ARCH (Association of Retained Council Housing) calls for £6 billion compensation for rent cut

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I recently wrote about the need to re-open the 2012 ‘debt settlement’ which was part of the introduction of the new Council Housing Finance system, ‘self financing’. The government is implementing a cut of 1% a year for Council tenants for four years from 2016. Inside Housing magazine has just reported that ARCH, the Association of Retained Council Housing, is calling on the government to cut the ‘debt’ by £6 billion.

As I explained previously (See “Starving Council Housing of Funds”) the level of ‘debt’ that each Council was given was based in part on an assessment of how much income they would take in over 30 years from tenants’ rent. Since the government is proposing to cut rents this means that Councils will have far less money than was estimated in their business plans. It also means that they will have more debt than they can cope with. Because of the loss of income Councils will have to scale back on the amount of work they have planned for the maintenance and renewal of their housing stock. This will lead to a backlog of necessary work and a deterioration in the standard of their homes.

Whilst there is a good case for writing off the whole ‘debt’ (over many years tenants have more than paid for the cost of building) this is obviously something which the Tories will not do. However, the demand of ARCH is an important point of support for a campaign to press the government to at least compensate Councils for the loss of money resulting from the rent cut.

When most people hear the word ‘debt’ they assume this is the result of borrowing. However, this wasn’t the case for Council housing ‘debt’ which was imposed on Councils in 2012. The ‘debt’ level was the result of what you might describe as creative accountancy by the Treasury.

Since the ‘debt’ distributed was based on an assessment of income over 30 years, then clearly if the amount of income shrinks because of government policies, then the ‘debt’ of each Council needs to be written off as a result of their loss of income. This is both logical and fair. ARCH itself, to which Councils with housing stock, has over 30 Conservative Council affiliates. If they can recognise the need to cut £6 billion off of the burden of Council Housing Revenue Accounts then there should be no reason why Swindon Council should not support this demand. Swindon Tenants Campaign Group will be calling on them to do just that.

Martin Wicks

September 24th 2015

Preparing their excuses beforehand


Why did Cameron say that Housing Associations were ‘part of the public sector’?

How could a man with a brain describe Housing Associations as part of the public sector? They are private businesses, most often, registered as charities. Yet David Cameron has described them as part of the public sector. Well, he certainly has a brain, of sorts, so why would he make this patently absurd statement? Did he not think we would notice?

The problem is that the government has got itself into a bit of a pickle. It is proposing to force Housing Associations to apply ‘right to buy’ to its homes; forcing them to sell off their homes at big discounts to the sitting tenants. How can they force private businesses to sell their homes and at a price less than their value? Imagine the furore if Labour demanded the ‘right to buy’ be applied to the private rented sector. The Tories would scream about expropriation. What about the sanctity of private property? How, they would say, could you force a private home owner (who rents out their property) to sell it? But that is exactly what they are proposing to do with Housing Associations. The only difference is they accept the need to give them some compensation. More

Starving Council Housing of funds

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Time to re-address the Council housing ‘debt settlement’

In April 2012 a new Council Housing finance system, ‘self-financing’, was introduced. The system had been designed by the New Labour government but was introduced by the coalition government. Housing Minister Grant Shapps said that the new system would “give Councils the resources they need to manage their own housing stock for the longer term – correcting decades of under-funding”. In fact under-funding was not corrected but built into the new system (see Appendix). Councils did have more money than they had under the previous system because what was known as a ‘negative subsidy’ was ended. In 2005 the Audit Commission reported that 82% of local authorities were subject to ‘negative subsidy’, meaning they received no subsidy and had to make a payment to central government from their rent income. According to the Audit Commission this comprised some £630 million a year. Whilst some of this was redistributed to other Councils, in the four years from 2008 tenants’ rents subsidised the Treasury to the tune of almost £1.5 billion1. It was predicted that if the old system, the ‘housing subsidy system’, continued, then eventually all local authorities would suffer from ‘negative subsidy’, largely as a result of year on year rent increases above the level of inflation. (Read on below or download a PDF here starvingchoffunds) More

Rent cut: compensate Councils for the losss of income

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First the good news. The government is proposing to cut Council (and Housing Association) rents by 1% a year for 4 years starting in 2016. Tenants will welcome the proposal, especially after many years of above inflation increases. However, the motivation of the government is certainly not the interests of tenants. It will save on its housing benefit bill an estimated £1.445 billion by 2020/21. Moreover, tenants will be adversely affected because the loss of rental income to the Councils will mean that they will have to cut their expenditure on the upkeep and maintenance of our homes. To understand why this is the case we have to look at the new Council housing finance system which was introduced in 2012, so-called ‘self-financing’. (Download a PDF of this article here to read offline rentcut or read on below) More

Crisis of affordability in Swindon as house price rise outstrips earnings

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The latest ONS (Office of National Statistics) statistics for house prices in local authority areas show the median (middle point) house price for Swindon in 2014  surpassed the highest previous level reached in 2007 before the housing crash. It was £165,000 compared to its post-crash low of £147,000. Detached dwellings now have a median price of £250,000, semi-detached homes £181,000, terraced houses £142,000.[1] The only exception, not having nearly reached or surpassed the previous highs, are maisonettes and flats. They were at £109,500 in 2014, still well below their 2007 high point of £138,000. This may well reflect the change in the composition of new build with a higher percentage of flats built than previously.

When the crash came in 2007/8 there was a precipitous decline in sales. In Swindon in 2007 there were 6,506 domestic property sales, nearly 8% of properties in the town. In 2008 it fell to 3,113. For the next 4 years sales remained below 3,000 a year. By 2014 they had risen to 4,010, or just 4.3% of properties in the expanding town. More

‘Right to Buy’ sales: the government’s ‘one for one replacement’ scam

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Brandon Lewis, the latest in a long list of short-lived housing ministers since 2010 has issued a press release on ‘right to buy’ sales. It is a classic example of using statistics to obscure the real situation. Mr Lewis, as with the previous housing ministers under the coalition government has a problem. The coalition spoke of ‘one for one’ replacement of homes sold under their new version of RTB with increased discounts. However, as we shall see, this did not mean replacement of all homes sold, as the term would seem to imply. Since the scheme was introduced in April 2012 there has been a significant gap between the numbers sold and the numbers replaced.

Like any dishonest propagandist you have to weigh Lewis’s words carefully. Take these.

“Today’s figures (25 June 1015) also show that 3,337 new starts and acquisitions have been made since the scheme was reinvigorated in 2012. This means that the additional homes sold in the first year of the scheme are already being replaced on a one for one basis nationally.” More

Housing ‘choice’… for those who can afford it

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Swindon Council’s Conservative Group says it will support the extension of ‘right to buy’ but fails to justify the policy nor explain how it will improve the housing situation.

Swindon Tenants Campaign Group recently wrote to Swindon Councillors calling on them to oppose the extension of ‘right to buy’ (RTB) to Housing Associations and the enforced sale of ‘high value’ Council housing to pay for it.[1] The receipts from the sale of Council homes would be used to subsidise Housing Associations for part of or all of the difference between the discount to their tenants under RTB and the value of their homes.

We have received a reply from Emma Faramarzi on behalf of the Conservative Group (See below). The essential message was that they had won the election and this policy “received the necessary endorsement by the British electorate” so the group would be supporting the government. Of course, 63.1% of those who voted voted against them, and they secured just under 25% support from the electorate. (Download a PDF of this here faramarzi or read on below)  More

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