“Affordable Rent”: Slough Council “doing the Conservative government’s dirty work for them”?

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Slough Council, a Labour administration, is proposing to apply the Tory government’s “affordable rent” policy to new council homes it plans to build. So-called “affordable rent” is up to 80% of market rent. According to the Slough Observer the town’s Cabinet is proposing rent increases along the following lines.

Current council rent

Affordable Rent”

1 Bed

£394.90 pcm

£656.50

2 bed

£474.80

£840.32

3 Bed

£553.80

£1,061.19

4 Bed

£607.45

£1,280.00

Any local authorities that accepted money from the Homes & Communities Agency for new build had to sign an agreement that they would charge “affordable rent” on new properties. The scheme also included “conversions” of existing stock from social rent to affordable rent in order to make up for the low level of government grant. In the case of Swindon’s Conservative administration, for instance, a building programme of 104 homes, partly funded by HCA grant, also involved conversion of 142 social rent homes to “affordable rent”.

However, any council building new homes with their own resources are not obliged to charge “affordable rent”. So why is a Labour council proposing to introduce it? The Cabinet document says that it has had to review its position on charging council rents for these reasons: (read on below or download a PDF here sloughhousingarticle ) More

“The case for cancelling council housing ‘debt’”

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Swindon Tenants Campaign Group’s new pamphlet, The case for cancelling council housing ‘debt’, aims is to raise awareness of the scale of the funding crisis which existing council housing is facing and to promote measures which will resolve this crisis. It calls on Labour to address this crisis by

  • Pressing the government to reopen the ‘debt settlement’ of 2012, and

  • Committing to cancel the Council housing ‘debt’ if elected to office.

Below we explain why these measures are necessary.

Council housing funding crisis

Council housing is facing a serious funding crisis. Government policies since 2010 are responsible for a significant decline in the income local authorities collect from tenants’ rent. In 2012 a new council housing finance system, self-financing, was introduced. Under this system local authority Housing Revenue Accounts1 receive no subsidy. Their income is overwhelmingly from tenants’ rent and service charges (around 91%)2. In ending the old housing subsidy system, the government divided up what it said was the national council housing debt, and redistributed it amongst councils. More than £13 billion extra debt was imposed on 136 local authorities, whilst 34 had some debt relief. Councils have to repay the principal (the original ‘loan’) and pay interest annually. So hundreds of millions of pounds a year have to be paid to the government’s Public Works Loan Board. This is money which cannot be spent on the upkeep of homes. Swindon was given an extra £138.6 million debt which costs more than £9 million a year to service. Even an authority like Leicester, which was one of the 34 which had their debt reduced, still pays £9 million a year to service theirs. More

Benefit Cap cut

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On November 7th the government is lowering the benefit cap – the amount of benefit that a household can have. It applies to people of working age who receive housing benefit or universal credit. For people outside of London the current cap of £500 per week for single parents or couples with will be reduced to £384.62. For single people it will be cut from £350 to £257.69 a week. There are lots of exemptions. Below is a link to the Shelter website where they explain all the detail. Have a look here to check whether you are affected.

http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/changes_to_housing_benefit/benefit_cap

If you are affected remember that you can claim a Discretionary Housing Payment from the Council. People in Swindon can download a DHP form here:

http://www.swindon.gov.uk/info/20013/benefits_and_swindon_money_matters/40/discretionary_housing_payments

 

STCG welcomes Labour commitment to suspension of Right to Buy sales

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Swindon Tenants Campaign Group welcomes Labour’s commitment to suspend Right to Buy, announced by Shadow Housing Minister Teresa Pearce. STCG has long argued for scrapping RTB as Scotland and Wales have now done. Whilst Labour’s commitment falls short of that we welcome Teresa Pearce’s statement. She is certainly right that given the housing shortage there is no justification for selling Council homes. So adopting a policy of suspending it is a step in the right direction. She told the conference that RTB “could only make sense in a time of surplus, in a time of shortage it makes no sense at all”.

