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Right to transfer

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

Attracting virtually no comment at the time it was passed, an obscure clause in Labour’s 2008 Housing and Regeneration Act could offer council tenants a unique but controversial way of owning and running their own homes.

Section 34A, as it is known, requires a local authority to co-operate with a formal notice from a tenant group to transfer ownership of council homes and estates to them.  The government has decided to press forward with making regulations under the section and has branded it the right to transfer.  A draft is expected in February.

As a policy, S34A is a direct descendant of the Tenants Choice legislation that was introduced by the Conservatives in 1988.  The political belief at the time was that tenants would rise up to take control of their housing from Labour councils who ran their housing badly.  In practice, and famously, it was used by Walterton & Elgin Community Homes (WECH) to take over their estates when Westminster Council, led by Shirley Porter, tried to sell them to developers.  As it didn’t lead to the hoped-for tenants’ revolt in Labour areas, and caused embarrassment in Westminster, it was repealed in the mid 1990s. 

WECH is still going strong, a leading example of tenant control working in practice.  Based on its experiences, the organisation has become a strong advocate of the principle that genuine empowerment through community ownership and control can lead to measureable improvements in happiness and wellbeing.

The right to transfer is seen by the ConDems as furthering both Localism and the Big Society.  So we have Labour legislation and ConDem implementation, does this mean there is a consensus that the right to transfer is a good thing?  The left has often been divided on the issues of tenant control and, in particular, tenant ownership.  The co-operative and mutual traditions run deep, but there has often been hostility to moving ownership out of the public sector and away from traditional democratic control.  Is transfer from a council to collective tenant ownership and control ‘privatisation’ or a different form of socialised ownership?  I go for the latter as long as the model does not allow for private gain (as some earlier co-ownership models did) and the homes are properly used to meet housing need.

There are of course dangers to negotiate.  If tenants wish to transfer part of a local authority’s stock to their ownership, coming out of the housing revenue account is hugely complex and has risks for both sides.  Other major issues to deal with include the viability of the new tenant organisation and the long-term relationship with the parent authority over issues like allocations and future development. 

The right to transfer will also cause bigger political divisions in the Conservative Party.  In Hammersmith and Fulham, normally the incubator of Tory housing policy, tenants on estates threatened by demolition as part of the huge Earls Court redevelopment have already served notice that they want to take over their estates, potentially scuppering the council’s plans to reduce the amount of social housing in the borough.  Will the government be willing to effectively overrule the Prime Minister’s favourite council to pursue its policy?

Given the need for the Labour Party to develop a new stance on housing, my own view is that Ed Miliband and the housing front bench should support tenants interested in using this new power. 

PS – In legislative technicalities, S296 of the Housing & Regeneration Act 2008 introduced a new Section 34A to the 1985 Housing Act.

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What will housing look like at Christmas 2014?

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Editor and Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone.

Just published on the Labour Housing Group website is a fascinating article by LHG Executive member Graham Martin, who tries to predict what will happen to the 3 main tenures between now and Xmas four years hence, when we will be 5 months away from the most likely date of the next General Election.  What will the Labour Party, when returned to government, be facing in housing?  Here is a summary of Graham’s conclusions (figures are for England only).   

Social Housing

Housing Associations currently own around 2.3m affordable homes.  Given the size of the stock, the overall numbers will change slowly despite the planned changes. 

  • The current (inherited and new) social rented programme will produce about 100,000-120,000 extra ‘target rented’ properties.  But between 100,000-170,000 existing target rent homes will be relet at intermediate (upto 80% market) rents.  In 2014 it is likely to be 50,000 fewer in total than now.
  • There will be around 285,000 more homes let at intermediate rents (say 135,000 relets and 150,000 new build). 
  • The debt funded/rental cross-subsidised new Intermediate rented homes will be produced mainly in London and the South East (with some in the South West and Midlands) as it is here that the maths work best.  In other parts of the country, intermediate rents will result in either a small increase or even a rent reduction, making development on the new model unviable. 
  • The biggest impact is likely to be caused by the interaction of the various benefit changes, and in particular the overall benefit cap of £26,000, restricting tenants’ ability to pay.

Council house numbers will change slowly.  There is little appetite and resources for significant stock transfers.  Some other conclusions: 

  • The reform of Housing Revenue Accounts is likely to improve councils’ financial strength and their ability to invest in their own stock.  There is a risk that there will be a smash and grab raid on HRA money (rising rents, financially more secure) to cross subsidise the General Fund.
  • The provision by councils of Intermediate rented housing is likely to be slow.
  • Management issues around benefits are likely to be the same as with Housing Associations.
  • Changes to statutory homelessness rules, and changing letting priorities will have a significant impact.

Home Ownership

Graham projects that house prices might fall another 20%, maybe 25%-30%, as measured against inflation. This will be mainly due to the long term ‘deleveraging’ of the residential mortgage market – i.e. there will not be the money to lend to home owners to buy new homes (such money as there is will go mainly to those buying the nicest properties with the biggest deposits).

Home construction for home ownership will be remain low until 2014, after which is may start to increase again (from a very low base).

The lack of affordable homes for (all but the best off) first time buyers will result in increased pressure on the rental market, and more adult children living in the parental home.

Private Rented Sector

The hardest to predict. The only certainly is that there will be big change.

The changes to Housing Benefit (and total benefit) rules will profoundly impact on the sector. Landlords may split their properties into smaller flats to respond to the benefit caps and ceilings.  Savills are projecting that the impact will be, first, large falls in demand for and rents of 1 bedroom flats (due to under 35’s now being subject to the ‘single room rate’ rule), and, secondly, increased demand for larger ‘shareable’ properties.

The new 30% centile cap on maximum HB and the plan to greatly widen the ‘Broad Market Rental Areas’ will have a big impact.  There are areas where over 30% of private tenants are dependant on HB, but will be constrained to living in the 30% of cheapest properties. 40% into 30% just does not go….

It is likely that the gap in housing (especially ‘green’) quality between other tenures and the private rented sector will grow significantly upto 2015.

Regulation and quality control are likely to be drastically reduced due to spending cuts, and there is a danger that undesirable landlord practices will increase. This is unfair to tenants but also to responsible landlords and managing agents.

There is an opportunity to promote high quality institutional landlordism, with investment available if the regulatory structure is right.  REITS – Real Estate Investment Trusts – could work well in residential letting, kick starting the UK residential construction industry, and providing high quality, long  term rented property at market rents.