Affordable (sic) Rent – HA’s cream the tenant for £130m more rent per year

Significant updated Wed Oct 29th – see below –  2 in every 3 affordable (sic) rent properties are old properties that have just had the much higher rent level imposed upon once the previous tenant has left

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Did you know the coalition allowed housing associations to charge and receive £130 million last year in ADDITIONAL rental income?

Housing associations, or to give them their correct name, PRIVATE Registered Providers, netted £130 million MORE in additional rent last year on top of about £65 million the year before.  So in the last two years that’s £200 million more.

This is through the so-called Affordable Rent scheme which allows landlords to charge up to 80% of the gross market rent level rather than its normal social housing rent level. This same AR scheme I said a year ago incentivises housing associations to evict the bedroom tax tenant and that is precisely what it does and however perverse and offensive that is.

Last week the social housing regulator the Homes & Communities Agency (HCA) issued the latest Statistical Data Return or SDR which is a record of all the rents charged and the numbers of rents of housing associations. It is the official dataset that is only usually studied by number geeks like myself and it contains a huge amount of numbers, or what I call pesky facts, as 2 plus 2 always equals 4 except in the mind of IDS obviously.

This report runs to 63 pages of text and has accompanying data tables in excel spreadsheets and in its overview it says:

SDR2014

I have highlighted that last year, the first year of the bedroom tax in 2013/14, that PRIVATE Registered Providers – the correct name of housing associations – brought online 79,815 Affordable Rent properties and each one of these charged the social tenant on average £31.38 more in rent per week.

Multiply 79,815 by £31.38 per week and we see that housing associations, sorry PRIVATE Registered Providers took in £130 million per year more in these AR properties than they did when they were let at normal social rent levels.

The vast majority, some 68%, of these AR properties were not new build properties. They were existing properties which had been vacated by social tenants and simply relet at this much higher rent level.  So there is no offsetting new cost to PRIVATE Registered Providers of these properties.

The above will re-open the debate over whether housing associations are moving away from their founding ethos and the £200 million figure for the last two years and this ‘rent grab’ has accelerated and is increasing year on year. HA’s will argue, with some validity, they need to have more AR income to offset the bedroom tax potential loss and for the significantly increased cost of rent collection that direct payments will obviate. Many will argue they need this additional AR income to develop new properties and many that they are forced to do this as this is the only financial game in town.

Many, alas, may not have considered the potentially negative aspects of this in financial terms when the direct payment tenant becomes a real not a captive customer as I discussed here.

I have looked at the figures in some depth and some HAs are strongly taking advantage and others not with for example two broadly similar former council housing HAs in Magenta in Wirral and OVH in Sefton, both of a similar size and both in Merseyside sees OVH ‘grab’ just £13k extra in rent in 2013/14 Magenta ‘rakes in’ £619k or 48 times as much.  Both Sefton and Wirral are newly piloted direct payments areas too and Wirral is always interesting in HB terms as two of its MPs are Frank Field and Esther Mcvey so the increased costs of HB and what it means to Wirral residents are interesting political issues.

Yet overall the picture right across thee country is of some landlords adopting AR in a big way and some merely dipping their toes in it.  AR is a politically sensitive issue and some landlords are aware of that while others have gone headlong into it for the very significant additional income, and increased income way above any bedroom tax arrears losses they may have faced.

As I always say those fact are pesky and the more some may want such facts not getting out the peskier they become!

Update

A very good read today from Neil Goodrich here which contained a very interesting graph originally put out by Shelter called the worst year for new build since WWII. This is below.

What this also reveals is that circa 15,000 of Affordable Rent properties in 2013/14 were new build yet the total AR units in 2013/14 went up by 40,221 from 39,594 to 79,815 as I revealed a few weeks back above and highlighted above.

This means of those 40,221 new Affordable (sic) Rent properties last year that over 25,000 of these or almost 2 in every 3 new AR properties were existing ones that social landlords had simply charged the vastly increased ‘affordable’ (sic) rent on when they were vacated by the previous tenant.

That is a real concern in many areas.  Housing Associations are exposed to charges of profiteering and being no different from private landlords by putting up rents on existing properties so significantly.  Secondly, tenants will be calling into question the charitable status and ethos of housing associations too and both these points are a worry for HAs as reputational risk is going to play a huge factor when direct payment of HB goes to the tenant.

It also exposes what a charade the Affordable Rent programme is when two-thirds of AR properties are not new build and just old properties with vastly increased rents.  Recently we also have the proposal to reduce the overall benefit cap to £23,000 per year or £440 per week which will hit many existing social tenants and makes AR distinctly unaffordable and not sustainable for landlords or tenants.

I could go on but the apparent fact that 2 in every 3 AR properties are not new build just existing properties that have a massively increased rent imposed when the previous tenant has left…Hmm!

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3 thoughts on “Affordable (sic) Rent – HA’s cream the tenant for £130m more rent per year

  1. The strategical nature of an nonprofit is the cost effective allocation of resources via surplus revenues for the achevement of that organization’s aims and objectives.

    The strategical nature of profit making organizations is the use of aims and objectives for the achevement of profit maximization.

    The AR model, like the use of mergers and acquisitions, diversification, and horizontal and vertical integration just goes to show that the ‘social’ housing ‘sector’ is in the process of corporatisation.

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