Since the ‘enhanced RTB’ was introduced in 2012, with increased discounts, over 45,000 Council homes in England have been sold off. During that time local authorities have managed only 5,731 starts on site and acquisitions (i.e. replacements by building or buying). Under the coalition government the number of council homes in England declined by 143,000. Demolition of 16,570 Council homes was more than double the number of new ones built under the coalition.

In Swindon, in the four years since the introduction of the ‘enhanced RTB’, 216 Council homes have been sold. Swindon Council is not replacing these. It has a programme of building 104 homes but when you take account of the demolition of Sussex Square the number falls to 70 additional homes. Hence the stock is declining year on year. More

Starving Council housing of funds: An update

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Swindon Council’s June Cabinet meeting had before it a Medium Term Financial Plan for the Housing Revenue Account (HRA), the separate account for Council housing. Since there is no government subsidy for the HRA it is entirely dependent for its income on rent and service charges paid by its tenants. However, the rent it charges is determined by central government. So it has no direct control over its income. For instance, the current government decided that Councils would have to cut rent by 1% each year for the next four years. This has completely disrupted planning to maintain the standard of housing. Government rent setting regulations had previously set increases for ten years at the level of the Customer Price Index + 1%. However, this commitment was abandoned and the rent cut imposed. As a result the loss of rent was expected to be £22.8 million. Subsequently the government decided to allow Councils to exclude supported accommodation for elderly and disabled people from the rent cut (at least for this year) and allow them to increase rent under the old formula. Swindon increased rent for these people by 0.9%. However, the loss of rent overall during those four years is still estimated at around £22 million. (Read on below or dowmload a PDF here starvingchupdate )
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Why Labour should write-off the fictional Council housing ‘debt’

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In order to stop the rise in Housing Benefit payments the government has imposed on local authorities which still own their Council housing stock, a 1% cut in tenants’ rent, for four years, starting in April of this year. By this and other policies Council housing is being seriously under-funded. In order to understand the extent of the problem and what to do about it it’s necessary to appreciate how Council housing is financed under the system known as ‘self-financing’.

‘Self-financing’

In April 2012 a new Council Housing finance system, ‘self-financing’, was introduced. The system had been designed by the New Labour government just before it lost the 2010 General Election and was implemented 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). Most 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 government subsidy and had to make a payment to central government from their rent income. According to the Audit Commission at the time 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 chdebtwriteoff )
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‘High value’, ‘higher value’, what’s in a word?

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A worrying amendment to the government’s Housing and Planning Bill may have an even bigger impact on the number of Council homes which could be sold off on the market. The Bill included the enforced sale of ‘high value’ homes when they become vacant. Prior to the General Election a conservative party document referred to “the most expensive third of all properties in their area”. The Conservative Manifesto itself referred to “the most expensive Council properties being sold off and replaced” when they became vacant.

Councils have been awaiting regulations from the minister determining how ‘high value’ would be measured. However, the government has now proposed an amendment which refers to “higher value stock”. The amendment, by implication could mean anything above the average value. Even worse another amendment tabled this week states that the government will be able to “use any category of housing that the secretary of state considers appropriate as a comparator”. This would in effect give the minister the absolute power to not only determine how much stock Councils had to sell, but to change the regulation at will if he thought that they weren’t selling enough. Clearly, the proposed amendments are in breach of their manifesto.

If implemented this could not only decimate Council housing numbers but lead to the deterioration of the remaining stock. Under the new financial system, ‘self-financing’, introduced in 2012, Councils were given a ‘debt’ level which was based on an assessment of how much rent Councils were expected to take in over 30 years. The more homes that are sold the more rent is lost. Councils are already losing a great deal of rent as a result of the 1% rent cut which central government is imposing over the next 4 years. Swindon will lose more than £22 million. More

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