Housing Associations: getting the best from them

Maximising really affordable housing in London 2021-2025 What could the Assembly & the Mayor of London do?

Letter from Just Space to Mayor and Assembly Members 3 February 2021 [This follows a letter sent a few days ago calling on the GLA to discuss ways of minimising the ill effects of the New London Plan. See previous post here.]

The new London Plan is now finalised and there is wide agreement —including by the Mayor— that it will not secure as much low-rent social housing as London needs. Totally inadequate investment in social rent housing will continue from 2021 to 2025, and grant funding from MHLG via the GLA is likely to remain biased towards intermediate tenures. But despite this, boroughs and the Mayor of London could still deliver much more, by positively influencing housing associations and adopting better planning policies and development management practices. Londoners’ experience during Covid adds urgency to the need for low-rent homes.

Just Space is keen to encourage and support moves from all quarters to mitigate the failings of current practice and submits the following list of proposals and suggestions.  If no groups lobby the Mayor, Assembly Members and Borough councillors for specific changes, thousands of households will be condemned to stay on housing waiting lists. 

Specifically the following suggestions could be implemented by

  • How the Mayor’s team deals with Housing Associations and accounts for their work
  • How the Assembly seeks to scrutinise and influence the Mayor’s work
  • How Mayor and Assembly respond to government consultations
  • How the GLA and Boroughs go about their plan-making and development management work in the coming years.
  • How the London Housing Panel works.

The matter is timely because bids from Housing Associations are being submitted during February.

Mayor of London

Part 1. Housing associations: maximising affordable and social rent stock 

Baseline funding conditions for the 2021-26 Affordable Housing Programme (AHP) were published on 23.11.2020. Some proposals below suggest that the Mayor introduce additional conditions for Strategic Partners (SPs) and Approved Providers (APs), as in the 2016-21 AHP. If he is unwilling to do this, or associations or regulations prevent such conditions, then the Mayor and Assembly Members could at the very least publicly ask SPs and APs to voluntarily commit to higher standards. 

  1. Strategic Partners & Approved Providers 

(SPs got all grant upfront from 2016-21. APs got some)

a) At least 70% of their new London supply should be ‘affordable’ tenures. (From 2016-21 SPs committed to 60%. APs to 50%. From 2015/18 London-based HAs averaged 70% ‘affordable’, when less grant was available. Some built much more than others). Some data is in the Appendix.

b) Far more important that a minimum proportion of social rent should be required; 60%+ of new ‘affordable’ supply, even if government grant conditions remain biased towards intermediate tenures. (One SP’s grant-funded affordable supply was split 18% ‘low cost’ rent/82% intermediate, for 2016-21, ignoring all boroughs’ Local Plans. (Network Homes. GLA FOI response after main grant allocations in December 2018. The Mayor will have more recent and complete figures. Our great stress on social-rent (council-rent) homes reflects the fact that the intermediate tenure forms which make up the balance of ‘affordable’ supply are NOT in fact affordable to the majority of those in great housing need. 

2. Stopping the sale of social rent voids to market-sector buyers or to councils at market prices.

a) HAs should only ‘sell’ vacant social rent homes at Social Housing Existing Use Value and should only sell them to councils or to other HAs, to retain them as social rent stock. (This should be a condition of AP & SP status. Most HAs sell voids to the highest bidding private buyers at auction, or offer them to councils at full market value only, which means boroughs can buy far fewer to house the homeless). 

b) Stop HAs leasing voids to councils ‘temporarily’ at LHA rents (the lower end of private rents) instead of at social rents. (LHA drastically increases tenants’ rents and councils’ costs for housing the homeless. Benefits cover most but not all costs, for tenants and councils). 

3. Discouraging London-based associations from spending revenues generated in London on building homes in regions with less housing need (as a grant condition for SPs and APs)

a) Publish full details of multi-region HAs’ revenue sources, spending, and planned tenures in developments by region; London -vs- the rest of England. The Mayor should require this data from bidders, consolidate it and publish it.

b) London-based HAs should not divert London’s (non-grant) revenues to areas with less housing need. (GLA grant has to be spent in London. Other revenue sources don’t.) If 60% of an association’s current stock is in London at least 60% of their new affordable homes should be built on sites within the GLA’s boundary. If HAs claim that shifting new supply outside of London is unavoidable due to the difficulty of obtaining sites in the capital at reasonable cost, they should explain why they can’t increase the proportion of social rent in their London schemes. 

4. Public Land & London Development Panel 2/3

The Mayor has some direct power over Mayoral bodies (TfL principally) which he could and should use more actively to maximise social housing production.

LDP2 members have exclusive rights to bid to buy or lease some public land to develop (19 developers, 6 HAs, and two joint ventures between HAs and private developers).

a) Stop LDP2 in 2022, not 2023, and allow councils and coops to buy land through LDP3.

b) For LDP2, promote non-profit developments by associations, rather than developer-led schemes or joint ventures, to boost affordable housing by avoiding 50% of higher profit margins being extracted by private developers instead of being used to cross-subsidise affordable housing. 

5. Reporting on associations’ current reserves and future targets

Commission a detailed independent financial analysis comparing associations’ policies and practices. Are vastly increased reserves —being pursued by some associations— necessary? If not, they could deliver more affordable housing or more social housing (which is what matters most) within the ‘affordable total’. 

