Affordable (sic) Rent – Have landlords set an unlawful rent?

Think of the early 1980s before micro computers (now called PCs) arrived.  The greatest thing I remember about that time was the term ‘data processing’ meant you had to process data for it to become information.  That still holds and raw data is simply data until it is processed into meaningful or pertinent information. I was minded of this late yesterday when THE most important piece of data around the coalition’s “Affordable Rent” (AR) was released by Steve Hilditch on the Red Brick blog.  It was a FOI request of actual costs of AR rent levels.and is THE must read as it is the ‘official’ data rather than speculation.

I noticed straightaway two quick and hopefully interesting points and of course I had to draft and post a quick blog with the promise of more to come.  These two points were:

  • that the highest AR rent level of £495 pw or so would see housing benefit paid out at 25% more than the PRS LHA cap of £400; and
  • that a tenant would need a gross salary of £206k pa to afford it, affordability assessed at 33% of net income.

There is so much data to be processed and so many easy points can be made about how the data proves AR is a back of a fag packet policy with little pre-thought and of course is not ‘affordable’ by the ordinary literal or accepted numerical definition of 33% of take-home pay.  The chance to embarrass the government of the day while it is at conference over a flagship policy is strong and regardless of their political hue, the fact that AR is not affordable is not a political point it is an economic one. I have no doubt that political points such as AR is a pig’s ear of a policy, and it is, will abound in numerous blogs that will be written.  I have written often that social housing should be seen in its economic light and not in its political and said that is THE problem with the social housing sector; because social housing is always seen and discussed in a political context its economic benefits are not seen and are downplayed massively.

So much for the economic and political dimensions yet are these rents lawful?

One of my earliest posts about AR asked the simple question – How can a social landlord set an AR rent level at up to 80% of gross market rent when there are no reliable figures on what GMR is?  This also asked what would happen if the social landlord employee tasked with imputing or assessing GMR got it wrong.  If they estimated GMR too lowly they could set a rent at much less than 80% of the real GMR figure and would cost their employer millions.  If they assessed GMR too highly then they could set an AR rent level at more than 80% of GMR and potentially set an unlawful rent.

Now we have the answer in the FOI data about the imputed or estimated gross market rent figure was at the time these AR were set – £9513 per year or £182.32 per week. The FOI data says:

The average ‘affordable rent’ per unit will be £6,909 a year (£133 a week) across England.  This is 72.6% of the assessed market rent for these properties (which averages £9,513 a year).

What we know for certain from the above is the average AR rent level will be £133 per week.  What we DO NOT KNOW is what percentage of GMR this equates to as the GMR figure was an estimate at the time.

HOWEVER, the VOA last month released the official data on this from almost 500,000 actual private rent levels across England.  This gave an average private rent figure of £706 per calendar month or £163.05 per week or just £8,472 per annum and not the imputed or ‘assessed market rent’ of £9513 as given above.

Do the arithmetic and we see that the average AR rent level at £133 per week is in fact 81.57% of the most reliable GMR figure given by the VOA of £163.05 per week  This is above the 80% threshold set at presumably the legal maximum permitted.

We can again make cheap political points at GrantShapps (aka Michael Green, aka Sebastian Fox) expense and also make comment that he  has been highly reluctant to release the actual AR data.  That is easy and in some ways cheap and is yet another political point.  I can also point the reader to the comments Shapps made back in the Guardian in March 2011 in which he said AR would not cost the public purse more in housing benefit terms which of course it will and was subsequently proved by the NAO. Or the points he made ahead of CIH conference when he said there will be another round of AR! – the same article in which he admitted AR was a “rough and ready exercise!”

Yet, for me, the much bigger point is the legal one and have social landlords set unlawful rent levels in AR?  If that figure of the average AR rent being 81.57% of GMR is correct and caused by a far too high assessment of what GMR is, or rather was at the time, then the average AR rent would need to reduce by 1.963% to become lawful, a significant income loss for social landlords and a further significant risk to them of this AR fiasco. Cue, Finance and Development Directors at AR social landlords having palpitations

However the reputational risk to any social landlord and to the social housing sector generally of it being discovered they have set unlawfully high rent levels is enormous. This cannot and should not be underestimated and it the matter of concern for Chief Executives. Why did you get involved with the huge risk too far which AR always was?  It being the ONLY scheme in town is excuse not explanation and the writing has been on the wall for AR for a long time.  AR cannot be viewed in isolation and has to be viewed in the context of all related and pertinent housing ‘policies’ such as the overall benefit cap and now admittedly after the fact ‘pay more to stay.’  The social housing ‘sector’ (or is it a ‘movement’) has rushed headlong into a highly dodgy scheme – quite befitting of Shapps and his HowToCorp  – yet he is just one MP whereas you represent the aspirations of millions of tenants who will no doubt see ‘their money’ being wasted and put at risk by dodgy decisions of social landlords such as involving themselves with AR.

You call yourself a movement yet you turn an empty social rent property with an average rent payment of £80.85pw (the HB figure which approximates to full rent on average) into a rent of £133pw overnight – a 65% average increase and call it affordable!! This is now potentially an unlawful rent and wont te Tories and tenants groups make hay out of that! How removed from the tenant perception of ‘normality’ or ‘sanity’ do you want to go?  How much do you want to expose your organisation that has taken decades or even a century to build up the ‘movement’ tag of providing for those that are vulnerably housed – the good reputation –  to lose it all overnight by involvement with AR?

Not only have you lost that reputation you have also lost the confidence of investors if your projected rent figures are 1.963% above what you can lawfully claim in rent haven’t you?  And there you have AR in a nutshell – a dodgy scheme dreamt up by a dodgy housing minister rushed headlong into by…yes dodgy Chief Executives who failed to see the huge risk that AR would cause for ‘their’ organisations.  Your choice and decision to enter this high risk scheme has irreparably damaged social housing, its cause and ‘movement’, overnight by the negligent strategy of it’s the only scheme in town we must get on board.  You think cheap jibes at the now Tory Party Chairman who admitted himself that AR was a ‘rough and ready’ exercise will get you off the hook?  Dodgy MPs come and go and a few Chief Executives should follow, yet I doubt they will. By the way anyone got figures on the average golden handshake these day?  Hmmm!

Just a final quick thought.  If the average private rent is £9513 per year or £182.32 per week then the average LHA in-payment figure of £108.32 in the official DWP figures means that LHA only covers 59.41% of the total rent and the average private tenant has to make up the difference of £74 per week from either savings or welfare benefits.  So the average private tenant has to make up more than the £71pw national figure for dole just to pay rent.  Far be it from me to say this is an example of how much largesse there is in the PRS and an argument social housing CEOs should be shouting from the rooftops to show just how cost-efficient social housing is and CEOs should have been lobbying for more traditional funding for social housing…. you know what I mean the traditional social housing funding model that still saves every taxpayer in the UK about £170 per year in tax….that same argument that has seen social housing fall from having 80% of the rented market down to less than 50% in the last few decades despite having the best product and service at the cheapest price…

Sorry can someone find me a brick wall my head is beginning to twitch!


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