Friday, December 08, 2006

Housing revisited

Thinking of the last two posts reminds me that a while ago I wrote a letter to the Crawley News which (as well as pointing out that Fastway was down to the Tories at Chichester) said that I thought tenants should vote against transfer as it was in their best interests.

Shortly after that, Duncan Crow challenged me in a reply to say how. I didn't bother, mainly because Martin Ballard does a far better job. But here's a few ideas:


  • Tenants will pay higher rents.

    Ok, rents go up every year. But Housing Associations generally charge more than councils.

  • Tenants will pay higher rents

    What is more, the transfer documents do not include anything to stop a revaluation of the stock by the new HA after transfer (this was one thing that the Council referred back to the Executive on Nov 22). A revaluation would probably lead to steep rises for at least some tenants. Would we be hugely surprised it it turned out to be most tenants? Shouldn't the stock have already had a recent valuation as part of the process going on now?

  • Tenants will pay higher rents (so will home-owners)

    If they are also renting a garage. In fact, most garages are rented by homeowners. When I asked a flippant question from the gallery on Nov 22 about whether garage rents would rise to meet the levels of house rents (as the valuation of the average house is about £2000 and the valuation of the average garage is about £2600 by the latest figures), I was surprised to get the answer from Bob Lanzer that the rentable value per square foot for a garage is indeed apparently more for a garage than for a house.

  • Tenants will pay higher rents

    The way the finances work is this. A new Housing Association will be set up to buy the housing stock etc from the Council. They will pay £30M, or thereabouts. As a brand new entity, it will not have the cash, so will have to borrow at market rates to do that. So, immediately, the HA will not only inherit the liabilities that landlords have (sitting tenants, repairs & maintenance), as well as assume new promises made for them by the Council to replace over 4000 kitchens and 5000 boilers in the next five years, but they will also have a massive debt. Who pays the interest on that? Tenants do, through their rents. If interest rates increase, we can expect that to be passed on.

  • Did I mention that tenants might have to pay higher rents?

    Of course, I could be spouting fearmongering propaganda (but at least I'm not spending £30K of public money on DVDs to do it). After all, the council sets up a rent agreement with the new HA doesn't it?

    Yes. But the National Audit Office has found that 17% of transfer associations had ripped up those agreements. Scottish Borders was supposed to limit increases to inflation plus 1%. But instead rents went up by 5.5% (inflation plus 3%). Increases in tranfer associations in Scotland are higher than increases in pre-existing Housing Associations, which are higher than for councils.

    And of course these agreements have a time limit. What happens when the time runs out? Well, look to Hastings, where the transferred tenants of 'Ten-Sixty-Six' found that the average rent went up by 10% in the year that the agreement lapsed.

  • Not to labour the point, but rents might increase

    Housing Associations are beholden to their 'owners' and creditors, not to the tenants. If there are financial problems, there's no hefty bank account to help out (Crawley Borough Council is £100M in credit), and so the choice is to increase rents, to sell assets, to cut services or to borrow (which will of course mean higher interest payments).

5 comments:

Skuds said...

On the first point, I thought that council rents were already supposed to be coming into alignment with HA rents over a period of time.

But that is not to say that transfer would not accelerate the change.

One thing you have not mentioned, and which I have not seen anyone else mention is the rent holidays which council tenants get. I don't know about other HA's but mine doesn't give a rent holiday.

Each week of rent is about 2% of the annual rent...

Danivon said...

Skuds, yes they are, but in reality the gap is actually widening.

But yes, I forgot that one - although surely the 'rent holiday' is really just paid for by tenants paying 50 lots of 2% chunks than 52 lots of 1.923% chunks, making it easier for the council to work out the weekly rent from the annual.

Skuds said...

Maybe. Maybe not. I think you are making an assumption. It may well be right, but still an assumption.

Its hard to say as rent is always quoted as "per week". When comparisons between council and HA rents are made do they use the figure which a tenant pays or what he pays times 1.04?

When a new tenant is told what his rent is does that value equal what he will actually pay for 50 weeks or what he would pay if he was paying for 52 weeks?

Does the proposal explicitly state that rent holidays would be kept?

If the rent holidays went would the landlords be able to just add two extra rent payments or would they have to reduce all every week by a small amount? Would that be in the rent agreement?

Is the rent holiday contractual or just a goodwill gesture? I really know nothing about it beyond that it exists.

It must be in the small print somewhere, but it would depend on whether the rent holidays are defined as the council letting tenants off a payment they should otherwise make or defined as free weeks with all the others uplifted to compensate.

It is not something I have thought much about, but now I have I would be interested to know the answer.

Danivon said...

Well, all council tax payers get a 2 month holiday, because we have to pay in 10 installments. It's the same thing.

Bob Deed said...

hjwpqYou mention the National Audit Office. I would recommend their very balanced report on impriving social housing through stock transfer
http://www.nao.org.uk/publications/nao_reports/02-03/0203496.pdf


It notes how "Transfer RSLs [houisng associations] have generally performed well in delivering the expected benefits to tenants, including the promises made during the consultation periods." It found that associations generally delivered the improvements to homes and services including the decent homes standard.

Interestingly their research found 77% tenant satisfaction that rents were value for money - the same as before transfer.