Part 2. Planning policies & funding guidance: to maximise social rent supply

6. Support ineffective boroughs to deliver higher proportions of social and affordable housing

a) Compare and report boroughs’ records with full publicity; the percentage of new supply delivered as social rent and other ‘affordable’ tenures (Some boroughs deliver less than 10% ‘affordable’ housing despite their Local Plan policies requiring 35% as a minimum. Clearly some don’t uphold their own policies). 

a) Increase local ‘going rates’ for affordable housing by supporting willing boroughs to fight planning appeals for schemes below 150 units (& thus not referred to the Mayor for viability scrutiny). (If the Mayor won’t do this councils could support each other in doing so.)

b) Report schemes (housing numbers and tenures) that councils refuse for failing to meet viability-tested policies on affordable housing, and the number of planning appeals that boroughs fight, win and lose. 

c) Consider GLA recognition for boroughs that deliver the best results for upholding their planning policies on social housing: average percentage achieved, and compliance with policy on low cost rent. (The GLA should rank boroughs annually in AMRs and press releases, and the best-performing councils should receive public recognition or awards).

7. London Plan tenure guidance to boroughs: increase the minimum ‘low cost’ rent requirement from 30% to 60% from 2021, in the London Plan AMR or an SPG. (Some developers are getting away with delivering 70% of ‘affordable’ homes as shared ownership, ignoring Local Plans). 

8. ‘Low cost’ rent levels: clarify that new build homes can still qualify for GLA grant when boroughs set rents below formula targets. (Target social rents aren’t affordable to many people in high value areas). 

9. Public Land: Mayoral bodies and other public sector

a) Require all schemes to deliver at least 50% affordable homes (before grant) and the tenures required by Local Plans; usually 70% ‘low cost’ rent/30% intermediate. (Currently only the first 35% has to meet tenure guidance, so the ‘additional’ 15% is often all shared ownership. This does not meet need, and fails adequately to embed affordability into accepted land costs used in viability tests). 

b) Mayoral bodies’ sites due to be developed; publish full details of tenures and rent costs for all sites owned by TfL, the Metropolitan Police, and Fire Service. Promote non-profit developments. 

10. Change the Build-to-Rent tenure model to deliver social rent

London-wide guidance allows B2R (large, private rent) schemes to deliver all ‘affordable’ homes as intermediate or ‘discounted’ rent, which ignores the priority need for social rent, on the grounds that the private rent developments don’t generate up-front profits for developers. 

While the provisions in the new London Plan cannot readily be changed quickly, the Mayor’s tenure model should be managed so as to encourage the provision of more social rent and LAR dwellings within each scheme, encouraging Boroughs to make use of the facility in London Plan §4.11.10 to justify and require lower rent provisions in their Development Plans. This objective can be further pursued in the SPG envisaged in §4.11.6.

11. Unaffordable intermediate tenures

London Living rent is much more affordable than shared ownership but of the G15’s ‘intermediate’ starts in 2018/19, only 5% was LLR, with 93% for shared ownership. 

* Shared ownership: cap full market values at £600k and/or cap monthly housing costs at a level that average earners can afford while not paying more than 40% of their net household income. 

* London Living Rent: The consensus view of Just Space member organisations is that all grant funding should be devoted to new social rent homes because of the overwhelming need, London’s homelessness crisis and the insecurity and increasing unaffordability of ‘intermediate’ tenures. However, in light of the fact that ministers have insisted on devoting a large proportion of funding to intermediate tenures under the 2016-21 AHP, we recognise that London Living Rent, and potentially boroughs’ local living rents, are generally much more affordable than shared ownership. Therefore the Mayor should require SPs/APs to deliver a minimum proportion; (e.g., 50% of intermediate supply) as LLR. From 2021 he should increase the grant rate for LLR. (From 2016-21 LLR & SO both got an initial set grant rate £28k/unit. For the 2021-26 AHP grant rates will be flexible rather than fixed but details have not been published. Alternatively, consider other incentives to increase the proportion of intermediate tenures delivered at living rents, as opposed to shared ownership). 

* Rent-to-buy: households who can’t afford to buy in 3-10 years shouldn’t be evicted. 

* Shared ownership: avoid rent defaults leading to eviction, by converting debt to equity or extending repayment periods and by tenancy sustainment policies. As a last resort landlords should repay tenants’ equity. 

12. RTB lease extensions as a revenue raiser: ask councils/HAs to conduct pilots

Hundreds of thousands of RTB leaseholders need to extend their leases in the next few years, at an average cost of around £5,000. How much revenue could be raised if they were contacted? 

13. Support long term reforms

* Social rent formula target rents are unaffordable to most low-income tenants in high value areas. Caps need to be lowered in line with incomes, or the property value element in the formula needs to be scrapped. The Mayor should initiate a review in 2022 in the light of post-Covid income distribution data.

* Giving HA residents the collective right to transfer landlords like council tenants have

* The Freedom of Information Act should be extended to associations (all PRPs)

* Fair Rent Regulations for pre-1989 secure tenants currently allow annual rent increases of inflation plus 5%. Maximum rises should be the same as other tenancies; inflation plus 1%.

* Housing Statistics Review: The Mayor and Assembly should be pro-active in the review being conducted by ONS of housing statistics.  In particular they should stress the need for annual data on both the stock and flows of dwellings by tenure and rent level, at least for Borough level. (Flow means new production, demolitions and voiding, switches between tenures or rent levels.)

These points should be reflected in the Mayor’s and the Assembly’s responses to the government consultation on Social Housing.

This letter draws on research by the London Tenants Federation and others for which Just Space is very grateful. It is not a statement of settled policy by any of the contributors but is intended as suggestions for debate and discussion.

END

Appendix

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