent paid.  There is also more security of tenure making it harder to evict and the reassurance that if not working at least the roof over ones head is secure.

This creates a massive incentive for the non-working current private tenant to transfer to the new affordable rent scheme.  Yet at the same time it is a strong incentive not to work at all as the new tenant has on average £50.37 more per week and £2628 per year to spend on other things other than housing from the same non-working position.

The reality is stay on benefits and get a free packet of fags per day / a fortnight’s jaunt to Benidorm paid for OR get a job and pay 85% more rent than your council neighbour.

The non-working council tenant or non-working HA tenant would have an 85% or £63% rent increase and so condemn them into benefit dependency is not there already but give them a new-build house.  This is a perverse disincentive to work and a perverse incentive to move and of course increase the overall HB bill even more massively than the ex PRS tenant becoming a new AR tenant.

So tell me again MR Shapps why is this called AFFORDABLE rent?

Politically of course it’s a good deal as it buys another 100,000 voters to accompany the success Thatcher had with the previous 2.5m RTB sales, and maybe even another 100,000 with the new AR tenants.  Yet you won’t keep 75% of the sales of the proceeds anymore like her governments did and your colleague IDS will have the hundreds of millions of pounds more to pay out in HB too.  It seems the cost of buying the electorate has risen substantially, but then again that’s perhaps to be expected as the
best council houses have already been sold. Be interesting to see how many of these 2.5m RTB sales now comprise the PRS market though as their numbers will increase again and give the PRS an even bigger percentage share of the overall rented market, and of course at a higher benefit rate than existing social market rents so even more cost to the overall HB bill.

Please note the inherent assumptions in this too, not just that we will see a 1 for 1 replacement but (a) tenants will wish to buy; (b) banks will wish to lend; (c) banks will lend for ex-council stock and of course
I couldn’t leave out your huge but errant assumption that LHA payments are more expensive than your ‘affordable rent’ model which they are not as this proves.  Its basic arithmetic Mr Shapps that even the
Daily Telegraph won’t like as they will have to start calling you the incompetent innumerate rather than the Chancellor.

Your numpties in the CLG as expressed in their Equality Impact Assessment on Affordable Homes http://www.communities.gov.uk/publications/housing/affordablerentpolicy made the mistake that ‘market rent’ is LHA and so AR would be 80% of this.  They, like you should have read the “Affordable Homes Programme Framework” policy document which says that it is 80% of the ‘gross market rent’ (see 3.11) which is the £164.55 per week figure and not the average PRS benefit figure of £111.18 or even the £113.74 LHA figure which is part of that overall average.

That was a ‘gross’ error and pun intended.  Now you have sold your party down the river by compounding that error and costing the public purse hundreds of millions of pounds per year with the renaissance of RTB.